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HomeMy WebLinkAbout11/13/2001 - Study SessionCITY OF NEWPORT BEACH City Council Minutes Study Session November 13, 2001- 4:00 p.m. ROLL CALL Present: Heffernan, Ridgeway, Glover (arrived at 4:20 p.m.), Bromberg, Proctor, Mayor Adams Absent: O'Neil (excused) CURRENT BUSINESS 1. CLARIFICATION OF ITEMS ON THE CONSENT CALENDAR — None. 2. "FUNCTIONAL BUDGETING" — GEORGE JEFFRIES' LETTER. Mayor Adams confirmed with City Manager Bludau that the item would be continued to the Study Session of December 11, 2001. Mayor Adams stated that it would have been better to have the discussion at the same meeting as Item No. 4, Contracting Out for City Services, but announced that Mr. Jeffries is out of town. Mayor Adams stated that the contracting issue could still be discussed in conjunction with functional budgeting at the December 111h meeting. Council Member Proctor asked if the item needed to be continued. Mayor Adams stated that it was up to the City Council. Council Member Proctor stated that he read the staff report and felt that it was fully explanatory, and that discussion was possibly not necessary. Mayor Adams stated that the benefit would be to provide the opportunity for the issue to be raised in a public forum. 3. ASSEMBLYMAN JOHN CAMPBELL PRESENTATION. Assemblyman John Campbell stated that his hope in attending the current meeting was to provide information to the City Council as well as to listen to their comments, so that he could better represent Newport Beach in Sacramento. Assemblyman Campbell began by mentioning the success of SB124, which he and Senator Ross Johnson were involved with. Assemblyman Campbell stated that the Bill allows the City to purchase the Caltrans West property at a reasonable price and turn it into a park. He stated that they were also able to get language into the Bill regarding Corona del Mar's Vision 2004 Program. Additionally, Assemblyman Campbell mentioned the success of a bill that puts the Irvine Ranch Water District in charge of cleaning up San Diego Creek, which flows into Back Bay. Regarding airports, Assemblyman Campbell admitted that he did not share the City Council's viewpoint on the potential for an airport at El Toro but Volume 54 - Page 547 INDEX Functional Budgeting (40) [No report] City of Newport Beach Study Session Minutes November 13, 2001 INDEX that he did share their viewpoints relative to the John Wayne Airport. He stated that he was ready to assist the City in extending the caps at the John Wayne Airport. He, additionally, offered to act as a mediator in discussions with South County regarding the issue. Assemblyman Campbell, lastly, stated that he wanted to let the City Council know how the State budget might affect Newport Beach. He announced that the projection of the State budget will be for a $12.4 billion deficit, which is 15% of the expected expenditures for the year and projects a 12% drop-off in revenues. Assemblyman Campbell added that the projection presumes an economic recovery during the second quarter of 2002, while some say the recovery won't occur until the third or fourth quarter. Assemblyman Campbell stated that one of the items that is under discussion at the State level is the money from the Vehicle License Fees (VLF) that is currently going to the cities. He stated that he recently signed a letter to the Governor, as did most of the Republican caucus, stating that the budget deficit is the State's problem and should not be transferred to the cities. For political reasons, Assemblyman Campbell believed that the State will go after the VLF. He stated that the money set aside for the Back Bay restoration has been funded, but there is still the possibility that the State will consider taking it back also. He said he will do his best to ensure that this doesn't happen. Mayor Pro Tem Ridgeway asked about a Statewide initiative he'd heard about that prevents the Legislature from attacking cities. Assemblyman Campbell stated that it hasn't qualified for the March, 2002 ballot yet, but that the Legislature has until November 26, 2001, to put items on the ballot. He added that six initiatives have qualified for the March ballot and, of those, four or five were put on by the Legislature. Additionally, he clarified that the State budget starts July 1st, and the projections he gave earlier were for the 2002 -2003 budget. Mayor Pro Tem Ridgeway asked if the shortfall was directly related to the electric bill that the State has picked up. Assemblyman Campbell stated that although the amounts are similar, they are not related. He explained that although the money that the State spent on buying electricity was paid out of the general fund, it is owed to the State by the ratepayers. He added that if the bonds are not sold, there will be a cash flow problem and money will have to be borrowed. Assemblyman Campbell stated that the deficit is due to increased spending in the State, which was previously covered by the capital gains taxes, but isn't any longer. Per Mayor Pro Tem Ridgeway's question, Assemblyman Campbell explained that the increased spending has been towards education, health and welfare programs, personnel, and a variety of other things. Council Member Proctor asked what approach the State would likely take and if a 15% cut on everything would be considered. Assemblyman Campbell stated that an overall cut would be unlikely. He explained that it would mean that education would be hit and with it being an election year, cutting education wouldn't be likely, and that it is also unlikely that public safety would be hit, due to current conditions. Assemblyman Campbell noted, however, that cities and counties are already carrying much of the additional security burden. Council Member Proctor thanked Assemblyman Volume 54 - Page 548 City of Newport Beach Study Session Minutes November 13, 2001 Campbell for his work on SB124. Mayor Pro Tern Ridgeway asked what the State was planning to do regarding the budget. Assemblyman Campbell stated that the largest dollars can be found in education, but it is politically difficult to make cuts in that area. He added that increased taxes could also be considered, but stated that he would oppose that approach. He stated that another option would be to play with the budget numbers, but that some are projecting a deficit through 2006 or 2007 and playing with the numbers wouldn't deal with the structural imbalance that is occurring. He stated that it's difficult to predict what will happen, particularly since it's an election year. Per Mayor Pro Tem Ridgeway's question, Assemblyman Campbell stated that, if it were up to him, he would look at the significant increases in the ongoing spending in such areas as State bureaucracy, welfare programs, and entitlements. He stated that the education money that is not well spent should also be looked at. He objected to any tax increases, since the problem is one of spending. Council Member Glover stated that there are too many laws and almost every law has budget implications. Assemblyman Campbell agreed. Council Member Glover stated that Newport Beach will need his support in getting the entire Orange County delegation to support the extension of the John Wayne Settlement Agreement. City Manager Bludau stated that it is frustrating when the State government exempts itself from many of the laws it passes. He stated that this is wrong and asked about the promises made about the VLF not being taken away. Assemblyman Campbell stated that the only value the promises have are that the cities can remind the State of the promises and involve the media. He stated that a similar situation occurred with transportation funding the prior year. City Manager Bludau complimented Assemblyman Campbell and his staff, noting that they've been good to work with. Assemblyman Campbell introduced Jennifer Cowen, his district director. Council Member Bromberg congratulated Assemblyman Campbell for his part in helping the City acquire the Caltrans West property, and asked what committees he is a member of. Assemblyman Campbell stated that he's Vice Chairman of the Budget Committee and the Business & Professions Committee, and a member of the Utilities and Commerce Committee, the Insurance Committee and other various energy committees. Mayor Adams thanked Assemblyman Campbell for the work he's does on behalf of Newport Beach. He presented the assemblyman with a City tile. 4. CONTRACTING OUT FOR CITY SERVICES. City Manager Bludau stated that Phil Arst wrote a letter to the City Council and the General Plan Update Committee regarding the City's efforts at contracting out for services and indicating that Newport Beach is not being run as efficiently as other cities, due to its negligible use of outside services. City Manager Bludau explained that contracting out, or privatization, isn't Volume 54 - Page 549 INDEX Contracting Out for City Services (66) City of Newport Beach Study Session Minutes November 13, 2001 INDEX an easy issue to deal with and that there are many ways to approach it. He stated that the decision to contract out for services, and to what level, has to be decided by each community because each community is different. He added that there is no right or wrong answer, and that the decision is based on how the tradeoffs are measured. City Manager Bludau stated that all of the cities in the State probably contract out for services, but that the extent to which it is done varies widely. He noted that some cities are referred to as "contract cities" and that these cities have just enough employees to oversee and manage the contracts that provide the basic services for the City. He stated that most of these cities are the newer cities that were incorporated after Proposition 13 and were used to receiving County services prior to incorporation. City Manager Bludau stated that the advantages of contracting out for City services include the reduction of overhead and administrative costs because fewer employees are needed, the cost savings that result from economy of scale, the reduction in personnel and compensation issues, the opportunity to compare City versus marketplace costs, contract employees usually cost less, it is easier to match service needs with financial capability, and liability risk is shared with the contractor. City Manager Bludau then listed the disadvantages of contracting out for City services as including the difficulty in not accepting the lowest bid, having services that don't lend themselves to performance standards, and paying extra money for work outside of the contract. He added that the employees of the contractor are not City employees, causing potential disadvantages in regards to employee turnover, employee selection, strikes, and the uncertainty of the employees responding to a disaster or emergency. City Manager Bludau stated that additional disadvantages of contracting out include the high cost of obtaining technical or specific expertise, and the inability to perform the services once they've been contracted out due to losing the proper equipment and employees. City Manager Bludau then listed the advantages of providing services through City employees. He stated that these employees are selected by the City through a public recruitment process, disciplinary action can be imposed, longevity is usually greater, there's a proven capability for responding to disasters, cross training is more easily facilitated, it's easier to develop loyalty, and job stability is an inducement to private sector workers. City Manager Bludau stated that the disadvantages of providing services through City employees include higher wages and benefit programs, higher administrative support costs, negotiations with employee bargaining units is mandated by State law, employee evaluations and disciplinary process is very time consuming, maintaining the right number of employees in positions affected by economic cycles is difficult, getting rid of marginal employees who've made it through the probationary period is difficult, the ongoing costs of retired employees, and the public perception that the private sector can do things better. City Manager Bludau stated that Mr. Arst based part of his information on a Volume 54 - Page 550 ' City of Newport Beach Study Session Minutes November 13, 2001 INDEX 1993 Los Angeles Times article, which stated that Newport Beach only uses private contractors in three areas. City Manager Bludau stated that the staff report includes a list of the contracted services used in the City today, and that the list includes twenty -seven different categories totaling approximately $7.4 million annually. He stated that the largest contracts are for street tree maintenance, landscape maintenance, building maintenance, and sidewalk and curb repair. He stated that the City began its first major contracting in 1994 and that the experience has been mixed, noting that problems have included contractors who have underbid and were unable to perform the services required, and the reduction in competition as a result of larger companies taking over smaller companies. City Manager Bludau stated that the most successful contracting experiences have been with street tree maintenance, but problems have been seen in the areas of landscape maintenance and restroom cleaning. He added that another specific problem has been with the contract building plan checkers who perform about 10% of the checks, but generate about 60% of the complaints. He stated that this is due to them not knowing Newport Beach as well as the City employees. City Manager Bludau mentioned that the staff report includes his ranking of the potential for each department in the City to contract out for services. He stated that he wouldn't recommend contracting additional services out due to the high quality of service currently provided by City employees. He added, however, that opportunities for contracting services should continue to be looked at. In conclusion, City Manager Bludau stated that Newport Beach is a unique city and a city based on quality, with a community that expects excellent service. He stated that the challenge is to provide a very high level of service at a reasonable cost. He noted that the benefits of contracting out revolve around saving money, and the strengths of providing services with City employees revolves around stability, the knowledge and pride of the workforce, and the control and influence that the City has over the employee's work performance. City Manager Bludau stated that his knowledge of the community is that it is willing to pay a little more for quality of service. He noted that residents pay the same in taxes, whether the services are performed by contracted or City employees. City Manager Bludau stated that his job is to provide good day -to -day services, and that he is looking to the City Council for the policy decision. Mayor Adams stated that one of the most valuable components of the staff report was the department -by- department assessment and the recommendation for the potential of contracting out of additional services for each. Per the request of the Mayor, City Manager Bludau read through this section of the report. He began by mentioning the City Clerk's office, with three permanent employees, and the knowledge that is required for the services provided. He stated that he saw no potential for contracting out of additional services in this office. Mayor Adams added that the City Charter designates the selection of the City Clerk. City Manager Bludau stated that Volume 54 - Page 551 City of Newport Beach Study Session Minutes November 13, 2001 INDEX the City Attorney is another City Charter designated position, and that the potential for contracting out of additional services is poor due to the value of having knowledge of the history and culture of the City. Mayor Adams noted that some contracting of services is already done in the City Attorney's office based on workload and the number of cases. City Manager Bludau stated that the City Manager's office has five permanent employees and one part - time employee. He stated that the City Manager is selected by the City Council, like the City Clerk and the City Attorney, per the City Charter. City Manager Bludau stated that the potential for contracting out of additional services is poor. City Manager Bludau stated that the Human Resources Department has eight permanent employees and that it is important to have a staff that is knowledgeable about City rules, procedures, programs and employees. He stated that some contracting out is done for workers' compensation and risk management, but that the potential for additional contracting is poor. City Manager Bludau stated that the Administrative Services Department has 45 permanent and 9 part -time employees, and that he doesn't see advantages to contracting out additional services. He noted that a stable workforce is a real benefit in these areas and that the cost to contract would likely be greater. City Manager Bludau stated that the Police Department is the largest department with 228 permanent employees and 49 part -time employees. He stated that the City has excellent police services and he didn't feel that contracting out could provide better service. He added that some cost savings could be realized with the County Sheriffs Department, but that the tradeoff would be a lower level of service. He stated that public safety is the community's greatest value and the potential for contracting out of additional services is medium, but not advised. City Manager Bludau stated that the same is true of the Fire Department, which has 132 permanent employees and more than six part -time employees. He stated that there is the option of working with the County Fire District, but he didn't feel that service could be improved. He stated that the potential is again medium, but not advised. Mayor Pro Tem Ridgeway noted that the residents of Newport Coast are agreeing to the annexation based on their high expectations of the City's police and fire services. City Manager Bludau stated that the Planning Department has 16 permanent employees and one part -time employee. He stated that specialized knowledge of the community and local regulations is very important, and that contracting for technical expertise would likely be more costly. He ranked the potential as being low. He stated that the Building Department has 25 permanent employees and that, although Building Codes are similar among most jurisdictions, detailed knowledge of the community is important. City Manager Bludau stated that contracting out would be more expensive, and that the potential is medium but not advisable. City Manager Bludau stated that the General Services Department has 125 full -time employees, and an additional number that are temporary. He Volume 54 - Page 552 3 City of Newport Beach Study Session Minutes November 13, 2001 INDEX stated that the department already contracts out for more of its services than any other department, and that the potential for further contracting is ranked as medium. City Manager Bludau stated that the Community Services Department has many part -time employees and that a great deal of contracting out is already done in the Recreation Division. He stated that knowledge of the community and the community's expectations are important, and the potential for additional contracting is low. Mayor Adams stated that a great deal of contracting is also done in the education area. City Manager Bludau stated that the Public Works Department has 33 full - time employees, and a high level of contract work is already done through the department. He stated that there is the potential for more contracting out of project planning, inspections and some transportation functions. He ranked the potential as medium. City Manager Bludau stated that the Utilities Department has 44 permanent and 18 part -time employees. He stated that the longevity of the personnel is valuable and that it would be difficult to duplicate the current quality of the services provided. He ranked the potential for additional contracting as low. Mayor Adams summarized the City Manager's comments by stating that the only two departments with any substantial opportunity for contracting services are Public Works and General Services. City Manager Bludau added that the City does consider contracting out of services on a daily basis. Council Member Glover noted that the City Manager is conservative in his spending and it is at the direction of the City Council that additional money is spent, per the requests of community members. Council Member Glover stated that recently she had someone in her district who felt he had a traffic problem. She stated that tests were done and much time was spent on the issue. She pointed out that no "contract city" could provide that level of service to any one individual's request. Council Member Glover stated that the residents of Newport Beach are accustomed to quality of service and speaking directly with employees in the higher -level positions. Additionally, Council Member Glover stated that by contracting out tree trimming services and not trimming the ficus trees as frequently to save money, the City has encountered many lawsuits. She stated that it has cost the City thousands of dollars. She noted that the "contract cities" are the newer cities and that they plant faster growing trees that don't live as long. Council Member Glover stated that all of the implications of contracting out need to be considered prior to doing so, and that it needs to be done carefully. In conclusion, she stated that the majority of the community does not support the contracting out of additional services. She stated that becoming a "contract city" would cause disruption in the community and that standards would have to be lowered. Council Member Proctor noted that he has experience with the contracting out of services through his own job and the Airport Commission. He complimented the City Manager's report and agreed that the residents have become accustomed to a higher level of service. Council Member Proctor suggested that the City Council discuss the opportunities for reversing some Volume 54 - Page 553 City of Newport Beach Study Session Minutes November 13, 2001 INDEX of the contracting out that is already done. He specifically mentioned the County patrolling the bay, and stated that it might be better handled by the City's Police Department. Mayor Pro Tern Ridgeway stated that his development company was founded on the contracting out of services. He stated that, like all organizations, there was a growth factor and services were later internalized. He stated that Newport Beach was incorporated in 1906, and that many cities desire to be as mature and self- sustaining as Newport Beach. He stated that he is open to listening to the public's input on the contracting out of services, but that he will not consider the contracting out of public safety. He added that efficiency could possibly be improved in some areas, but that residents are not interested in spending less money and lowering their expectations. Mayor Adams stated that contracting out of City services was discussed during the budget process but when he received Mr. Arst's letter, he felt that it was appropriate to discuss the issue midyear. He noted that looking at improving efficiency is done on a daily basis. Mayor Adams stated that some of the issues brought up in Mr. Arst's letter were not responded to in the report from the City Manager. He noted the comment in the letter about Newport Beach having the highest governmental expenditures per capita. Mayor Adams stated that this is partly due to the doubling of the City's population during the summer months and the higher level of service that is provided in general. He additionally noted the comment in the letter about Newport Beach having the highest ratio of employees to residents. Mayor Adams stated that again he is not alarmed due to the services provided. He specifically mentioned lifeguards, police and fire. He stated that he doesn't feel that Mr. Arst's numbers demonstrate that the City is being run inefficiently. He agreed, however, that there is always room for improvement and there are areas that the City should continue to watch. Mr. Arst stated that he is accustomed to always looking at costs and revenues. He clarified that he doesn't feel that Newport Beach should become a "contract city" or that public safety should be replaced. He stated that the level of service in the City should be maintained, but that administrative costs should be looked at. Mr. Arst stated that it was unfortunate that Mr. Jeffries wasn't present at the current meeting since they worked together on their ideas. Mayor Adams reminded Mr. Arst that when the functional budgeting item is discussed that Mr. Arst could also discuss the contracting out of City services in conjunction with it. Mr. Arst stated that Mr. Jeffries included information about the efficiency of the library operation and that the decision to privitize can only be evaluated if the costs can be determined. He stated that the City Manager's report didn't include information on the actual costs of outside services. Mr. Arst agreed that Newport Beach has extra expenses, but stated that there could be room to improve efficiency. He also agreed that Newport Beach does do more itself, and added that he's not saying that it should become a "contract city ". Mr. Arst stated that costs and revenues need to be looked at and the cost basis needs to be improved. He stated that the key Volume 54 - Page 554 1 City of Newport Beach Study Session Minutes November 13, 2001 INDEX point to remember is that privatization works for many Orange County cities. He specifically mentioned data processing services and stated that it's a prime area to contract out. He recommended that functional budgeting be discussed in conjunction with the issue of privatization. He suggested that it would be reasonable to contract out for City services at a rate of ten to thirty percent over a period of five years. Additionally, he suggested that a consultant do an analysis and possible areas of privatization be considered, with enactment done in phases over a period of time. Mr. Arst stated that the possibilities for the contracting out of services should be looked at. City Manager Bludau noted that if Mr. Arst's figures for per capita revenue and expenditures were used, it would mean that the City is spending approximately $400 more per capita than it is receiving. He noted that this totals $28 million of unaccounted revenue, which isn't correct. Mr. Arst stated that he got the figures from the League of California Cities. Mayor Pro Tem Ridgeway stated that the City has a balanced budget and there isn't a deficit. He stated that Newport Beach is a unique city with its summer population, and can't be easily compared to other cities. Council Member Bromberg added that the residents of Newport Beach expect a level of service that is probably greater than any other city in Orange County. He stated that services could possibly be provided for less money, but it wouldn't be at the current level of quality. Council Member Bromberg confirmed with City Manager Bludau that tree trimming services have been contracted out since 1994. Council Member Bromberg noted that the tree in front of his home hasn't been trimmed since that time. He stated that this only provides an example and he wonders what would happen if other, more significant services were contracted out. Mr. Arst stated that the City adopted a policy to not trim the trees every year. He stated that the subcontracting has nothing to do with it and if the trees were trimmed at the previous rate, it would still be cheaper with the subcontractor. Council Member Bromberg stated that he sees a lack of service with the subcontractor and he is concerned how other services would be affected. Mayor Adams complimented Mr. Arst for raising the issue of contracting out for City services, and added that data processing might be a candidate for additional opportunities. He added, however, that Mr. Arst and Mr. Jeffries' implication that the City is budgeting without knowing what it is doing is open to debate. He explained that there are two forms of budgeting and one way isn't necessarily better than the other. He agreed that the discussion should take place. Council Member Glover suggested that Mr. Arst look at redevelopment agencies in other cities and understand the indebtedness these cities have taken on. She stated that these redevelopment budgets are also kept separate from the general budget. Mr. Arst explained that he hasn't made any comments about Newport Beach's overall financial structure and that he has only made a suggestion about the City's opportunity to operate more efficiently. He stated that he hoped the City Council would look at the suggestion as one that would be done on a gradual basis. Volume 54 - Page 555 City of Newport Beach Study Session Minutes November 13, 2001 Tom Hyans, Balboa Peninsula resident, thanked Mr. Arst for bringing the issue to everyone's attention. He stated that he believes there is excess in city government and specifically didn't agree with the annexation of Newport Coast. Mr. Hyans stated that Mr. Arst's points should be looked at. He cited tree trimming as a good example of how privatization can be done successfully, and stated that more privatization should be looked at. Mayor Adams stated that the City is taking a serious look at the issue. He asked when the City had last done a Citywide efficiency study. City Manager Bludau stated that he didn't believe that such a study had been done. He added that if one is done, the guidelines of what efficiency means would have to be set. He stated that government is very influenced by politics. Council Member Glover added that government is human oriented, while businesses are product oriented. She stated that, for this reason, efficiency would be hard to define. Mayor Adams asked if the privatization of residential refuse pickup had been looked at in the City. City Manager Bludau stated that it had been looked at twice in the last ten years, and that the recommendation was not to privatize. He added that it was also recommended not to change to mechanical pickup. Mayor Adams asked that a copy of the minutes of these discussions be forwarded to him. PUBLIC COMMENTS — None. ADJOURNMENT — 5:55 p.m. The agenda for the Study Session was posted on November 7, 2001, at 1:45 p.m. on the City Hall Bulletin Board located outside of the City of Newport Beach Administration Building. City Clerk � , ' / fit✓ /L�- - ti Recording Secretar Mayor Q f� aE�rrPp�' Off` Volume 54 - Page 556 INDEX