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HomeMy WebLinkAbout01 - 04-25-2000May 9, 2000 Agenda Item No. 1 CITY OF NEWPORT BEACH City Council Minutes ®���� Study Session April 25, 2000 - 4:00 p.nL INDEX ROLL CALL Present: Thomson, Glover, Adams, Debay, Ridgeway, O'Neil, Mayor Noyes Absent: None CURRENT BUSINESS 1. CLARIFICATION OF ITEMS ON THE CONSENT CALENDAR - None. 2. PRESENTATION BY TWO OF THE CITY'S INVESTMENT ADVISORS. City Manager Bludau reported that Mayor Pro Tem Adams requested that Council be made more aware of the City's investment strategies about two months ago. Administrative Services Deputy Director Kurth reported that the City's investment portfolio is $61,114,486.19, plus some accrued interest. This is near seasonal peak, but noted that other factors cause interim volatility (i.e. debt issuance, large capital projects, oil recovery money, and bankruptcy recovery money). He pointed out that the long term trend and the size of the City's investment portfolio is definitely up and that the audited financial reports for the past few years tells the City it is doing better. He indicated that the $61 million portfolio is as large as it has been at any time during his 10 years with the City and has at some point been less than half that amount. He stated that stronger revenues today have certainly helped the City but the main reason for the improved financial posture is because the City has been adhering to Council's new reserve policy goals as part of the budget appropriations process. Mr. Kurth reported that about 75 percent of the investment portfolio is managed by four investment advisors. Two are in attendance today. He indicated that each of the gentlemen are responsible for 20 percent of the investment portfolio. He indicated that these types of presentations were previously given to the Council Finance Committee on a quarterly basis and suggested to Brad Craig of Wells Fargo and Richard Babbe of Public Financial Management that they follow the same general format as before; however, Council can modify the format for future presentations. Mr. Kurth indicated that, even though the City's investment policy contains restrictive parameters, the advisors have room to disagree on such things as the optimum maturity target and the right mix between corporates and governments. In response to Council Member Debay's question, Mr. Kurth reported that book -to- market refers to whether the City shows the balance of the portfolio at a book figure or a market figure. He stated that, if the City is holding Volume 53 - Page 295 Investment Advisors (40) City of Newport Beach Study Session Minutes April 25, 2000 INDEX securities that bear lower interest in a rising interest rate market, the actual value is reflected. Therefore, if they have to be liquidated, the City would not get the same amount that shows on the books. He indicated that the City deals with this situation by reporting both book value and market value. He added that this is not too much of an issue right now because maturities are so short and the City is so liquid. He pointed out that this was not the situation for the County. Mayor Pro Tem Adams stated that he has looked at the investment policy with a couple of independent asset managers and that they will be bringing something back to Council within the next month. He expressed concern relative to certificates of deposits (CDs), but Mr. Kurth assured him that CDs are authorized by the policy and that there are restrictive parameters. Council Member Ridgeway asked who establishes the investment criteria for charter cities. Mr. Kurth reported that the State has public law that establishes criteria for all cities within the State. However, the City's policy goes beyond the State's minimum criteria. Mr. Bludau added that Council Policies are established by resolution and that those are reviewed annually. Council Member Glover reported that the Finance Committee worked for quite some time on the investment policy and reviewed it after the County bankruptcy and two years following that. She stated that the Committee tried to be cautious and noted that there are laws on several levels that the City must follow. Mr. Kurth reported that the policy was reviewed on March 24 and that only minor changes were made, noting that it has been a few years since the policy underwent significant changes. He indicated that they spoke with Mayor Pro Tem Adams several times to possibly do a more significant update and that they look forward to working with him on this. Brad Craig, Wells Capital Management, representing the investment advisory for Wells Fargo Bank, stated that they are a wholly owned subsidiary of the bank created in 1997, and its primary business deals with institutional funds management. He clarified that they do not act as the principle broker in any transaction, are paid a fee as the buying and selling agent in the market, and are mandated to deliver results to an investment policy. Regarding Council Member Ridgeway's concern, Mr. Craig stated that with public agency accounts, unless they are given specific direction, they default to California Code §53601 which specifies permissible investments for public agencies. He indicated that the intent of the code is to restrict maturities to five years and to maintain an average maturity of two years or less. He emphasized that, with those restrictions, unrealized losses and market volatility are minimized significantly. Mr. Craig stated that they measure the performance of a client's portfolio on a total rate of return method that has been increasingly adapted by public agencies. The results are not yield only and measure the changes in the principal value of the portfolio in addition to the interest income. He noted that interest rates were rising in 1999 as the Federal reserve commenced on an effort to slow down the U.S. economy. He reported that last year's results were positive and that they delivered a 3.37 percent total rate of return to Volume 53 - Page 296 City of Newport Beach Study Session Minutes April 25, 2000 INDEX the Merrill Lynch One to Three Year Treasury Index benchmark. He indicated that they are tracking well to the benchmark for the first quarter of this year, but are not too concerned about quarterly comparisons since they are driven by long term results. In response to Mayor Pro Tem Adams' questions, Mr. Craig indicated that the financial manager could set the benchmark that is based on the City's need for liquidity and the risk tolerance within the California Code parameters. He confirmed that benchmarks are commonly part of an investment policy for fiduciary agent managers like Wells Capital Management. He expressed the opinion that the City's policy does not have to state a benchmark, but the individual manager will often have its own guideline statement which condenses or captures the essence of the investment policy. They will then usually ask for some performance measurements beyond the document so that the financial manager receives guidance on an appropriate amount of risk on the fund management. Regarding a Merrill Lynch One to Three Year Treasury Index with an approximate average maturity of 1.5 years, Mr. Craig stated that they have a policy in which they will not be longer or shorter than the duration by more than 30 percent. He reiterated that their goal is to deliver a consistent return, net the fee that they charge, and to deliver the expectation. Mr. Bludau asked if the benchmark should be changed depending on the economic situation. Mr. Craig stated that they would like to keep the same benchmark and that the only factor that would cause the benchmark to be altered would be a different need for liquidity. If the money is more stable, as is the City's portfolio, they can manage well with a longer index and have shown some historical benchmark returns that demonstrate that this index will deliver a higher net return in the long run. Further, it also adds to the income by delivering higher interest income. In response to Council Member Ridgeway's question regarding the 30 percent duration, Mr. Craig stated that when a financial manager is given a benchmark, it has a constant duration or average maturity. The manager will dynamically adjust the duration of the portfolio to be measured against the benchmark to take more risk or have longer securities in the portfolio if conditions in the economy warrant that. If the benchmark duration is 1.5 years, it means that they would be pushing the duration out to two years and would enhance the return as interest rates come down. The City would own longer securities in the portfolio that would re -price to their interest rates and appreciate. He assured him that the 30 percent is an internal limit to prevent them from monetary control. He clarified that the City's portfolio is a short duration portfolio and that the duration would always be short and would never differ by more than 30 percent of the benchmark duration. Mr. Craig reported that the annualized compound return of 5.63 percent is the earning stream of the portfolio measured on the latest quarterly data and is rapidly heading toward 6 percent since they have been able to reinvest at higher rates as interest rates increase. Regarding the 5.22 percent Local Agency Investment Fund (LAIF), he stated that this is a gross number and is tracking close to LAIF when their management fee is backed out. However, LAIF is a one -year- and -under type of fund and will Volume 53 - Page 297 City of Newport Beach Study Session Minutes April 25, 2000 INDEX give them the opportunity, on an interest income basis, to significantly outperform the LAIF option. Mr. Bludau indicated that a positive about LAIF is that it is very liquid. Mr. Craig indicated that all the securities that they invest in are extremely liquid. He reported that the types of securities they would use in the City's portfolio are U.S. Treasuries, U.S. Federal agencies, investment -grade corporate bonds (minimally rated single -A), short term commercial paper, and cash equivalence. He stated that, if the portfolio were liquidated tomorrow at current market prices, the funds could be wired tomorrow. He noted that the duration for the portfolio is a little above 1.5 years and that the number tracks very well with the City's price risk per interest rate move. He explained that a one percent adverse move in the interest rate would impact the principal by about 1.5 percent. He emphasized that they would like to avoid unrealized losses, even on an unrealized basis, but it is inevitable when trying to enhance the income stream. He reiterated that the portfolio is not risky in that the securities used are very short. In fact, Wells Capital Management does not have many securities that go beyond three years because they do not see a reason to take undo risk or use the maximum permissible limit of five years. In response to Council Member Thomson's question regarding the annualized compound realized return, Mr. Craig indicated that the figures are gross figures and that the March statement shows that the gross yield is 5.94 percent, but would be about 5.70 percent with fees. When comparing the fee base with money market funds, he indicated that money market funds typically charge a similar basis point management fee imbedded within the fund. However, their service includes a custody relationship with a manager and risk consulting, making them a better value on a relationship basis for the fee. Mr. Craig clarified that he is not a star manager since he does not have individual responsibility for the decisions made in the portfolio. Wells Capital Management is organizationally driven, they conduct monthly strategy meetings, and even meet weekly to discuss conditions in the market. He is a relationship manager who is the primary point of contact for discussing results and making sure that the investment policy is being followed. He indicated that the portfolio manager is in San Francisco and that his only focus is the buying and selling of securities. He added that the administrative officer is primarily responsible for financial reporting and the movement of funds. The results are very predictable since they are based on a top -down approach to managing that corresponds to the interest rates. Council Member Ridgeway stated that the portfolio contains different duration maturities and asked if Wells Capital Management breaks that down by percentage. Mr. Craig clarified that their strategy is to simultaneously hold some of the securities longer on the yield curve which flattens out after two years. He added that they are also holding quite a bit of near term cash in their managed portfolios. The blended weighted average of the assets and cash ends up at a duration target which matches the benchmark. He stated that they forecast some increased short term rates from the Federal reserve. Volume 53 - Page 298 City of Newport Beach Study Session Minutes April 25, 2000 INDEX Council Member Glover stated that she sits on the South Coast Air Quality Management District Governing Board which reviewed the City's investment policy. She indicated that Newport Beach had the highest earnings and was the only entity that hired outside investors when compared to Orange County, Los Angeles County and City, San Bernardino County and City, Riverside County and City, Montclair, and Santa Monica. She attributed the earnings to the City hiring the investors. Mr. Craig believed that the fiduciary nature of how they manage funds gives the City complete objectivity on the decisions being made on behalf of the portfolio. He explained that some abusive situations with public agency funds has been driven by an abnormal relationship with a brokerage firm and an individual doing directed trades. He reported that they deliver the results and that Mr. Kurth institutes a monthly overview of the results and verification that they are in compliance with the investment policy. He stated that the combination of how Wells Capital Management is structured and the internal oversight will continue to meet the expectation. Referencing Section 2 of the handout, Mr. Craig reviewed the Treasury Yield curve and noted that the slope is due to the U.S. Treasury buying back their debt. He indicated that they forecast that the Federal reserve will increase rates another 25 basis points next month and sequentially raise them another 25 basis points in the summer. He pointed out that the agencies, corporates, and asset backed securities are higher than U.S. Treasuries, and noted that those are total rate of return figures calculated for last year. Referencing Section 3 of the handout, Mr. Craig reported that the red bar of the first graph is measuring the latest cycle by the Federal reserve to raise rates, reiterating that they have raised rates five times (25 basis points each time) over a period since October 1998. He believed that there will be two more rate hikes by the end of the year. Further, he indicated that the wage costa remain low because productivity has been very high as a result of technology. He reported that a driver of the economy that is making it grow so rapidly is personal wealth gains and that the Federal reserve is trying to contain enthusiasm about the economy and prevent overspending. Regarding oil prices, Mr. Craig stated that their chart indicates that oil stocks have sometimes caused recessions, but that they are not suggesting this by any means. However, if oil prices were to spike higher and stay there, it could disrupt some of the economic models. Mr. Craig concluded by stating that, since the economy is subsequently slowing, the Federal reserve will continue to raise rates. He reiterated that the longer term yields are related to the dynamics of the Treasury buying back debt, but believes that the curve will reflect increased tightening by the Federal reserve. He indicated that the strategy is to be neutral to the duration target, favor short term investments because of the continued inversion in the U.S. Treasury curve, and continue to use corporate and asset backed securities since they outperform Treasuries. He pointed out that the last chart is a composition of the City's portfolio. He assured that, if the City needed money, it could probably work out of the portfolio and minimize losses. Richard Babbe, Senior Managing Consultant with Public Financial Management (PFM), stated that they are one of the leading public agency Volume 53 - Page 299 City of Newport Beach Study Session Minutes April 25, 2000 INDEX investment advising firms, have been doing this for over 20 years, manages nationwide, and handles over $10 billion in public funds. He indicated that they manage money exclusively for public agencies because it gives them a better understanding of the City's needs and strengths. He added that they also utilize the resources of 50 to 60 brokers. Like Wells Capital Management, Mr. Babbe reported that PFM is independent, not a broker /dealer, and manages for a fee. Further, they are an independent investment advisor that advocates active management but does not speculate. He stated that they actively look at the market, reposition the portfolios as necessary, and take the necessary action. Mr. Babbe pointed out that the economic environment for the first quarter of 2000 is given on Pages A -1 and A -2 of the Performance Review. He indicated that the yield curves for December 31, 1999 and March 31, 2000 indicate that there were dramatic changes in the U.S. Treasury Yield Curve. The short end was responding to two moves by the Federal reserve to raise interest rates 25 basis points each. As previously indicated, he stated that the longer end is due to the Treasury buying back existing long term debt. He indicated that they also saw a lot of stock market volatility during the quarter. On a total return basis, he stated that this means that U.S. Treasury indices outperformed a portfolio that would be comprised of other types of securities, like the City's portfolio. Mr. Babbe highlighted the Detail of Securities sheet and reported that the City has a very well- diversified, high quality portfolio. He noted that a predominant portion of the City's portfolio is either in AAA or A -1 securities, which are the highest credit qualities. He stated that, in PFM's approach to managing public funds, they emphasize a balance of risk and reward in focusing on very high quality securities for its clients. He stated that, on the yield to maturity at cost level, the total portfolio at quarter end was performing at 6.31 percent (gross of fees). Further, at a total return basis, he noted that the portfolio performed at 4.4 percent for the quarter on an annualized basis. Council Member Ridgeway requested clarification on the relationship between the two 25 basis point raises by the Federal reserve and the Treasuries decrease. Noting that the Federal reserve is acting on short term rates, Mr. Babbe stated that short term rates increased correspondingly to about 50 basis points over the quarter. On the intermediate and longer term of the yield curves, he indicated that the basis points are responding more to supply and demand in other actions within the economic environment, explaining that this is why those rates declined during the quarter. Council Member Ridgeway asked if there is a corresponding event between the Federal reserve raising the short term rates and the Treasuries long term rates. Mr. Babbe stated that, when talking about short term rates, one is really looking at what is going to be happening in the next six to twelve months. However, over time, you are looking at what their expectations are and what they anticipate to happen in the economy over that longer time period even though higher rates on a short term are expected. Council Member Thomson requested clarification regarding the accrued interest in the Detail of Securities chart. Mr. Babbe indicated that the amount listed is the interest that is accrued to be paid on that security since Volume 53 - Page 300 City of Newport Beach Study Session Minutes April 25, 2000 the last time interest was paid. On coupon securities, interest is paid every six months. He added that, if it has been three months since the last interest payment was paid to the City, the City would have accrued three months worth of interest. He also confirmed that the accrued interest is an unrealized credit. Council Member Thomson expressed concern relative to the market value. Mr. Babbe stated that, if the security was sold at this time based on the market values on the chart, the City would receive the market value (last column of the chart) plus any accrued interest up to the time it settled. This would be how much the City would actually realize in funds transferred to the account. Council Member Thomson asked if coupons and accrued interests are reinvested in the same factor or if they go into another pool of money. Mr. Babbe indicated that it is paid back to the account and would become liquid funds. He stated that those funds become available to the City when they are paid to the custodian account. If PFM receives direction that those fund are to be reinvested, then PFM would reinvest the funds. He confirmed that PFM is fee based, based on the portfolio, but does not include custodian services because the City properly uses a third party custodian (who is accounted for and paid for separately) to hold the securities in its name. Council Member Ridgeway asked if custodial account moneys earn interest. Mr. Babbe stated that a custodian typically will have a very short term money market fund in which interest is paid. He reiterated that PFM is an independent firm and is owned by the members of the firm. 3. SAN JOAQUIN RESERVOIR CAPACITY TRANSFER. Public Works Director Webb stated that Paul Jones, Manager of the Irvine Ranch Water District (IRWD), Greg Heiertz, Director of Engineering and Planning, and Mike Hoolihan, Assistant Director of Engineering and Planning, are present today. He reported that the City owns about 1.18 percent of the capacity rights (36 acre feet of about 3,000 acre feet) within the reservoir which is currently empty. Council Member Debay pointed out that the staff report indicates that Newport Beach and Huntington Beach have not yet agreed to accept IRWD's offer. Mr. Webb clarified that the City has not accepted the offer because it has not been presented to Council until now. He indicated that staff feels it is a good idea to accept the proposal with the conditions listed in the staff report. Mr. Jones added that The Irvine Company, who has a small ownership capacity, is also in the process of reviewing the offer. Regarding Huntington Beach, he stated that the issue has been agendized for their May 1 meeting. Mr. Jones reported that a Power Point presentation will be used to review the history and condition of the San Joaquin Reservoir and to discuss IRWD's proposal to convert the reservoir to a reclaimed water storage facility. Mr. Heieritz reported that San Joaquin Reservoir is located between the Harbor Ridge development and the currently developing Newport Ridge area, and was started in 1962. He stated that the original 1962 agreement funded the reservoir construction at a capacity of 3,050 acre feet (af). 300 of Volume 53 - Page 301 INDEX San Joaquin Reservoir (89) City of Newport Beach Study Session Minutes April 25, 2000 INDEX went to Metropolitan Water District (MWD) to meet their peak requirements for East Orange County Feeder No. 2, which serves a number of cities including Irvine and Newport Beach. He noted that the reservoir was originally owned by IRWD, but operated by MWD. Mr. Heiritz stated that the current agreements that govern the reservoir are the 1980 San Joaquin Reservoir Trust Storage Agreement (Agreement) and a 1990 memorandum of understanding (MOLT) that deals with the covering of the reservoir. The 1980 Agreement was a settlement of legal issues that evolved out of the 1962 agreement surrounding how the reservoir was owned and operated. He reported that MWD was made the trustee of the reservoir in 1980 for the mutual benefit of the seven public agency owners. He pointed out that most important aspects of the Agreement are that it redistributed ownership in proportion to the original lease amount and that the owners created an advisory committee to provide input to MWD on how the reservoir was to be operated. He emphasized that today's issue requires unanimous consent from all the owners in order to make a major change in the reservoir. Regarding ownership distribution, Mr. Heiritz reported that IRWD has the highest ownership at 47.9 percent (1,461 af) and the City has the lowest ownership at 1.18 percent (36 af). He noted that the Mesa Consolidated Water District, Huntington Beach, MWD, Laguna Beach County Water District, The Irvine Company, and South Coast Water District also have ownership of the reservoir. Mr. Heiritz discussed water quality issues, including the midge fly infestation that caused turbidity problems in the late 1970s, the accidental introduction of the African clawed ,frog, and contaminations due to the reservoir being uncovered. MWD installed chlorination in the mid -19808 which solved some of the immediate water quality problems. Also by this time, the Department of Health Services was aware of the water quality problems and requested a water quality improvement plan. He reported that the 1990 MOU was primarily a response to the water quality issues. He indicated that options for addressing these issues included covering the reservoir and providing a treatment plant downstream from the reservoir to treat the water. It was determined that the most cost effective approach was to install a floating cover on the reservoir for $17 million. MWD offered to pay the entire cost, with the condition that all the owners sell back half of their capacity so that MWD would become a majority owner of the reservoir. The sales proceed would then be used to fund the owners' portion for the covering. He reported that the 1990 MOU was to become effective when MWD awarded construction contracts; however, these were never awarded and, therefore, the MOU does not affect how the reservoir is operated. In the process of implementing the 1990 MOU, Mr. Heiritz reported that MWD was involved in a lengthy CEQA process to proceed with the covering. MWD subsequently identified the need for additional facilities to make the cover feasible. Unfortunately, in 1995, a major landslide took the reservoir out of service. He indicated that the cost to restore the reservoir for drinking water storage was estimated at about $32 million. MWD determined that covering the reservoir would not be a cost effective solution since the cost almost doubled. Mr. Heiritz showed photos of the reservoir before and after Volume 53 - Page 302 City of Newport Beach Study Session Minutes April 25, 2000 INDEX the landslide. He reported that the owners realized that something had to be done about the landslide problem, commissioned a number of studies, and designed a stabilizing buttress. Mr. Heiritz indicated that MWD determined that they do not intend to cover the reservoir, use the reservoir to store drinking water, or build a treatment plant downstream from the reservoir. Today, the three options for the reservoir are to do nothing which will keep the reservoir unusable and out of service; restore the site and allow the reservoir property to revert back to The Irvine Company; or transfer all joint interests in furtherance of IRWD's proposal to use for the seasonal storage of reclaimed water. Regarding The Irvine Company, he reported that the original deed includes a reversionary clause in the event the owners stop using the reservoir for water reservoir purposes. He indicated that the City would be paying 1.18 percent of the $100,000 to $200,000 annual maintenance cost for Option 1, the owners are potentially liable for the restoration costs ($5 million) in Option 2, but there would be no cost to the City in Option 3 and the City would realize $13,000 from the sale of its storage interest. He reported that IRWD started negotiating with the reservoir owners about a year ago and that a number of them believed that the reservoir was actually a liability, not an asset, because of the geotechnical problems and the potential of reversion to The Irvine Company and wanted to get out of the reservoir at any price. The price for storage in the reservoir was negotiated to be $1001af for the first owners, but noted that Huntington Beach, Mesa Consolidated Water District, and the City first wanted to look at their historical costs. Based on the book value, minus future liabilities for maintenance, geotechnical problems, etc., he stated that IRWD came up with a value of about $280 /af. However, that value was subsequently negotiated to $360 1af. He reported that the Mesa Consolidated Water District's Board has taken an action to accept $360 /af and Huntington Beach's staff indicated that $360 /af is an acceptable amount. Mr. Hieritz stated that IRWD feels that $360 1af is a fair offer based on the potential liability and its book value, and intends to pay all of the owners the same amount even though $1001af was negotiated earlier with some of the other owners. Mr. Hieritz reported that IRWD proposes to use the San Joaquin Reservoir for the seasonal storage of reclaimed water (maximize storage during the winter and withdraw water during the summer), with a minimum level of 300 a£ He utilized photos to demonstrate the maximum and minimum reservoir levels. In order to not become a nuisance to the surrounding community and to continually maintain good water quality, he stated that they intend to use the existing circulation system at the facility and will install treatment facilities to prevent odors. He noted that IRWD has a long history of operating reclaimed water reservoirs adjacent to residential areas. He reported that the reservoir water will be used to supply reclaimed water to Irvine, Newport Coast, and possibly Newport Beach. Mr. Hieritz believed that the benefits of the proposal are that it eliminates the need for the cover, restores the water view to the surrounding residents, increases the reclaimed water supply, reduces the need to discharge reclaimed water into the bay, and the City would realize $13,000 from the sale of its storage rights. He reiterated that a significant change such as this requires unanimous approval from all the owners. He reported that IRWD Volume 53 - Page 303 City of Newport Beach Study Session Minutes April 25, 2000 INDEX has already started preparing an environmental analysis and that there will be a kickoff meeting next week. He added that IRWD will also need to complete the transfer agreements to terminate the existing Agreement, design and construct the modifications and downstream facilities, and then begin operations. Mr. Hieritz reported that IRWD hopes to have the agreements approved by June 2000; the environmental analysis completed and the mitigation measures formulated by July 2000; complete the facility designs by January 2001; complete construction by December 2001; begin filling the reservoir by January 2002; and reach full capacity by May 2002. In response to Council Member Debay's questions, Mr. Hieritz stated that they have anticipated that they will incorporate landscaping into the design since it is a feature of most of their facilities and helps soften the impact of these types of water facilities. He also pointed out that the reservoir water will be treated to drinking water standards. He indicated that the water starts out as domestic wastewater /sewage; undergoes a multi -step process to remove the solids, organics, and nutrients; is filtered; chlorinated; and then stored in the reservoir. He clarified that reverse osmosis is generally intended to remove salt from water and would really not be required since the water will be used for irrigation. Mayor Noyes asked if the water from the plant is being pumped up into the reservoir. Mr. Hieritz stated that all the water would essentially be produced at the Michaelson Water Reclamation Plant (sea level) and then pumped into the reservoir (470 feet above sea level). In response to Council Member Ridgeway's questions, Mr. Hieritz indicated that no one knows how the African clawed frogs got into the reservoir, but there is speculation that they may have been released from UCI. He stated that they have not seen a frog problem in recent years. Further, MWD underwent a major eradication program in 1985, refilled the reservoir, and did not have a subsequent problem with the frog. He hoped that there will not be a reintroduction of the frogs since the reservoir has been empty for over five years. Regarding the midge flies, Mr. Hieritz stated that they are native to this area and expect that they will have some midges on the lake; however, they do not become as much of an issue in this sort of facility because IRWD will not be using the water for drinking. Council Member Thomson thanked Mr. Jones and Mr. Hieritz for the thorough tour they gave him around several reclaimed water reservoirs. He explained that his main concern dealt with the odors that might be emitted from the facility, but noted that he could not smell any odors during his tour. He believed, however, that there will eventually be some smell from sediment falling into the water unless there is circulation or aeration. He indicated that he has asked several times for assurances that there would be aeration within this contract for the future residents of that area. Council Member Thomson took issue with the offer, noting that the MOU values the City's share at $408,000. Further, he emphasized that the City needs to be assured that IRWD will not dump any recycled water into the bay if the City gives up ownership of the reservoir and allows IRWD to have reclaimed water in the reservoir. Regarding the landslides, he noted that the asphalt caps on the reservoir are held down by the water inside the reservoir, and that landslides occur when reservoirs are emptied. Council Member Volume 53 - Page 304 City of Newport Beach Study Session Minutes April 25, 2000 4. Thomson concluded by stating that real studies and discussions need to be conducted and that the City needs to receive assurances in the agreement that there will be no air quality problems, that the City is being paid the correct amount, and that no recycled water will ever enter the bay. In response to Mayor Pro Tem Adams' question, Mr. Hieritz indicated that IRWD has begun the environmental impact analysis and intends to incorporate the City's comments into the document. He stated that they hope to circulate a draft mitigated negative declaration sometime in June, receive comments, incorporate those comments, and adopt a document. John Skinner, 1724 Highland Drive, reported that IRWD's system was designed to be a closed system in 1960 and that all the water was to be used for reclamation. As expansion occurred, storage became more problematic because there was no market for it. He expressed concern that IRWD plans to do a plant expansion from 15 million gallons a day to 27 million gallons a day, which will cause a problem for winter storage. He reemphasized that there will not be a need to discharge into the bay since they have storage in two reservoirs, Green Acres, and possibly the San Joaquin Reservoir. He believed that the City should take a stand on this issue and complimented Council Member Thomson for bringing this point forward. Council Member Glover agreed with Mr. Skinner that the City should be in a position to have no discharge enter the bay and also concurred with Council Member Debay that IRWD should work with the citizens around the reservoir on landscaping. Regarding Mayor Noyes' question relative to notification about the environmental document, Mr. Webb stated that IRWD is not required to notify residents 300 feet from the facility. The notification would be a general publication in the newspaper and then IRWD would conduct public meetings to receive comments. Mr. Hieritz stated that IRWD welcomes public involvement, will conduct a general notice, and will also mail notices to property owners within 1,000 feet of the reservoir. Nancy Skinner, 1724 Highland Drive, expressed faith that IRWD can keep the odors down and the midge flies and frogs under control; however, agreed that there is never a need to discharge into the bay. Council Member Ridgeway stated that he supports what Council Member Thomson, Mayor Noyes, and Council Member Glover have stated. He believed that there is probably a fairly clear direction for IRWD to work with staff and take the comments into consideration. Mayor Noyes believed that, when he first heard about this proposal, the no discharge factor was a prerequisite for even starting discussions. JOINT MEETING WITH THE LIBRARY BOARD OF TRUSTEES. library Board of Trustee Chair Wood stated that the library strategic planning process, entitled "Commitment to Excellence: Library Services 2000 - 2005," consists of 50 community members and a professional facilitator that focuses on what the library would like to look like 10 years from now. Volume 53 - Page 305 INDEX Library Board of Trustees (24) City of Newport Beach Study Session Minutes April 25, 2000 s►` He reported that the members represent the youth, Newport Beach Public Library Foundation, Friends of the Library, City government, Library Board of Trustees, Newport -Mesa School District, Coastline College, Chamber of Commerce, Doily Pilot, library users, and those that do not frequent the library, and have conducted five meetings which have each lasted 2.5 to 3 hours. He indicated that the areas the group is working on are new and increased funding sources, increased technology services and resources, library's role as a cultural center, physical facilities including the branches, and community awareness. When the meetings are concluded, he stated that they hope to have a report that will be presented to, and hopefully accepted by, the Trustees so that a working goal will be established for the next five years. Library Board of Trustees Vice Chair Ryan discussed expanded services to the youth, stating that a crisis exists since young people are not reading. She indicated that reading enhances the powers of concentration, thinking skills, and ability to analyze; develops creativity; and disseminates knowledge. She indicated that it is everyone's job to encourage teens to read. She reported that the library is bringing back teen services, has two young adult librarians in the teen center, and the teen reading program visits high school classes to encourage reading. In response to Council questions, Ms. Ryan stated that teens no longer spend hours at the library since they utilize the internet more than ever. Additionally, teens find reading boring, but believed that they would get hooked on reading if they find one author they liked. She stated that there will be a population of uneducated adults in 20 to 30 years if the youth do not exercise their minds and believed that this is a social issue that may take a long time to change. Council Member Thomson stated that his 13 year old enjoys reading condensed versions of novels and believed that this will probably lead him to read full sized novels. He recommended that the library consider purchasing condensed versions of novels. Regarding promoting community awareness of the library, Council Member Debay suggested that the library invite homeowner associations to conduct their monthly board meetings at the library. Council Member Thomson asked about library security, non - resident use, and parking. Mr. Wood stated that the library does rent out space to assist with the revenue stream; however, finding a parking space is sometimes difficult. Council Member Thomson expressed concern relative to financial institutions renting space and then advertising that their event is "City sponsored." City Manager Bludau indicated that how income is being generated is discussed in Council Policy I -21, but can be reviewed. Library Board of Trustees Member Saar - Kranzley stated that everyone is proud of the library and that they have received a lot of recognition. She emphasized that they find out what customers think about the library and determine their needs by telephoning library cardholders during study sessions and by distributing a survey. She stated that they always incorporate the results and feedback into their plans, study sessions, and Volume 53 - Page 306 City of Newport Beach Study Session Minutes April 25, 2000 INDEX staff programs. She reported that some of the responses showed that people are not aware of some of the programs the library offers. Ms. Saar - Kranzley indicated that some of the issues that need to be addressed over time deal with parking and the difficulty in finding materials at the Central Library. She stated that they are looking ahead to ensure that the library is relevant to the communty five years from now since the world is changing, the internet is making more things accessible, and people are being more visually stimulated than ever before. Library Board of Trustees Member Bartolic read a portion of a brochure, entitled "The Center for the Book ", and reported that the Newport Beach Public Library was chosen as one of the sites for the California Center for the Book. The program hopes to heighten public interest in books and printing, promote reading and literacy, and encourage the interdisciplinary study of print and the electronic culture. He indicated that this is a great honor for the library because it is only bestowed on just a handful of public libraries in the nation. Regarding special collections and events, Mr. Bartolic stated that the Building Excise Tax for last two years ($100,000 a year) has been used to purchase American history and arts collections, and that they intend to purchase a literature collection with next year's allocation. Mr. Wood noted that Council has yet to budget this year's Excise Tax. Mr. Bartolic added that the library also has a nautical collection. Discussion ensued relative to the process for picking and purchasing collections. Library Board of Trustees Member Knox thanked the Martin Witte family and others for their assistance in reaching the third year of the Distinguished Speakers Lecture Series and the Distinguished Panel Discussion Series, which are joint efforts by the Newport Beach Public Library and the Newport Beach Public Library Foundation. He reported that three well attended and interesting Panel Series programs were presented last fall (Tale of Three Cities, Law and Crime in Orange County, and Eye on Orange County Education). He stated that this year's Distinguished Speakers Lecture Series featured Susan Faludi and Orville Schell, and reported that Tom Brokaw is the speaker on April 28 and Jay Gould will be speaking on May 19. Mr. Knox stated that they added a Saturday afternoon presentation at a greatly reduced ticket price since Friday night presentations have been sold out two years straight. He reported that the committee's budget was about $90,000 and that they are financially secure due to sponsor assistance. Mr. Knox reported that Tom Brokaw has donated back $10,000 of his honorarium to the library but will be donating the other $10,000 to two different charities. He indicated that the Trustees voted to use the funds to bring the library into the 21st Century by offering 500 a -books at an inexpensive cost. He assured everyone that they still believe in the bound book, but that this gives another valuable choice to the community. In response to Council Member Debay's question, Mr. Knox indicated that they will be showing a video of Tom Brokaw on Saturday because he cannot attend, but arrangements have also been made for Jess Marlow, Stan Chambers, and Vikki Vargas to be in attendance at Saturday's series. Volume 53 - Page 307 City of Newport Beach Study Session Minutes April 25, 2000 ltegardmg video taping the other speakers, he believed that the writers would probably want more money. Jene Witte, Distinguished Speaker Series Underwriter, stated that the Witte family is proud of the Distinguished Speaker Series and grateful that they could honor Martin Witte. However, she stated that the committee was led to believe that Tom Brokaw would waive all of his honorarium or return it to the committee, and took issue that $10,000 of the honorarium was going to two charities outside the City. She asked who is going to tell the major contributors that they were not going to get this money back since they already budgeted it into next year's budget. Further, she noted that the committee raised the money and was not made aware it was going to be used to purchase e- books, believing this would be an improper use of funds. Mr. Knox reported that the honorarium for someone like Tom Brokaw is normally between $50,000 and $100,000. Adele Mann, Friends of the Library, announced that the library book store is always in need of used books and reported that the store made over $12,000 in March. PUBLIC COMMENTS - None. ADJOURNMENT - 6:25 p.m. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * ** The agenda for the Study Session was posted on April 19, 2000, at 2:20 p.m. on the City Hall Bulletin Board located outside of the City of Newport Beach Administration Building. City Clerk Recording Secretary Mayor Volume 53 - Page 308 INDEX CITY OF NEWPORT BEACH City Council Minutes Regular Meeting April 25, 2000 - 7:00 p.n�. ��r INDEX — 4:00 p.m. CLOSED SESSION — 6:30 p.m. to separate minutes] — None. RECESSED AND RECONVENED AT 7:20 P.M. FOR REGULAR MEETING ROLL CALL Present: Thomson, Glover, Adams, Debay, Ridgeway, O'Neil, Mayor Noyes Absent: None Pledge of Allegiance - Council Member Debay. Invocation by Pastor Bruce Bender, Calvary Chapel of Costa Mesa. Presentation by Newport Beach Conference and Visitors Bureau concerning revenue generated by visitor industry. Rosalind Williams, President of the Newport Beach Conference and Visitors Bureau (CVB), stated that tourism revenue generated during the 1998/1999 fiscal year totaled $21,202,168. She stated that the money was an increase over the prior year and represents 100% of the transient occupancy tax, 100% of the harbor marine tax, 78% of the parking fees and fines and 50% of the sales tax. She stated that the CVB has many partners in the community and is proud to make such a contribution to the City's general fund. Ms. Williams acknowledged CVB staff members, present in the audience. Mehdi Eftekari, CVB Board of Directors Chairman and General Manager of the Four Seasons Hotel, acknowledged the efforts of the CVB and thanked the City Council for their support. Mr. Eftekari and Ms. Williams presented the facsimile check to the City. Mayor Noyes noted that the total is about $5 million more than the City receives from property tax. Presentation of Tree City USA Awards by Thom Porter, Community and Urban Forester, Department of Forestry, State of California. Thom Porter, California Department of Forestry (CDF), stated that the City supports its residents and visitors by having a community forestry program that gives back to the community by planting and maintaining trees. Mr. Porter added that sometimes this involves the removal of trees that may be causing damage. He stated that the City does a superior job and is, therefore, receiving two awards. He Volume 53 - Page 309 City of Newport Beach City Council Minutes April 25, 2000 `110117o1Y stated that the City has about 30,000 trees with plans for more trees in the future. Mr. Porter presented the Growth Award for superior tree care and urban forestry, and the Ten -Year Award indicating that the City has been a Tree City for ten years. Mayor Noyes and Marcy Lomeli, Park & Tree Superintendent, accepted the awards on behalf of the City. Film Festival Presentation. Gregg Schwenk, Newport Beach Film Festival, thanked the City Council for the City's financial and philosophical support of this year's film festival. He also thanked Lucy & Leigh Steinberg and Rosalind Williams. Mr. Schwenk read from a list of 2000 Film Festival highlights. He said the number of short films puts the Newport Beach festival up with the top venues and the number of feature films picked up for distribution moves the Newport Beach festival from just a destination festival to a market, as well. Mr. Schwenk thanked the sponsors of the event, and singled out the Marriott Hotel & Tennis Club as being a true partner. He concluded by stating that plans are already underway for next year's event. Mayor Noyes thanked Mr. Schwenk for his efforts and time in pulling the entire event together, and also noted the Economic Development Committee for their support. Mr. Schwenk added his appreciation for the efforts of the Planning Department staff, particularly Senior Planner Christy Teague. CITY COUNCIL ANNOUNCEMENTS OR MATTERS WHICH COUNCIL MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION. ACTION OR REPORT (NON- DISCUSSION ITEM): • Council Member Ridgeway announced that the Newport Beach Police Department participated in the Baker to Vegas 120 -mile twenty -man team race a few weeks prior. He stated that there were 195 teams that competed and that Newport Beach placed third, which was also the best in the County. Council Member Ridgeway stated that the City has been busy planting trees, including a reforestation project on Balboa Peninsula with approximately 125 queen palms planted. Council Member Debay referred to the minutes of the Parks, Beaches & Recreation Commission in item #16 of the current agenda, addressing West Newport Park. She stated that a low block wall with lexan glass panels highlights the area. She added that there was quite a battle to put the glass in instead of having a solid block wall, and showed a process that resulted in unobstructed views of the ocean. Council Member Debay stated that the glass has since clouded and needs to be replaced. She stated her support for replacing the panels as a part of the upcoming budget. Mayor Pro Tem Adams congratulated the 22 graduates of the fifth class of the Newport Beach Citizens Police Academy. • Council Member Thomson reported that the Edison Company has cut the upper ten feet of the power poles on San Joaquin Hills Road up to Newport Coast. He said a committee is working to underground the utilities in the area. Volume 53 - Page 310 City of Newport Beach City Council Minutes April 25, 2000 INDEX CONSENT CALENDAR READING OF MINUTES /ORDINANCES AND RESOLUTIONS 1. MINUTES OF THE ADJOURNED REGULAR AND REGULAR MEETING OF APRIL 11, 2000. Waive reading of subject minutes, approve as written and order filed. 2. READING OF ORDINANCES AND RESOLUTIONS. Waive reading in full of all ordinances and resolutions under consideration, and direct City Clerk to read by title only. RESOLUTION FOR ADOPTION 3. ONE -HOUR PARKING RESTRICTION ON WEST COAST HIGHWAY. Res 2000 -32 Adopt Resolution No. 2000 -32 establishing a one -hour parking restriction in 1 -Hr. Parking front of 1100 West Coast Highway. (85) CONTRACTS AND AGREEMENTS 4. Item removed from the Consent Calendar by Council Member Glover. 5. AGREEMENT WITH THE ORANGE COUNTY TRANSPORTATION C -3342 AUTHORITY (OCTA) FOR TRAVELTIP PROGRAM. Authorize the OCTA/ Public Works Director to sign an agreement with the Orange County TravelTip Transportation Authority (OCTA) to formalize the installation of TravelTip Program equipment and define the City's role in the TravelTip Program. (38) 6. SEWER AND STORM DRAIN LINING PROJECT (C -3271) - C -3271 COMPLETION AND ACCEPTANCE. 1) Accept the work; 2) authorize the Sewer & Storm City Clerk to file a Notice of Completion; 3) authorize the City Clerk to Drain Lining release the Labor and Materials bond 35 days after the Notice of Completion (38) has been recorded in accordance with applicable portions of the Civil Code; and 4) release the Faithful Performance bond 1 year after Council acceptance. 7. NEWPORT HEIGHTS STREET LIGHTING (C -3258) - COMPLETION C -3258 AND ACCEPTANCE. 1) Accept the work; 2) authorize the City Clerk to Newport file a Notice of Completion; 3) authorize the City Clerk to release the Labor Heights and Materials bond 35 days after the Notice of Completion has been recorded Street Lighting in accordance with applicable portions of the Civil Code; and 4) release the (38) Faithful Performance bond 1 year after Council acceptance. 8. Item removed from the Consent Calendar by a member of the audience. 9. NEWPORT DUNES RESORT ENVIRONMENTAL IMPACT REPORT. C -3235 Approve amendment to the professional service agreement with LSA Newport Dunes Associates, Inc. Resort EIR (38) 10. BALBOA PIER CONCESSION - RUBY'S DINER. Authorize Mayor C -2326 Volume 53 - Page 311 City of Newport Beach City Council Minutes April 25, 2000 INDEX Noyes to execute the Balboa Pier Concession Agreement with Ruby's Diner, Ruby's Diner Inc, on behalf of the City. (38) Council Member O'Neil abstained from voting on this item. 11. STUDY THE FEASIBILITY OF WITHDRAWAL FROM METRO C -3341 CITIES FIRE AUTHORITY AND MERGING THE POLICE Metro Cities DEPARTMENT AND THE FIRE AND MARINE DEPARTMENT Fire Authority/ EMERGENCY DISPATCH, TECHNOLOGY AND INFORMATION Emergency SUPPORT SYSTEMS (C- 3341). 1) Authorize the City Manager to Dispatch, negotiate final scope of work and final contract price with Emmack Cronan Technology and Group, Inc. to perform a study regarding the withdrawal from the Metro Management Cities Fire Authority and the merging of the Police Department and Fire and Information Marine Department Emergency Dispatch, Technology and Management Support Systems Information Support Systems; and 2) award a contract (C -3341) to Emmack (38) Cronan Group, Inc. of Reno, Nevada for a price not to exceed $75,000 and authorize the Mayor and the City Clerk to execute the contract. MISCELLANEOUS ACTIONS 12. PLANNING COMMISSION AGENDAS FOR APRIL 13 AND APRIL 20, Planning 2000. Receive and file. (68) 13. REVISION TO OUR HAZARDOUS MATERIALS EMERGENCY C -3343 RESPONSE SYSTEM. Discontinue the Newport Beach type II hazardous Hazardous material team operations; contract with the Orange County Hazardous Materials Materials Emergency Response Authority (OCHMERA) for type I hazardous Emergency material team response; and maintain three (3) certified hazardous Response materials specialists at the captain rank and one in the fire prevention (38) division to provide expertise on hazardous material incidents and issues and assist with the hazardous materials disclosure program. 14. BUDGET AMENDMENT IN THE AMOUNT OF $2,500 TO INCREASE BA -057 REVENUE ESTIMATES TO REFLECT THE DONATION RECEIVED Youth Track & FROM THE NEWPORT BALBOA ROTARY CLUB FOUNDATION TO Field Meet SUPPLEMENT THE YOUTH TRACK AND FIELD MEET AND TO (40/62) INCREASE EXPENDITURE APPROPRIATIONS. Approve BA -057. 15. EXTENSION OF TIME FOR BALBOA THEATER BUILDING PERMIT C- 3248/Balboa APPLICATION. Approve extension to May 15, 2000. Theater (38) 16. Item removed from the Consent Calendar by Mayor Pro Tern Adams. 17. Item removed from the Consent Calendar by Council Member Debay. S23. Item removed from the Consent Calendar by City Manager Bludau. S24. SUPPLEMENTAL MEMORANDUM OF UNDERSTANDING WITH C- 2051/C -2059/ NEWPORT BEACH CITY EMPLOYEES ASSOCIATION, EMPLOYEES C -2065 LEAGUE, AND PROFESSIONAL AND TECHNICAL EMPLOYEES City Employees ASSOCIATION REGARDING EMPLOYEE BENEFIT PLAN Assoc./Employees Volume 53 - Page 312 City of Newport Beach City Council Minutes April 25, 2000 CHANGES. Approve Supplemental Memorandum of Understanding (MOUs) with the Newport Beach City Employees Association, Employees League, and Professional and Technical Employees Association. Motion by Mayor Pro Tern Adams to approve the Consent Calendar, except for those items removed (4, 8, 16, 17 and S23) and noting the abstention on Item #10 by Council Member O'Neil. The motion carried by the following roll call vote: Ayes: Thomson, Glover, Adams, Debay, Ridgeway, O'Neil, Mayor Noyes Noes: None Abstain: None Absent: None ITEMS REMOVED FROM THE CONSENT CALENDAR 4. BALBOA BAY CLUB REDEVELOPMENT ADDENDUM TO LEASE (contd. from 4/11/00). City Attorney Burnham stated that in July of 1999, the City Council approved minor amendments to the proposed redevelopment plan for the Balboa Bay Club, and that these changes required an amendment to the coastal development permit that was issued in 1996. He stated that the Coastal Commission has suggested that there needs to be confirmation through a lease addendum, that public access is confirmed and obligations for water quality, if not performed by the Bay Club, would be handled by the City. He concluded by stating that the proposed lease amendment is designed to satisfy the conditions that the City expects the Coastal Commission will impose on the modifications to the coastal development permit. Council Member Glover read the recommended action, as stated in the staff report. She confirmed with City Attorney Burnham that the action only applies to the Coastal Commission permit. Additionally, she asked what the City Attorney would consider as "substantive" changes. City Attorney Burnham responded that such changes would include anything that changes the size of the project or increases any of the obligations of the City, beyond what is specified in the addendum to the lease. Council Member Glover stated that everything that happens at the Balboa Bay Club, since it sits on public property, needs to come before the public and should be voted on by the City Council. City Attorney Burnham added that changes to view corridors, public walkways or size of facilities would also be considered substantive. He explained that the reason for the recommended action was to avoid returning to the City Council if the changes were only minor. Council Member Glover expressed her concern for leaving the public out, and asked what scenario the City Attorney was considering. City Attorney Burnham stated that he was assuming the Coastal Commission might request minor changes that don't relate to size or public access, but he understands Council Member Glover's concern and would be happy to bring the addendum back for public input and review. Volume 53 - Page 313 110 11 League/Prof. & Tech. Employees Association (38) C -519 Balboa Bay Club Lease (38) City of Newport Beach City Council Minutes April 25, 2000 INDEX 91 Motion by Council Member O'Neil to authorize the Mayor to execute the proposed Addendum to Lease or a modified Addendum so long as the modifications are not substantive. The motion carried by the following roll call vote: Ayes: Adams, Debay, Ridgeway, O'Neil, Mayor Noyes Noes: Glover Abstain: Thomson Absent: None DAHLIA AVENUE STREET ENDS - FERNLEAF AVENUE SLOPE REPAIR (C -3157) -AWARD OF CONTRACT. Public Works Director Webb stated that the contract low bidder is Metro Builders & Engineers Group, Ltd. and staff is recommending that the contract be awarded to that contractor. Council Member Debay confirmed that the house that was hanging over the edge of the area was removed. Dan Purcell, 3 Canyon Lane, stated his support for the contract since he has felt that the slope could give way at any time. He thanked the City for their cooperation in working with the residents on the wall. Mayor Noyes pointed out the drawings on display at the meeting. He said he expects it to be a good project. Council Member Debay suggested to Mr. Purcell that the residents might want to consider undergrounding the utilities in the area. Motion by Council Member O'Neil to approve the plans and specifications; award contract (C -3157) to Metro Builders & Engineers Group, Ltd. for the total bid price of $457,612 and authorize the Mayor and the City Clerk to execute the contract; establish an amount of $45,000 to cover the cost of unforeseen work; establish an amount of $20,500 to cover the cost of construction services; authorize a budget amendment (BA -056) transferring $119,851.26 from Miscellaneous Slope Repairs Account No. 7014- C5100508 into Account No 7013- C5100023; and authorize a budget amendment (BA -056) transferring $6,727.70 from the NPDES Program Account No. 7012- C5100011 into Account No. 7013- C5100023. Council Member O'Neil added that the project is long overdue and he is pleased that everything is in place to begin the work. He said it has been a long and complicated process. Public Works Director Webb stated that the project will take three to five months to complete, with work beginning in about one month. Council Member Debay confirmed that one lane would be closed at times. The motion carried by the following roll call vote: Volume 53 - Page 314 C -3157 BA -056 Dahlia Avenue Street Ends - Fernleaf Avenue Slope Repair (38/40) City of Newport Beach City Council Minutes April 25, 2000 Ayes: Adams, Debay, Glover, Thomson, Ridgeway, O'Neil, Noes: None Abstain: None Absent: None 16. CITY STREET TREE DESIGNATION LIST. Council Member Debay referred to the Parks, Beaches & Recreation (PB &R) Commission minutes included in the staff report and confirmed with Public Works Director Webb that CalTrans is not responsible for Seashore Drive. General Services Director Niederhaus stated that the staff report includes answers to questions that he has received from members of the City Council. He explained that the street tree designation list is maintained by Council Policy G -6, reviewed annually and processed for change by the PB &R Commission. He stated that the current list has so many revisions because the list wasn't ever completed and new information has been received about trees that are unsuitable for parkways or have environmental problems. He added that the list is an effort by staff and the PB &R Commission to rejuvenate or improve the tree population throughout the City. He indicated that there has been some concern that the number of revisions would cause a significant change in the City's treescape. He said that this shouldn't be a problem since, of the City's 30,000 trees, less than 200 trees would probably be removed per year. Council Member Glover suggested that General Services Director Niederhaus and Building Director Elbettar should work together on new homes being built in the City and insure that the tree policy is being followed. General Services Director Niederhaus confirmed that the City is responsible for planting street trees. Council Member Glover suggested that a future study session should address this specific requirement of the tree policy. City Manager Bludau confirmed that Council Member Glover was referring to trees on City property being removed by private homeowners. Dr. Jan Vandersloot, 2221 East 16th Street, SPON (Stop Polluting Our Newport) Tree Committee, stated that he has been involved with the revisions to the street tree designation list since the process began. He referred to his letter of April 25, 2000, and stated the list will dramatically change the streetscape in the City because changes are being made to 437 streets, or 85% of the streets in the City. He added that the new trees being proposed are smaller than the trees that would be removed. Dr. Vandersloot discussed the most common trees being added to the list, as referred to in his letter, and the problems with each for Newport Beach. He suggested that the City Council not accept and file the report. He suggested that the City Council, instead, authorize staff and the PB &R Commission to analyze tree replacements individually and make a decision for each street as the need arises. Council Member Glover stated her concern for the number of trees being cut down in the City, but did state her support for slow growing trees since they Volume 53 - Page 315 INDEX Tree Designation (62) City of Newport Beach City Council Minutes April 25, 2000 INDEX will last longer and require less maintenance. She referred to the look of the trees in South County, but stated that it was partly due to the undergrounding of their utilities. Dr. Vandersloot stated that he did not have an issue with the slow growth of a tree, but more with its final size. Council Member Glover pointed out that fast growing trees do not have the lasting power of slower growing trees. Dr. Vandersloot stated that many of the new trees being added to the list will require more maintenance because they are exotic and more delicate. He cited the Hong Kong Orchid as an example. He concluded by stating that the smaller trees selected will reduce the overall tree canopy in the City. Council Member Debay referred to the last paragraph of the staff report that outlines how a street tree designation can be changed and stated that there is the opportunity for residents to submit petitions. Mayor Noyes asked for a clarification of the appeal process. General Services Director Niederhaus stated that, to date, the PB &R Commission has approved every street tree petition submitted when at least 60% of the people on the street have signed it. He noted that this appeal process makes the list an ideal list since it is easy to change. He further explained that the street tree designation can be changed for the entire length of a street or for parts of a street between main streets, or other such boundaries. Lastly, he responded to a statement made earlier by Dr. Vandersloot about there being 88 reforestation requests. General Services Director Niederhaus explained that reforestation requests were accumulated during the revision of Council Policy G -1. Once the revision process was completed, the requesters were notified and only 35 were still interested in having their requests processed. He added that of the ten up for review at the following week's PB &R Commission meeting, staff was only recommending the approval of two of the requests. Alden Kelley, a Fullerton resident, stated that he is a consulting arborist hired by SPON to work with the City and individuals in regard to some of the tree problems in the City. He said that a tree problem he sees on the horizon is with the proposed street tree designation list. He said a large proportion of the proposed replacement trees are considered to be tree shrubs. He said that training them to become single- stemmed trees with extensive maintenance can be done, but they would most likely end up as large shrubs. Mr. Kelley also noted that the Ten -Year Award received earlier in the evening was based on programs that preceded the recently adopted Council Policy G -1. He continued by stating that some of the trees on the proposed street tree designation list are inappropriate for the climate zone in Newport Beach, or are too small. He added that no specifications were included with the list, and concluded by stating that the list needs to be redone. Pat Beek, Chair of the PB &R Commission, clarified that the Commission only intended to create a manual. She stated that many streets did not have a tree designation prior to the proposed list. Ms. Beek added that the list was created through public input and nothing stops changes from being made in the future. She clarified that the list only applies to tree Volume 53 - Page 316 City of Newport Beach City Council Minutes April 25, 2000 INDEX that many streets may never see a change. Mayor Pro Tem Adams asked for staffs response to some of the arguments raised by Mr. Kelley, and the reason for the selection of various trees. City Manager Bludau stated that the item is on the agenda as an informational report only and, therefore, action cannot be taken by the City Council at the current meeting. He suggested that a joint study session might be held with the PB &R Commission to review the process and the trees chosen. He added that the final tree list should be adopted by resolution. Mayor Pro Tem Adams agreed that it might be a good idea to address some of the major concerns, without repeating the same process that has already been performed. City Manager Bludau noted that the next three Study Sessions are devoted to the 2000 -2001 budget. Mayor Pro Tem Adams decided that it might not be appropriate for the General Services Director to justify the selection of each of the trees at the current meeting. He did, however, refer to the letter contained in the staff report from the Balboa Peninsula Point Association and asked how their recommendations were addressed. In response to earlier statements, General Services Director Niederhaus began by explaining that Council Policy G -6 includes the instructions for the care and planting of street trees. He also stated that the trees were selected using a manual that was developed by the urban foresters of all major cities in the State, Southern California Edison (SCE) and other public utilities and agencies that have to deal with trees. He apologized that he did not have the manual with him at the current meeting, since it provides detailed information on each tree selected. He added that the manual could be made available upon request. Mayor Noyes asked if smaller trees, in general, were looked at for the street tree designation list. General Services Director Niederhaus stated that the trees selected are not necessarily miniatures, but will grow to twenty to thirty feet in height. He said the City is trying to address all of the issues involved. Mayor Noyes stated his understanding for the limitations to having all large trees. Council Member Glover stated that she attended a meeting with SCE and they very honestly stated that they are trying to make shrubs out of trees, so that all growth is below their electrical lines. SCE added that the cities of Laguna Beach and Pasadena are trying to work with SCE on creating new policies. Council Member O'Neil stated that it is difficult to resolve tree issues because there are different emotional feelings. He acknowledged the PB &R Commission for handling many of the City's tree issues and feels that the proposed street tree designation list provides enough flexibility. Council Member O'Neil suggested that the report be received and filed. Volume 53 - Page 317 City of Newport Beach City Council Minutes April 25, 2000 Mayor Noyes asked that staff and the PB &R Commission be sensitive to the issues brought before them by the public. He stated his belief that through diligence, many tree issues will be resolved. 17. GENERAL DREDGING PERMIT UPDATE. Deputy City Manager Kiff stated that the City has held a ten -year permit to allow limited maintenance dredging in the bay, and that renewing the permit with the Coastal Commission has been a struggle. He stated that the Coastal Commission has applied a number of different criteria to its proposed permit that most individuals think are too onerous to deal with. Deputy City Manager Kiff stated that the Coastal Commission has been willing to talk with the City on some of the key concerns, such as the requirements for the quality of dredging material that can go on the beach versus the quality that has to go out to sea. He stated that the City is on the May 9, 2000, Coastal Commission agenda, which will be held in Santa Rosa. He stated that he will provide an update to the City Council that same day at the City Council's regular meeting. Council Member Debay asked if it would be helpful to have a Council Member present at the Coastal Commission meeting. Deputy City Manager Kiff stated that it may be and he'll know more after receiving their immediate response to the packet recently submitted by the City. Council Member Debay also suggested that staff meet with a City of Huntington Beach Council Member who is on the Coastal Commission. Deputy City Manager Kiff stated that staff met with her the previous week, and that she was very helpful. Council Member Ridgeway asked when the chemical analysis test would be performed on the areas excluded from the permit. Deputy City Manager Kiff stated that they want to do them as soon as possible, and that Fire & Marine Deputy Chief Melum was in the process of soliciting bids. Council Member Ridgeway thought that the information should be available by the May 9, 2000, Coastal Commission meeting. Deputy City Manager Kiff stated that it probably wouldn't be but that staff is expecting to have a condition in the permit that will allow for the excluded areas to be added once they are proven clean. Mayor Noyes noted that the recommended action was to receive and file the report. 523. REORGANIZATION OF MARINE ENVIRONMENTAL DIVISION City Manager Bludau referred to page two of the staff report and the reference to the location of the office for the personnel of the Harbor Resources Division. He stated that he originally planned not to renew the lease with Heritage Yacht Brokers but, has since, spoken with them and has decided that there might be another alternative worth exploring, such as the use of one of the apartment units. Mayor Noyes noted that the recommended action was to receive and file the Volume 53 - Page 318 INDEX Dredging Permit Update (51) Marine Division (51) City of Newport Beach City Council Minutes April 25, 2000 report. Council Member Ridgeway agreed that yacht brokerages are being misplaced in the bay, and the City should be conscious of that and support their presence. Mayor Noyes acknowledged the group of students in the audience and asked for one of them to speak about why they were in attendance at the meeting. William Tran, a University of Irvine student, stated that the students at the meeting were fulfilling a requirement of E109, Urban Planning. He stated that they were being required to attend two public meetings and get an idea of what goes on in various cities in regards to urban planning. Mayor Noyes also suggested that the students might want to attend a Planning Commission meeting. Assistant City Manager Wood encouraged the students to stay through the current meeting to Item #21, the discussion on the General Plan Update. Kathy Harrison, 1621 Lincoln Lane, Arts Commission Chairman, stated that she wanted to announce three upcoming events in Newport Beach. The first was the Juried Spring Show artists' reception to be held at City Hall on May 5, 2000. She stated that Mayor Noyes would be in attendance and presenting the awards to the winners of the juried show. Ms. Harrison also encouraged local art organizations and groups to get their applications in by April 27, 2000 for the cultural arts grant program. She stated that the Arts Commission would be looking at the requests and making a recommendation to the City Council in May. Thirdly, Ms. Harrison announced the Imagination Celebration to be held at the Central Library on May 6, 2000. Allen Beek, 2007 Highland, stated that he is concerned about statements he has heard and read in local publications by people who say that if the City doesn't accept a project, it will just go to a nearby city. Mr. Beek argued that if a project is accepted in Newport Beach, the available parcel in the nearby city would also be developed. He concluded by stating that the available sites in nearby cities are going to be developed, regardless of what is done in Newport Beach. 18. UNSCHEDULED VACANCY ON THE PARKS, BEACHES AND RECREATION COMMISSION. By the following roll call vote, Debra Allen was appointed to fill the vacancy on the Parks, Beaches and Recreation Commission: Debra Allen: Thomson, Glover, Adams, Debay, Ridgeway, O'Neil, Mayor Noyes Roy Englebrecht: None Abstain: None Absent: None Volume 53 - Page 319 INDEX Parks, Beaches & Recreation Commission (24) City of Newport Beach City Council Minutes April 25, 2000 Council Member Debay thanked the people who applied for the position and noted that there are many qualified people who offer their services as volunteers to the City. 19. UNSCHEDULED VACANCY ON THE PLANNING COMMISSION. Mayor Noyes announced that the Ad Hoc Appointments Committee nominated Barry Eaton and Earl McDaniel for the current vacancy on the Planning Commission. Motion by Council Member Ridgeway to confirm the nomination of Barry Eaton, Earl McDaniel and Christi Bettingen for the current vacancy on the Planning Commission; and schedule the appointment for May 9, 2000. The motion carried by the following roll call vote: Ayes: Thomson, Glover, Adams, Debay, Ridgeway, O'Neil, Mayor Noyes Noes: None Abstain: None Absent: None 20. STATUS REPORT ON SANTIAGO DRIVE SPEED REDUCTION PROGRAM (contd. from 3 /28/00 & 4/11/00). Item continued to May 9, 2000. 21. GENERAL PLAN UPDATE - DISCUSSION OF EXISTING GENERAL PLAN (contd. from 4/11/00 Study Session). Planning Director Temple provided a brief history of the staff reports prepared for previous City Council meetings on this item. She stated that the current report tries to show how the City of Newport Beach's process is different from how other communities have approached a general plan program. She stated that she did find one rural community in Central California that had used the visioning process to update their general plan. Council Member Debay referred to page one of the staff report and the list of weaknesses in the City's current General Plan and, specifically, the item regarding the impact of visitors to local resources and residents. She asked how a general plan can address traffic and circulation issues for visitors coming to the beach in the summer. Planning Director Temple stated that the City may never be able to fully satisfy the need people have to move around the beach areas during the peak summer weekend hours. She added that what the City can do is attempt to maintain the circulation system in such an improved fashion and in such a way that the best use of the system is accomplished. She referred to the timing of signals on Newport and Balboa Boulevards as an example. She summarized by saying that it's probably more a matter of management. Council Member Debay noted that the City's Traffic Phasing Ordinance requires a developer to be responsible for improving traffic circulation. Planning Director Temple confirmed that the Traffic Phasing Ordinance Volume 53 - Page 320 u RFITI NA Planning Commission (24) Santiago Drive Speed Reduction (85) General Plan Update (68) City of Newport Beach City Council Minutes April 25, 2000 INDEX implements some of the broader circulation goals contained in the Circulation Element, and is mentioned within the Element. Council Member Debay asked the Public Works Director to explain how funding is received to make street improvements that improve circulation and also if CalTrans had been contacted to perform an update and improvement of the City's signal system. Public Works Director Webb began by stating the Transportation/Development Services Manager Edmonston had been in contact with CalTrans and received input on some small specific areas but hasn't received the final report yet. Public Works Director Webb continued by stating that the Circulation Element and the City's system do not provide for maximum beach uses, but instead the facilities are designed for the day -to -day traffic. He stated that the funds available for implementing the Circulation Element are received from numerous sources including the gas tax, Measure M, competitive Measure M funds, Fair Share Fees, CIOSA (Circulation Improvement and Open Space Agreement) program, and some federal funding through OCTA (Orange County Transportation Authority) and the AHRP (Arterial Highway Rehabilitation Program). Public Works Director Webb listed some of the projects that have been completed and said that the City does actively pursue outside funding. Council Member Debay commented that the Circulation Element is one of four major concerns when discussing an update of the General Plan. Mayor Pro Tem Adams noted that the item before the City Council at the current meeting was the Land Use Element. He referred to the tables in the staff report showing the estimated growth for the various statistical areas in the City, as presented in the 1988 Land Use Element. He asked how these projections were made in 1987, and what the difference was between the general plan growth column and the projected column. Planning Director Temple stated that the tables are intended to be summary tables, and that the actual regulatory language is the controlling factor. She stated that for the commercial developments, a parcel by parcel database was developed which accounted for all the square footage and land uses in increments as used in the traffic model. She stated that the projections were done based on two different approaches, one being through the application of floor area ratios and the other through the application of specific floor area limits. She added that for most of the larger commercial districts, actual square footage limits were used as the established limits. Mayor Pro Tem Adams asked what accounted for the difference between the general plan projection and the projected growth, when they did differ. Planning Director Temple explained that it is the difference between what was on the ground at the time the Land Use Element was written and what the General Plan limitation would allow. Mayor Pro Tem Adams confirmed that the existing projection column added to the general plan growth column equaled the projected column, in the tables previously referenced. He additionally asked where the City currently was in regards to the projected growth estimated in 1987. Planning Director Temple stated that one of the preliminary exercises of any general plan update would be to update the existing database with this information. She added that the database for the traffic model has been kept current. Volume 53 - Page 321 City of Newport Beach City Council Minutes April 25, 2000 INDEX Mayor Pro Tem Adams referred to Appendix A of the 1988 Land Use Element, which listed general plan amendments incorporated into the Land Use Element since October 24, 1988. He noted that amendments through 1998 were listed and requested any additional amendments to date be added to the list. Council Member Glover referred to Council Member Debay's previous comments and the general plan weakness addressing the impact of visitors to the residents of the City. Council Member Glover noted that there are different types of visitors to the City, some who come from nearby cities and shop at such places as Fashion Island and others, such as those who come to enjoy the beach, who provide very little revenue to the City. She noted that there is an unmet financial need and the rest of the City is looked at to pay for services, such as Police. She noted that this makes Newport Beach very unique and that the revenue flow must continue. Council Member Glover concluded by stating that a general plan update should be done, and that the process should begin now. She noted that support staff will most likely be needed. Mayor Pro Tem Adams stated that there are twelve policies in the Land Use Element. He stated his concurrence with staffs discussion in the staff report of the weaknesses of the current General Plan. He briefly mentioned these, as listed on page one of the staff report. He pointed out that the twelve policies are still applicable today and he feels that the City has done a good job of adhering to them. Council Member Thomson confirmed with Planning Director Temple that a full update of the General Plan would cost several hundred thousand dollars and take approximately 18 months to complete. Council Member Thomson agreed with Mayor Pro Tem Adams that the City has a good start, referring to some of the statistical areas that are not experiencing a lot of growth. He added that some of the growth areas and changing areas do need to be addressed in regards to traffic, visitors and revenue. He asked what vehicle could be used to facilitate these areas. Assistant City Manager Wood stated that what might help these areas the most is to look at the philosophy for the areas and the direction the City would like to see them go. She noted the policies from the 1972 General Plan Policies, and specifically land use supporting policies (f) and (g) which related to destination tourist facilities and water - oriented recreational facilities. Assistant City Manager Wood expressed her opinion that looking at the philosophy and policies for various areas would be a better place to start than updating databases. Council Member Thomson agreed, but added that too much visioning could be done and he's ready for things to get done. He said parts of the City are in need of some infrastructure changes. Council Member Ridgeway referred to the 1972 General Plan Policies and noted that they are non - quantitative, while the current General Plan is too regulatory. He stated that the City should concentrate on the Land Use and Circulation Elements first. He referred to the land use general objective in the 1972 document, which states that Newport Beach is a low- density residential - recreational area. He suggested that the City may just need to Volume 53 - Page 322 City of Newport Beach City Council Minutes April 25, 2000 re- establish this objective from 1972. Additionally, he referred to land use supporting policy (e), which related to commercial areas. Council Member Ridgeway stated that the airport area is different because it is regional in nature, not residential. He stated that the only thing missing from the 1972 document is a discussion of the airport area. He stated his belief that the City can address the circulation element and the build -out in the airport area, while at the same time maintaining the quality of life in the residential neighborhoods. In conclusion, he stated that the 1972 document was very insightful and is still very timely. Mayor Pro Tem Adams asked Council Member Ridgeway's opinion of the current document, the 1988 Land Use Element. Council Member Ridgeway commented that the 1988 document didn't get into policy, but was more specific. He stated that he thought the City wanted to get into a discussion on who and what the various areas of the City are. He agreed that the peninsula is an original part of the City, has a deficient infrastructure and will never contribute to the general fund. He added that the peninsula is the largest single recreation element of the City, is world -known and the City has an obligation to maintain it. Council Member Glover clarified that, earlier, she was only talking about the financial implications of the peninsula. Council Member Ridgeway noted that the City's operational budget is about $85 million with the majority of revenue coming from property tax, sales tax and transient occupancy tax (TOT). City Manager Bludau stated that TOT provides approximately $7 million, sales tax $15 million and property tax $18 million. Council Member Ridgeway stated that the City is a long -term residential community with a few regional areas that need to be addressed and included into the overall quality of life in the City. He concluded by stating that a general plan and circulation update should be done.. Council Member Debay confirmed with Planning Director Temple that staff is looking for the City Council to receive and file the staff report, and direct staff on the next steps of the general plan update process. Council Member Debay confirmed that the housing element process is underway and needs to continue since it is mandated. She requested that staff provide the City Council with more information on the priority of the weaknesses and potential areas of change, as listed in the staff report. She suggested that this could be in an executive summary type format. Mayor Pro Tem Adams suggested that a starting point should be to create a scorecard on the twelve policies, receive input from the City Council, and decide if the policies should be changed, if they are still appropriate and if any should be added. Allen Beek, 2007 Highland, referred to Mayor Pro Tem Adams' earlier comments about updating the databases for the various statistical areas and stated that in 1988, it was projected that the plan included enough growth to provide for approximately 20°x6 more traffic. He said that when it was updated, seven years later, there was still about 20% growth. Volume 53 - Page 323 City of Newport Beach City Council Minutes April 25, 2000 INDEX Dan Purcell, 3 Canyon Lane, agreed with Council Member Ridgeway's earlier comments and thanked Mayor Pro Tem Adams for placing the item on the agenda. He stated that he knows a general plan update takes a lot of work and can be very tiring, but he also feels that it is very important and an opportunity to look at the whole City. He stated his support for going through the process. He concluded by stating that Newport Beach is a wonderful place and updating the general plan will help it to continue in that direction. Council Member Ridgeway referred to page 26 of the 1972 General Plan Policies and community design supporting policy (f2), which discussed high - rise buildings being limited to protect the low- density residential character of the community. He said this represents an example of a policy and a vision. He complimented the 1972 document, even though the growth in the surrounding communities wasn't anticipated. He suggested that the 1972 document be revisited and incorporated it into the City's current general plan. Council Member O'Neil stated that he was not in attendance at the Study Session that discussed the visioning process. He recalled from a meeting at the Hyatt Newporter, a couple years prior, that it was decided that a complete general plan update would not be done due to the time and money involved, and since specific area plans were also being discussed. He said later it was decided to do more of a visioning process, then an airport specific plan was looked at and later, again, a general plan update. He stated he's having trouble determining where the City Council is headed, but that it seems evident that the City has developed at a rate and with land uses that are compatible with the policies discussed in 1972. He noted that growth in communities surrounding the City may have something to do with the increased traffic that some are seeing and the recent need to discuss a potential general plan update. He asked what would happen if the City did not do a comprehensive update of its general plan and instead uses the specific plan concept, since the City is basically developed. City Manager Bludau stated that the general public does not understand the general plan or the land use policies very well, leading them to believe that development occurs helter- skelter. He suggested that a visioning process may need to be done just to educate the community on the current policies, with little change really being made. Council Member Ridgeway suggested that the 1972 document should be looked at and updated, and then a determination should be made on how the general plan and each element in it might be addressed. Mayor Pro Tem Adams disagreed and suggested that the twelve current policies should be assessed and discussed. He said they provide a summary of the 1972 policies. Mayor Pro Tem Adams confirmed for Council Member Ridgeway that the 1972 document is not effective and only provided in the staff report for historical perspective. Assistant City Manager Wood confirmed that the 1988 document supersedes Volume 53 - Page 324 City of Newport Beach City Council Minutes April 25, 2000 the 1972 document. Council Member Ridgeway agreed with Mayor Pro Tem Adams' suggestion that the City should start with the overall policies, update them and that the process should provide guidance on specifically where the City will decide to go from there. Mayor Noyes asked about the formation of an Ad Hoc Committee to focus on how the City wants to proceed. He requested that this item be placed on the agenda of the May 9, 2000, City Council meeting. Allen Beek, 2007 Highland, stated that he was involved in the creation of the 1972 document and he wished that some of the.others who worked on the document were alive today to hear the kind words and admiration expressed by the City Council for the work that was done. CURRENT BUSINESS 22. APPOINTMENT BY MAYOR OF AD -HOC APPOINTMENTS COMMITTEE TO REVIEW APPLICATIONS AND MAKE RECOMMENDATIONS TO THE FULL COUNCIL FOR THE BOARD AND COMMISSION VACANCIES SCHEDULED TO OCCUR ON JUNE 30, 2000. Item continued to May 9, 2000. MOTION FOR RECONSIDERATION — None. ADJOURNMENT — 9:40 p.m. + + + ++ +tom * * * * * * * * * * * * *•�rrr + ++ The agenda for the Regular Meeting was posted on April 19, 2000, at 2:20 p.m. on the City Hall Bulletin Board located outside of the City of Newport Beach Administration Building. The supplemental agenda for the Regular Meeting was posted on April 21, 2000, at 12:50 p.m on the City Hall Bulletin Board located outside of the City of Newport Beach Administration Building. City Clerk Recording Secretary Mayor Volume 53 - Page 325 I Qi17a/:1 Ad Hoc Appointments Committee (24)