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HomeMy WebLinkAboutApproved Minutes - March 16, 2023Finance Committee Meeting Minutes March 16, 2023 Page 1 of 8 CITY OF NEWPORT BEACH FINANCE COMMITTEE MARCH 16, 2023 MEETING MINUTES I. CALL MEETING TO ORDER The meeting was called to order at 3:02 p.m. II. ROLL CALL PRESENT: Will O’Neill, Chair Allen Cashion, Committee Member William Collopy, Committee Member Keith Curry, Committee Member Nancy Scarbrough, Committee Member ABSENT: Noah Blom, Mayor (excused) Joe Stapleton, Council Member (excused) STAFF PRESENT: City Manager Grace K. Leung, Finance Director Jason Al-Imam, Deputy Finance Director Michael Gomez, Administrative Assistant Amy Byrne, Budget Manager Shelby Burguan, Budget Analyst Eric Wilson, Budget Analyst Jessica Nguyen, Contracts and Purchasing Administrator Sander Huang, Management Analyst Melanie Franceschini, Administrative Analyst Raymund Reyes, UCI Intern Kimberly Sanchez, Harbormaster Paul Blank, Code Enforcement Supervisor Matt Cosylion, Finance Manager/Public Works Theresa Schweitzer, Accounting Manager Trevor Power MEMBERS OF THE PUBLIC: Jim Mosher, Resident; Charles Klobe, Resident OTHER ENTITIES: None III. PUBLIC COMMENTS Chair O’Neill opened public comments. Jim Mosher commented on Council Policy F-14 and suggested the document could benefit from additional clarification, particularly as related to circumstances where loopholes could allow staff to evade the City Council approved limits for staff approvals. He provided examples of situations that could occur with “on-call” and invoice-only type of contracts. Chair O’Neill requested Mr. Mosher email him a copy of the example he referenced in his comments. Seeing no others, Chair O’Neill closed public comments. IV. CONSENT CALENDAR A. MINUTES OF FEBRUARY 16, 2023 Recommended Action: Approve and file. Chair O’Neill opened public comments. Seeing none, Chair O’Neill closed public comments. Finance Committee Meeting Minutes March 16, 2023 Page 2 of 8 MOTION: Curry moved to approve the minutes of February 16, 2023 as amended, seconded by Scarbrough. The motion carried as follows: AYES: Collopy, Curry, Scarbrough, O’Neill NOES: None ABSENT: Blom, Stapleton ABSTAIN: Cashion V. CURRENT BUSINESS A. OVERVIEW OF REVENUE PROJECTIONS Summary: Staff will present to the Committee an overview of the assumptions utilized to prepare revenue projections for the City's major funds as part of the FY 2023-24 budget preparation process. Recommended Action: Receive and file. Finance Director Al-Imam introduced the item and explained that the presentation will outline the City’s methodology and assumptions used in forecasting revenues. He pointed out that under Council Policy F-3, staff is required to conservatively project revenues and by design, the budget is prepared to result in an operating surplus. He noted an overview of the expenditure projections will be presented to the Finance Committee in April 2023, and introduced Budget Manager Burguan, who continued with the presentation. Budget Manager Burguan commenced her presentation with a review of historical General Fund Revenues. There is $9.5 million of projected revenue growth in FY 2023-24 as compared to the FY 2022-23 projected amount. The primary drivers of growth are Property Tax (+$4.5 million), Transient Occupancy Tax (TOT) ($1.45 million), Parking & Property Income (+$2.2 million), and Transfer from Tidelands (CAP) ($1.7 million). Chair O’Neill commented that it was worth noting that the City has changed how transfers are reflected, which are now incorporated within revenues. Budget Manager Burguan continued her presentation and presented information related to the City’s top three sources of revenue, which is derived from Property Taxes, Sales Tax and Transient Occupancy Tax revenue and comprises 75% of all General Fund Revenue. She provided detail as to the various sources of other revenue including 10% from service fees and charges/licenses and permits, 5% from property income, and 4% comes from other taxes. The remaining 3% comes from Intergovernmental revenues (primarily Proposition 172 revenue), fines and penalties (primarily parking fines), and investment income and other minor revenues. Budget Manager Burguan provided detailed information regarding each of the remaining categories which comprise the 25% of revenues to the City. Service fees and permits revenue primarily includes building and planning fees, recreation class and Junior Lifeguard program fees, paramedic service fees, and recycling fees. Projection methodology is developed by Finance staff in collaboration with Department subject matter experts. Growth is projected due to increased recreation program activity and Junior Lifeguard Program participation. In response to an inquiry from Committee Member Collopy, Finance Director Al-Imam stated a review of the City’s various fees will be presented to the Finance Committee at their April meeting. Budget Manager Burguan continued by outlining that property income revenues include revenues from property leases and parking revenue from parking lots and meters. Next year, Finance Committee Meeting Minutes March 16, 2023 Page 3 of 8 part of the $2.2 million increase in revenue relates to anticipated lease revenue from the property located at 1201 Dove Street. Chair O’Neill inquired about why property income revenue decreased in FY 2022-23. Budget Manager Burguan responded that staff would research and follow up with the Committee with information on why there was a decrease in revenue that year. Chair O’Neill commented there are many factors which contribute to revenues in this area, including parking, and would be curious if the drop was from lease-generated revenues. Committee Member Scarbrough inquired if the City has performed an audit of its property leases. City Manager Leung indicated that staff would look into this, and would report back to the Committee on whether the City has performed an audit of its property leases. Budget Manager Burguan continued her presentation by detailing the final category of tax revenues (other taxes) which include business license, property tax, and franchise fees. Overall this category has steadily decreased since FY 2020-21 however inflation is contributing to recent increases. Committee Member Collopy expressed concern with the property transfer tax, citing the projection that the real estate marking is slowing down considerably. He inquired how conservative is the City’s approach with regard to the transfer tax. Budget Manager Burguan responded property tax transfers are budgeted at $3.4 million dollars where last year they were $4.1 million. Committee Member Collopy commented the projections are likely very accurate and not just conservative. Finance Director Al-Imam also noted the same methodology was used on the property tax side with supplemental property tax revenue, which was also reduced. Budget Manager Burguan continued her presentation by focusing on the Tidelands Fund, a special revenue fund used to account for revenues related to the Tidelands areas under the City’s jurisdiction. Funds are deposited into either the operating or capital fund from all revenue generating activities within the Tidelands. The General Fund subsidizes the operations and capital funds. A slide was presented which displayed the top Tidelands revenue producers, including the Balboa Bay Club and Balboa Pier Parking Lot. Committee Member Curry confirmed with staff that the lease revenue from Lido House goes into the General Fund not the Tidelands Fund. Budget Manager Burguan continued her presentation on the Tidelands Fund, stating that 96% of revenues are generated from property income in the categories of leased property income, parking income, and oil well income. 4% of revenues are generated by investment income (primarily from capital reserves). The Tidelands Fund revenue projection for 2023-24 is $19.8 million. Budget Manager Burguan continued her presentation by detailing water utility revenue projections. She stated 98% of revenues are generated by service fees and charges from customers, 1% of revenues are generated by investment income, and various other sources account for the final 1% of revenues. The 2020 Rate plan provides for one last annual increase on January 1, 2024. Also, staff has commenced a rate study with a consultant. The FY 2023-24 projection for water utility revenues is $34.8 million. The increase in revenues is due to a rate increase in January but which is offset by a decrease in expected water usage. Budget Manager Burguan continued her presentation by detailing wastewater utility revenue projections. She stated 98% of revenues are generated by service fees and charges from customers and various other sources account for the final 2% of revenues. A rate plan is in place with annual increases through January 2022 and no new rates are currently scheduled. Staff has commenced a rate study with a consultant. Finance Committee Meeting Minutes March 16, 2023 Page 4 of 8 Committee Member Curry inquired whether there was a surcharge for excess water usage during the “so-called” drought emergency. Chair O’Neill and City Manager Leung both confirmed there was not. Chair O’Neill confirmed there were no new rates currently scheduled however City Council authorized a new rate study. Budget Manager Burguan concluded her presentation by stating staff will return in April to present the proposed expenditures. Chair O’Neill opened the floor to the Finance Committee for questions. Committee Member Cashion had a few follow up questions regarding Tidelands Funds and inquired as to the appropriate time to direct them to staff. Chair O’Neill suggested he schedule a meeting with the Finance Director and also copy the City Manager on the request. Committee Member Collopy inquired if CalPERS had exposure to SVB. Finance Director Al-Imam indicated that he would look into that, and would report back to the Finance Committee. Chair O’Neill opened public comments. Charles Klobe expressed concerns regarding impacts to the City’s revenue streams due to on-line retailers shifting to the fulfillment centers. He contemplated that every City with similar impacts would join in a challenge to that practice. Jim Mosher referenced the top ten Tidelands Revenue producers’ slide did not include private piers which he understood from the Harbor Commission meetings was a significant revenue source. He stated there was an equity issue related to assessment and requested staff look into the matter. Seeing no other speakers, Chair O’Neill closed public comments. In response to Chair O’Neill’s inquiry regarding the private piers, staff responded they would follow up on the matter and return to the Finance Committee with additional information. Committee Member Collopy requested the entire Finance Committee be copied on responses on this item. In response to a request from Committee Member Scarbrough regarding being copied on the answer to the CalPERS question, City Manager Leung responded the entire Finance Committee will be provided with the information. In response to an inquiry from Committee Member Collopy regarding the timelines for the Departments to prepare their budget requests, City Manager Leung stated they begin in December, and she reviews them in-depth with each Department in approximately February. She continues to vet them through, and the proposals will be presented to the Finance Committee in April. The item was received and filed. B. HARBOR DEPARTMENT OPERATIONS AND FINANCES Summary: Staff will present to the Committee an updated overview of the status of the Harbor Department's budget and staffing, as well as possible future budget enhancements for the Department. Recommended Action: Receive and file. Harbormaster Paul Blank introduced the item and provided an overview of the Harbor Department Operations and Finances. A PowerPoint presentation was displayed. He provided Finance Committee Meeting Minutes March 16, 2023 Page 5 of 8 historical information about the Department, including their inception as an independent Department in July 2018. The Harbor Department’s mission is to keep Newport Harbor clean, safe, and well-enjoyed for residents first, then businesses, then outside visitors. The Harbor Department provides services including mooring management, code enforcement, commercial marine activity and harbor events permitting, safety/rescue operations, Marina Park/Hospitality, Pump-out equipment maintenance and upgrades, impounds and auctions, and public relations and concierge services. Harbormaster Blank provided detail on service statistics in the various service areas. Committee Member Collopy inquired as to how the auctions are publicized. Harbormaster Blank responded they use all of the City various media outlets, including the City’s social media site. Harbormaster Blank continued his presentation, noting all Department activities are tracked. He stated their most significant activity tracking is related to code enforcement activities, and provided the example of ensuring individuals are not utilizing public docks for storage of private vessels. This remains a large focus for the Department. Harbormaster Blank continued his presentation, displaying information regarding revenues. He stated there were certain revenues over which they have very little control, regardless of the Department’s efforts. However, there are other revenues over which the Department’s efforts do make a significant difference in that the Newport Harbor is a more welcoming and friendly place to visit, thereby generating revenues from those efforts. He displayed a slide illustrating Marina Park guest survey results which indicate an increasing level of satisfaction from 2021 to 2022. Harbormaster Blank continued his presentation, speaking to the various challenges to the Department’s operations, including servicing a very diverse constituency, increasing traffic and opportunities for Harbor use, balance between commercial and recreational uses, water quality and environmental concerns, competing agencies with varying scopes of authority, noise, and speed impacts. The biggest challenges are noise and speed impacts. In response to an inquiry from Committee Member Collopy regarding permitting for charter vessels, Harbormaster Blank responded there are a variety of agencies which are involved with licensing in the harbor, however, all vessels must obtain a marine activities permit from the Harbor Department before they can operate legally in the harbor. Chair O’Neill clarified that it was not the Transient Occupancy Tax (TOT) that was low for the vessels, but rather the “passenger tax.” Discussion ensued regarding the impacts of the pandemic on the collection of those taxes and there was a dip during that time. Harbormaster Blank stated the Department is at approximately 80% of where they were pre-pandemic as related to the collection of the passenger tax. He also estimated the charter vessels will likely be back to pre-pandemic levels by this summer. Committee Member Scarbrough inquired whether that revenue comes back to the City. Harbormaster Blank responded affirmatively that it goes into the General Fund. Chair O’Neill confirmed it is the City’s tax and City Manager Leung affirmed it would require five of the seven Council Members to place the matter on the ballot in order for the voters to consider any tax increase. Harbormaster Blank continued with his presentation, stating the passenger tax is graduated based on occupancy of the vessel. Passenger capacity greater than 50 is taxes at $2.50. In response to an inquiry from Committee Member Collopy, Harbormaster Blank confirmed Long Beach charges $14.00. Finance Committee Meeting Minutes March 16, 2023 Page 6 of 8 Harbormaster Blank displayed slides which provided a historical perspective of the Harbor Department’s budget. Revenues have grown steadily in recent years. The slides displayed the major sources of revenue. Committee Member Collopy inquired whether the City’s capital improvement plan included addressing the Balboa Yacht Basin Slips. Harbormaster Blank stated there will be a project that rebuilds that marina in approximately three years. Committee Member Collopy inquired how that project will impact revenues. Harbormaster Blank stated revenue will be cut during that project by approximately 20% and there are contingency plans to utilize other available slips and docks during that time. Harbormaster Blank continued with his presentation, displaying slides which illustrated expenditure categories and Harbor Department staffing. He also stated the challenges involved with staffing turnover, detailing that 43.2% of staff separate from employment within the first year. It also requires significant time and attention to hire employees. Many of the part-time employees leave for a full-time employment opportunity. Harbormaster Blank detailed the Department’s program enhancement requests which include conversion of 6 full-time equivalents of current part-time positions to full-time positions. City Manager Leung confirmed the City took a very conservative approach in starting the Department and laying out all operations. She noted the challenges impacting Department operations with a majority of the employees being of part-time status. She noted the impacts were carefully vetted prior to making the request, as the City does not take likely the conversion of positions from part-time to full-time. Harbormaster Blank spoke regarding an additional program enhancement, extended hours of operation for the Department, citing the ability to provide needed additional code enforcement particularly as related to noise complaints. He mentioned he is frequently called to provide certain services beyond the normal hours of operation and provided several examples. Chair O’Neill inquired that if Harbormaster Blank did not respond in those occasions, would the Sheriff’s Department then respond. Harbormaster Blank did confirm they would, however, he often is able to respond more quickly. Harbormaster Blank displayed slides which provided detail on the conversion of part-time to full-time positions. Committee Member Scarbrough stated she would support the conversion of part-time to full-time employees, noting the time-consuming nature of managing the onboarding and training process, just to have employees leave. Committee Member Scarbrough inquired whether the City could recoup funds from the County related to the extended hours of operation program enhancement request. Harbormaster Blank stated even though the County will respond in certain after-hours situations, the City is responsible for code enforcement activities in the harbor. Committee Member Cashion inquired as to what would have happened to the couple whose vessel went adrift in the example provided earlier by Harbormaster Blank, to which City Manager Leung and Harbormaster Blank responded they would have unfortunately been on their own to find a solution until the Sheriff’s Department responded. In response to Committee Member Curry’s inquiry regarding the use of Police or Fire boat patrols, Harbormaster Blank stated he is unaware of any such consideration by the City at this time and noted the Harbor Department is continually striving to strengthen the collaboration with the Police Department related to harbor matters. Committee Member Collopy inquired if the City pays for County Sheriff’s Department services. Chair O’Neill stated the City does not and that it has not been realistically proposed, as the City would likely need to take over a substantial amount of revenue producing property in the harbor Finance Committee Meeting Minutes March 16, 2023 Page 7 of 8 before such conversation could be entertained. Chair O’Neill noted the County has certain pockets of property they control on the harbor, and this may be something the City may want to address in the future. Chair O’Neill stated he was in favor of the approach being taken by the Harbor Department and acknowledged other Departments are also experiencing similar issues in relation to part- time employees. He expressed support to address the conversion items at the joint budget planning session. Chair O’Neill opened public comments. Jim Mosher stated several mooring users provided comments at the most recent Harbor Commission meeting related to a mooring buyback program. Mr. Mosher requested information on the specifics of the mooring buyback program, in which budget year it would commence and how the program would be funded. Chair O’Neill stated he was not familiar with the program mentioned by Mr. Mosher and inquired whether staff could provide additional information. Harbormaster Blank responded there was no action or vote taken on any specific program, however at the recent Harbor Commission there was discussion regarding the types of programs which could be considered as a capital program under the Harbor and Beaches Master Plan. One of the projects proposed, but was subsequently removed from consideration, was a mooring buyback program. Harbormaster Blank stated a mooring buyback program is not included in the capital improvement program. Seeing no other individuals who wanted to speak, Chair O’Neill closed public comments. The item was received and filed. C. WORK PLAN REVIEW Summary: Staff will report on the upcoming Finance Committee items. Recommended Action: Receive and file. Chair O’Neill stated the entire budget review will take place on April 13, 2023 and requested the Finance Committee be prepared with any questions. The fee study review will also be presented. City Manager Leung stated they will move the date for the enabling resolutions to May 11. Chair O’Neill stated the Joint City Council and Finance Committee Budget Study Session will take place Tuesday, May 23, 2023, at 4:00 p.m. The Finance Committee is scheduled to make their recommendation on the budget to the City Council on May 25, 2023. He also reminded Committee Members that their terms are up in June and to contact their appointing Council Member if they would like to continue service on the Finance Committee. He suggested the Finance Committee to think about the types of items they would like to see in the first half of the Fiscal Year prior to commencing on their budget review for FY 2024-25. Chair O’Neill opened public comments. Seeing none, Chair O’Neill closed public comments. There was no further action taken on this item. VI. ADJOURNMENT The Finance Committee adjourned at 4:39 p.m. to the next regular meeting of the Finance Committee on March 16, 2023 at 3:00 p.m. in memory of David Grant.