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HomeMy WebLinkAboutApproved Minutes - July 26, 2023Finance Committee Special Meeting Minutes July 26, 2023 Page 1 of 4 CITY OF NEWPORT BEACH FINANCE COMMITTEE JULY 26, 2023 SPECIAL MEETING MINUTES I. CALL MEETING TO ORDER The special meeting was called to order at 3:01 p.m. II. ROLL CALL PRESENT: Will O’Neill, Chair Joe Stapleton, Council Member William Collopy, Committee Member Keith Curry, Committee Member Nancy Scarbrough, Committee Member (arrived at approximately 3:06 p.m.) ABSENT: Noah Blom, Mayor (excused) Allen Cashion, Committee Member (excused) STAFF PRESENT: Grace K. Leung, City Manager; Jason Al-Imam, Finance Director/Treasurer; Michael Gomez, Deputy Finance Director; Shelby Burguan, Budget Manager; Jessica Nguyen, Budget Analyst; Mark Vukojevic, Utilities Director; and Brittany Cleberg, Administrative Assistant MEMBERS OF THE PUBLIC: Jim Mosher Laura Curran OTHER ENTITIES: III. PUBLIC COMMENTS Chair O’Neill opened public comments on the consent calendar and non-agenda items. Seeing none, Chair O’Neill closed public comments. IV. CONSENT CALENDAR A. MINUTES OF MAY 11, 2023 Recommended Action: Approve and file. MOTION: Collopy moved to approve the minutes of May 11, 2023, as amended, seconded by Stapleton. The motion carried as follows: AYES: Collopy, Stapleton, O’Neill NOES: None ABSENT: Blom (excused), Cashion (excused), ABSTAIN: Curry Upon the arrival of Committee Member Scarbrough, Chair O’Neill reopened this item for voting. The final vote is listed below. MOTION: Collopy moved to approve the minutes of May 11, 2023, seconded by Stapleton. The motion carried as follows: Finance Committee Special Meeting Minutes July 26, 2023 Page 2 of 4 AYES: Collopy, Scarbrough, Stapleton, O’Neill NOES: None ABSENT: Blom (excused), Cashion (excused), ABSTAIN: Curry B. MINUTES OF MAY 31, 2023 Recommended Action: Approve and file. MOTION: Collopy moved to approve the minutes of May 31, 2023, seconded by Stapleton. The motion carried as follows: AYES: Collopy, Stapleton, O’Neill NOES: None ABSENT: Blom (excused), Cashion (excused), Scarbrough ABSTAIN: Curry Upon the arrival of Committee Member Scarbrough, Chair O’Neill reopened this item for voting. The final vote is listed below. MOTION: Collopy moved to approve the minutes of May 31, 2023, as amended, seconded by Stapleton. The motion carried as follows: AYES: Collopy, Scarbrough, Stapleton, O’Neill NOES: None ABSENT: Blom (excused), Cashion (excused), ABSTAIN: Curry V. CURRENT BUSINESS A. 2023 WATER AND WASTEWATER RATES Recommended Action: 1. Review the water and wastewater enterprise fund financial analysis and 2023 Draft Water and Wastewater Rate Study information; Provide input to staff; 2. Forward the item to City Council for discussion and consideration. Utilities Director Mark Vukojevic gave a presentation detailing the system’s cost structure and rate history. Committee and staff discussion ensued on water rates including definition of “production,” the existing structural deficit with rates, the length of time the structural deficit has been building, the growth of the system, the cyclical nature of revenue surplus and deficits, rate of water usage in various years, water usage forecasts in upcoming years, authority to pump water from other districts at lower costs, water pumping percentage limitations for Newport Beach, impacts of inflation, complexities of the water system infrastructure, existing reserve fund policies related to cash flow for use in catastrophic situations, the three main categories of reserves, incremental adjustments to rates, the status of of the water meter change outs project and related savings and costs. Committee and staff discussion ensued on wastewater rates including equitable costs based on customer class and the type of study which would need to be conducted to determine such, comparisons with other similar agencies, the impacts of inflation, and the low number of Proposition 218 objections and other feedback received. Chair O’Neill opened public comment. Finance Committee Special Meeting Minutes July 26, 2023 Page 3 of 4 Jim Mosher requested clarification on the metrics and calculations used for wastewater rates. He requested clarification as to whether the proportional rate charge for water was used to encourage conservation and whether that process was allowable under Proposition 218. Laura Curran inquired if the City could provide a “roll up” which would show the revenue and costs over five years for “O and M,” capital improvements, and the drought. She requested projected revenues and costs as compared to reserves. Additionally, she inquired whether water bills could include daily usage for clarification purposes. Chair O’Neill closed public comment. Utilities Director Mark Vukojevic responded that the City’s online portal includes hour-by-hour water usage for properties, “roll up” costs will be in the report presented to the City Council, and that the five-year period numbers requested by the speaker are available in the 2019 water rate study. Chair O’Neill suggested projected cost revenue would be a good item to include in the report to City Council on this matter, as well as projected expenditures. City staff further responded the City maintains a variable component which encourages conservation, and fixed costs must be justified with calculations provided. The City seeks to move the needle as related to rate structures incrementally. Additionally, the City’s objective is to keep the methodology simple for easy understanding of the rate method. MOTION: Curry moved to forward the proposed 2023 water and wastewater rates to the City Council for discussion and consideration, seconded by Scarbrough. The motion carried as follows: AYES: Collopy, Curry, Scarbrough, Stapleton, O’Neill NOES: None ABSENT: Blom (excused), Cashion (excused) ABSTAIN: None B. FINANCIAL STATEMENT AUDITOR’S COMMUNICATION WITH THE FINANCE COMMITTEE ACTING AS THE CITY’S AUDIT COMMITTEE Recommended Action: Receive and file. Marc Davis, representing the City’s Auditor Davis Farr, gave a presentation and provided a summary of the initial communication, as included in the publicly noticed agenda report. Discussion ensued regarding the length of time a particular auditor is utilized, policies on the rotation of auditors, and the types of typical issues found in agencies in terms of compliance or procedural laxity. Chair O’Neill opened public comment. Laura Curran inquired as to the size of Newport Beach from the auditor’s perspective. City staff responded the City is considered a large organization due to its complexity. Jim Mosher inquired whether the auditing function verifies that expenses charged internally are going to the account that was intended in the budget and being properly accounted for in the budgeting process. He expressed that the link to the budget document the Council actually votes on each year is unavailable subsequent to the publication of the adopted budget.