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HomeMy WebLinkAboutApproved Minutes - April 11, 2024Finance Committee Regular Meeting Minutes April 11, 2024 Page 1 of 7 CITY OF NEWPORT BEACH FINANCE COMMITTEE APRIL 11, 2024 REGULAR MEETING MINUTES I. CALL MEETING TO ORDER The meeting was called to order at 3:00 p.m. by Mayor Pro Tem Stapleton II. ROLL CALL PRESENT: Joe Stapleton, Mayor Pro Tem William Collopy, Committee Member Keith Curry, Committee Member Nancy Scarbrough, Committee Member ABSENT: Will O’Neill, Mayor/Chair (excused) Noah Blom, Councilmember (excused) Allen Cashion, Committee Member (excused) STAFF PRESENT: Grace K. Leung, City Manager Jason Al-Imam, Finance Director/Treasurer Shelby Burguan, Acting Deputy Finance Director Brittany Cleberg, Assistant Management Analyst Theresa Schweitzer, Public Works Finance/Administrative Manager Jonathan Stafford, Deputy Director, Newport Beach Police Jessica Kan, Revenue Manager Jessica Nguyen, Budget Analyst Anthony Alannouf, Budget Analyst Jennifer Anderson, Purchasing & Contracts Administrator Raymund Reyes, Fire Administrative Manager MEMBERS OF THE PUBLIC: Jim Mosher Charles Klobe III. PLEDGE OF ALLEGIANCE The Pledge of Allegiance was led by Committee Member Curry. IV. PUBLIC COMMENTS Jim Mosher commented on the recent Harbor Commission meeting which included discussion concerning the rental rates for City-owned moorings. He inquired as to whether the City has tidelands that are not under the State’s jurisdiction, such as one created artificially by the Irvine Company. He believes the City should be charging for use of City-owned tidelands and requested the City look into the matter. Mayor Pro Tem Stapleton closed public comments. V. CONSENT CALENDAR A. MINUTES OF MARCH 14, 2024 Recommended Action: Approve and file. Finance Committee Regular Meeting Minutes April 11, 2024 Page 2 of 7 MOTION: Committee Member Curry moved to approve the minutes of March 14, 2024, seconded by Committee Member Scarbrough. The motion carried as follows: AYES: Collopy, Curry, Scarbrough, Stapleton NOES: None ABSENT: Blom (excused), Cashion (excused), O’Neill (excused) ABSTAIN: None VI. CURRENT BUSINESS A. PROPOSED FISCAL YEAR 2024-25 BUDGET Recommended Action: Review and discuss the proposed budget and provide any recommendations for consideration by the City Manager and City Council. Acting Deputy Finance Director Shelby Burguan and Finance Director/Treasurer Jason Al-Imam provided a detailed summary and presentation of the proposed Fiscal Year 2024-25 budget. Director/Treasurer Al-Imam noted a minor change to the PowerPoint presentation that was included in the agenda packet. The document was revised to include the next Finance Committee meeting of May 9, 2024. Acting Deputy Director Burguan commenced her presentation which included detail on the timeline for budget development, budget priorities for the upcoming year, public meeting schedule, a brief recap of the FY 2023-24 second quarter where General Fund revenues are projected to be higher than the adopted budget projection, a high-level projection for FY 2024- 25, which includes increases due to a larger proposed capital improvement budget, and increases in routine salaries, internal service funds, and transfers. Committee Member Collopy inquired as to the nature of the Capital Improvement Program (“CIP”) increase from FY 2022-23 to 2023-24. Acting Deputy Director Burguan responded that the increase was due to the influx of ARPA funding. Committee Member Collopy inquired as to the nature of the CIP increase in FY 2024-25 from the previous year’s amount of $29,375,044 to the upcoming year’s amount of $56,464,000. Finance Director/Treasurer Al-Imam reported at the end of the discussion on this item that the increase in the CIP in FY 2024-25 related to the following projects: $9.3 million for the Balboa Library/Fire Station No. 1; $6.6 million for the Big Canyon Restoration Project; $2.4 million in additional street improvement projects; and a $1.3 million increase associated with the Parks Master Plan. Acting Deputy Director Burguan continued her presentation which included detail on the breakdown of the total operating expenditure budget by fund and the City’s main three revenue sources: property, sales, and transient occupancy tax (TOT). Committee Member Collopy inquired if the TOT revenue displayed was the net or gross amount. Acting Deputy Director Burguan responded it was the net amount. Committee Member Collopy recalled he requested the information to be expressed in gross terms. Director/Treasurer Al-Imam responded that staff would change it to gross terms moving forward. Acting Deputy Director Burguan continued her presentation which included detail on the total projected General Fund revenue for FY 2024-25, 2.1% higher than current year-end projections for FY 2023-24, due to items which include increases in property tax and projected rebound in sales tax activity. Committee Member Scarbrough noted the Pendry was now open and inquired as to why TOT was only projected at a 2% increase. Director/Treasurer Al-Imam responded that the projected TOT would have likely been flat or negative if not for the opening of the Pendry, as generally speaking, overall hotel tax revenue has been slowing and revenue from short-term lodging has Finance Committee Regular Meeting Minutes April 11, 2024 Page 3 of 7 been down. Commission and staff discussion ensued concerning the overall slowdown in hotel tax revenue and that sales tax revenue will be increasing due to Porsche coming back online in the upcoming year. Committee Member Scarbrough inquired whether the City has anyone working with Porsche on processing permits. City Manager Grace Leung responded the City’s Community Development Department is working closely with the business. Committee Member Scarbrough commented the reopening should be expedited as the City is losing money monthly. Mayor Pro Tem Stapleton stated he recently toured the new Restoration Hardware, and their representatives commented the City has been very involved in facilitating an expedited opening, and the same thing is happening with Porsche. General discussion ensued commenting on the positive impact these openings will have on sales tax for the City. Committee Member Collopy inquired if the City has the ability to estimate the projected sales tax for a business such as Restoration Hardware, and whether the business itself provides those estimates. Director/Treasurer Al-Imam responded that the City’s sales tax consultant has access to a statewide database and general projections could be made based upon a business’ sales tax revenue generation in other locations, however it should be noted the City’s new Restoration Hardware location is very unique. Committee and staff discussion ensued concerning the upcoming openings and reopening of various businesses and their positive impacts on the City’s budget. Acting Deputy Director Burguan continued her presentation which included detail on the proposed FY 2024-25 budget expenditures, a 5.9% increase over the current budget, including $40 million toward paying down the City’s unfunded pension liabilities. Other items presented included proposed program enhancements, internal service charges, the majority of which are increases to the workers comp and general liability premiums. Detail on other projected expenditures was presented including General Fund enhancements, inflationary adjustments to maintenance and operating budgets, cost of living adjustments, merit increases, and Dove Street property expenses. Committee Member Scarbrough inquired if the expense associated with the Dove Street Property was budgeted somewhere else and then moved. Acting Deputy Director Burguan responded that previously the City was budgeting for revenue net of expenses. However, now revenues and expenses are reported on a gross basis in their respective categories. Additionally, $3.8 million was added to the General Fund budget to increase capital contributions to the various capital funds. Committee Member Collopy inquired whether the costs for the ambulance include staffing. Acting Deputy Director Burguan responded the amount is just for purchase and outfitting of the ambulance, and those costs are much higher than they used to be. In response to Committee Member Collopy’s request for confirmation of the actual ambulance related costs, City Manager Leung responded she was confident with the approximately $600,000 costs; however, she and staff would provide accurate detail to the Committee. Committee Member Collopy requested clarification concerning the Police recruitment assistance program. City Manager Leung responded it was a one-time dollar amount included in the proposed budget, primarily to address overfill situations. This was explained to be a situation where the City has met its budgeted number of hired police officers, but then the recruiting class has a couple more people. Then, if the City anticipates there are some Finance Committee Regular Meeting Minutes April 11, 2024 Page 4 of 7 retirements upcoming, they can overfill for a period of time. If the funds are not utilized, the amount is just carried over to the next year, so it does not have to be re-budgeted. Acting Deputy Director Burguan continued her presentation which included detail on the cost -of-living adjustments citywide, program enhancements in various Departments, general municipal election costs, and the backing out of the one-time program enhancements for recruitment assistance. Committee Member Collopy inquired as to the cost-of-living adjustment process for employees not represented by bargaining units. Director/Treasurer Al-Imam responded that the expenditure increases across Departments include cost-of-living adjustments for all employees, but also the costs for contractual and other services. Mayor Pro Tem Stapleton confirmed with staff that the increase in the Community Development Department includes the expansion of the Code Enforcement enhancements. Acting Deputy Director Burguan continued her presentation which included detail on the proposed transfers for CIP, master plan, and parks projects, to subsidize other operations, tidelands fund, bonds, and debt service requirements. Acting Deputy Director Burguan continued her presentation which included detail on internal service funds, which encompass increases in insurance-related costs, particularly the workers' compensation and liability premiums, even though the City shopped for carriers. Director/Treasurer Al-Imam stated the City also looks at various methods to optimize premium costs. Committee Member Scarbrough commented that the City should consider alternatives due to the high costs. Committee Member Collopy inquired as to the items the City elects to self-insure. Director/Treasurer Al-Imam responded the City self-insures workers’ compensation and general liability to a certain level and then excess insurance kicks in. City Manager Leung noted that there are certain City activities, such as Police and Fire positions, which increase risk exposure, and related insurance costs are increased accordingly. Acting Deputy Director Burguan continued her presentation which included detail on compensated absences, cost-of-living and merit increases, proposed new positions and program enhancements, Tidelands fund subsidy, the proposed Police Department Crime Information Center and addition of three full-time Police Civilian Investigators. In response to an inquiry from Committee Member Collopy, Acting Deputy Director Burguan confirmed the proposed $359,000 for the three full-time positions was a “fully loaded” number as they are non-sworn positions. Acting Deputy Director Burguan continued her presentation which included detail on a proposed automated license plate reader system (ALPR). Committee and staff discussion ensued on this topic, as follows. The ALPR system reads all plates it can identify clearly, and it was confirmed that it confirms with various databases whether there are related crimes throughout the country related to a particular vehicle. The system will feature fixed equipment at various locations throughout the City, with specific locations yet to be determined, but focused on main thoroughfares, ingress/egress points, and areas of special interest where the population density is higher. It was noted that the fixed cameras perform better than those mounted on vehicles. Discussion ensued on the success of ALPR systems in other jurisdictions. Finance Committee Regular Meeting Minutes April 11, 2024 Page 5 of 7 Acting Deputy Director Burguan continued her presentation which included detail on the Fusus Intelligence Ecosystem, the foundation of the day-to-day Crime Information Center operations, that will enable integration of multiple systems into a single ecosystem for crime analysis and investigation. Discussion ensued related to the options for various entities to register and work within the Ecosystem. This is annually licensed software. Acting Deputy Director Burguan continued her presentation which included detail on the use of asset forfeiture funds for software and equipment for the Crime Information Center and new use of force immersive training simulator. Additional funds are also proposed for outside agency staffing for Fourth of July, the mounted enforcement unit, and uniform expenses. Committee Member Curry inquired as to the funding for animal control and animal shelter contracts. Deputy Director, Newport Beach Police Department Jonathan Stafford, responded the associated costs are budgeted within the Police Department Traffic Division and various detail regarding both was provided. In response to inquiries from two Committee Members, additionally, Deputy Director Stafford stated that the $20,000 increase establishes the mounted enforcement unit and associated costs, and that it is a very selected deployment, not an everyday resource. The unit is part of the Orange County Mounted Enforcement Unit which provide mutual aid to member agencies. The costs include uniforms, tack, feed, and use of the individual Officer’s personal horses. Acting Deputy Director Burguan continued her presentation which included detail on the remaining program enhancements, encompassing non-personnel items such building maintenance, maintenance for new city facilities, increase in contract services for Streets and Beaches, and increased programming for youth programs as well as instructor payments at various community centers. In response to an inquiry from Committee Member Collopy, Acting Deputy Director Burguan stated the costs for increased youth programs and instructor payments would be offset by user fees. Acting Deputy Director Burguan continued her presentation which included detail on the remaining program enhancements, encompassing increases for a replacement Harbor Department patrol vessel and crane maintenance. In response to an inquiry from Committee Member Scarbrough, City staff noted the crane is owned by the City and located at Marina Park. Acting Deputy Director Burguan continued her presentation which included detail on citywide proposed additional staffing and personnel enhancements. Committee Member Collopy referred to individual former Council Members who did not sign off on proposed budgets in previous years due to proposed increases in staff and other reasons. He inquired whether City Manager Leung has had discussions, in compliance with the Brown Act, with the Council in order to avoid such uncomfortable situations in the future. City Manager Leung responded she has had legally compliant discussions with the City Council concerning personnel impacts to the proposed budgets. It is understandable when the City is dealing with a pension liability and the concern with bringing on full-time employees, so she understood where the reluctance came from. What really changed the equation for the better was the implementation of PEPRA (pension reform) which is a sustainable retirement formula. It is the City Manager’s responsibility to evaluate and recommend personnel structures that are needed by the City in order to effectively meet Council directives and policies. Finance Committee Regular Meeting Minutes April 11, 2024 Page 6 of 7 Committee Member Collopy inquired whether the proposed 921 personnel number will remain consistent year over year. City Manager Leung responded the City’s needs are dynamic and the City also tends to be fiscally conservative. As a result, she thoroughly evaluates true needs concerning staffing as they are proposed by the individual Departments. Committee Member Collopy expressed support for the deep dives into the Fire and Police budgets, including their versions of work volume indicators and requested the same for future reviews of budgets, in particular that of the Public Works Department. Director/Treasurer Al- Imam stated that Departments have been asked to provide performance metrics and a related report will be on the next Finance Committee meeting agenda. Committee Member Scarbrough mentioned that there may be additional needed services from the Police, Fire, and Building Departments due to State housing-related mandates. Acting Deputy Director Burguan continued her presentation which included detail on projected surplus, UAL payments, increased contributions to the various Capital Improvement Plan funds for long-term leases, and any program enhancements proposed by the City Council. Director/Treasurer Al-Imam briefly commented on the various Capital Improvement Project and Program proposals. Committee Member Scarbrough inquired as to the design and rehabilitation phases of the pier project and the clarification of the associated costs. Committee and staff discussion ensued including confirmation of the budgeted amount for current rehabilitation, however, the larger scale project (the entire McFadden Square) is still several years out. There will be public meetings to obtain input on the project prior to finalization, as at this time it is still at the committee level for preliminary discussion. Mayor Pro Tem Stapleton opened public comments. Jim Mosher requested clarification on the organizational chart for the Library Board of Trustees, uniformity of fund balance references throughout various pages of the preliminary budget, and lack of information and projected funds as related to City moorings in light of recent consideration by the Harbor Commission on rates. Director/Treasurer Al-Imam responded that the City Council had not yet approved the proposed mooring rental rates, therefore placing information in the preliminary budget would be subject to that final approval. Committee Member Collopy inquired as to the total amount of fees if recommended to the City Council via Finance Committee approval. Director/Treasurer Al-Imam responded that it would be approximately $600,000, with the majority related to credit card fees and utility costs. Committee Member Collopy also inquired if the City had considered creation of an assessment district for maintenance of the bridges which serve only specific residences. City Manager Leung responded that staff could review that suggestion, however the responsibility would be placed on the City, as there would likely not be any incentive for residents to initiate the process for an assessment. Seeing no others, Mayor Pro Tem Stapleton closed public comments. City Manager Leung stated the Finance Committee will review the budget, including proposed performance metrics, at their next meeting, after which the Finance Committee will meet in joint session with the City Council for overall budget review. Then one final meeting for final comments prior to presentation to the City Council for adoption on June 11, 2024. This item was received and filed and there was no further action taken.