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HomeMy WebLinkAboutApproved Minutes - May 9, 2024Finance Committee Regular Meeting Minutes May 9, 2024 Page 1 of 6 CITY OF NEWPORT BEACH FINANCE COMMITTEE MAY 9, 2024 REGULAR MEETING MINUTES I. CALL MEETING TO ORDER The meeting was called to order at 3:03 p.m. by Mayor O’Neill. II. ROLL CALL PRESENT: Will O’Neill, Mayor/Chair Joe Stapleton, Mayor Pro Tem Allen Cashion, Committee Member William Collopy, Committee Member Keith Curry, Committee Member Nancy Scarbrough, Committee Member ABSENT: Noah Blom, Councilmember STAFF PRESENT: Grace K. Leung, City Manager Jason Al-Imam, Finance Director/Treasurer Shelby Burguan, Acting Deputy Finance Director Brittany Cleberg, Assistant Management Analyst Steven Anderson, Department Assistant Jonathan Stafford, Deputy Director, Newport Beach Police Dave Webb, Public Works Director Theresa Schweitzer, Public Works Finance Administrative Manager Jessica Kan, Revenue Manager Trevor Power, Accounting Manager Jessica Nguyen, Budget Analyst Abigail Marin, Budget Analyst Anthony Alannouf, Budget Analyst Jennifer Anderson, Purchasing & Contracts Administrator Raymund Reyes, Fire Administrative Manager Mark Vukojevic, Utilities Director MEMBERS OF THE PUBLIC: Jim Mosher Charles Klobe Chuck Fancher III. PLEDGE OF ALLEGIANCE The Pledge of Allegiance was led by Committee Member Cashion. IV. PUBLIC COMMENTS A. ADDITIONAL MATERIALS RECEIVED Mayor/Chair O’Neill opened public comments. Jim Mosher commented that the new format for rents, fines, and fees is less informative and that there may be continuing errors in the calculations for related CPI adjustments. Seeing no others, Chair O’Neill closed public comments. Finance Committee Regular Meeting Minutes May 9, 2024 Page 2 of 6 V. CONSENT CALENDAR A. MINUTES OF APRIL 11, 2024 Recommended Action: Approve and file. Chair O’Neill clarified that various submitted modifications to the minutes, as proposed and included in the agenda packet, would be incorporated into the final document, including changing language from “negative” to “down,” as confirmed by Finance Director/Treasurer Al-Imam and the changes submitted by Mr. Mosher. MOTION: Chair O’Neill moved to approve the minutes of April 11, 2024, seconded by Committee Member Curry. The motion carried as follows: AYES: Cashion, Collopy, Curry, Scarbrough, Stapleton, O’Neill NOES: None ABSENT: Blom ABSTAIN: None VI. CURRENT BUSINESS A. PROPOSED FISCAL YEAR 2024-25 BUDGET REVISIONS 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 summary and presentation of the proposed Fiscal Year 2024-25 budget revisions. Acting Deputy Finance Director Burguan noted the TOT revenue pages now featured gross revenue as requested by the Committee and the Fund Balance overview was revised to show updated beginning spendable balances for the Water & Wastewater funds, and a correction was made to the budget number for the Tidelands Fund. Each year, after the proposed budget book is distributed, there are various revisions which are also presented for the Committee’s consideration. The first of these revisions is the transfer of one full-time Department Assistant from the City Clerk’s office to the City Manager’s office and reclassification to an Administrative Assistant, resulting in an increase of $6,681 in projected General Fund expenditures. Finance Director/Treasurer Al-Imam detailed the second revision which proposes the migration of utility billing from a bi-monthly (every two months) process to a monthly process, resulting in $81,600 in one-time costs for the reconfiguration of the billing setup to accommodate monthly, $51,200 to convert one part-time Senior Fiscal Clerk position into a full-time classification resulting in an increase of 0.3 full-time equivalents (FTEs), and $79,600 in additional ongoing operating costs related to postage and bill presentment. Utilities Director Mark Vukojevic provided additional detail on the benefits of monthly billing, including that it has been a Department goal for several years and that monthly billing decreases the amount of time between usage and when charges appear on a bill, which is expected to aid in leak detection. Discussion ensued between Committee Members Collopy and Scarbrough and Finance Director/Treasurer Al-Imam, noting that while monthly billing may improve customer service and aid in leak detection, there will be an increase in overall operating costs. Nonetheless, the Finance Committee was not opposed to the proposed transition to monthly billing for utilities. Chair O’Neill requested clarification on large deviations between the 2023-24 revised budget and the Fiscal Year 2024-25 proposed budget (referencing the “Department Revenue Overview – All Funds” page 22 in the agenda packet), including the increase in the intergovernmental revenues. He requested information on what decisions the City Council may Finance Committee Regular Meeting Minutes May 9, 2024 Page 3 of 6 have made during the current fiscal year which modified the intergovernmental revenues up to $31 million and why it decreased back down to $17 million in the proposed FY 2024-25 budget. Finance Director/Treasurer Al-Imam responded that it was likely grant-related, however, he would provide additional detail to the Committee. Chair O’Neill also requested clarification on large deviations in funds across Fiscal Years on the following two items: 1. Non-Operating Source: Cause of fund fluctuations, particularly as related to FY 24 revised amount of $30 million, and 2. Transfers: Cause of change from FY 24 adopted amount of approximately $59 million to approximately $103 million in FY 24 revised. He requested clarification at the next meeting and prior to consideration of this item by the City Council. Committee Member Scarbrough requested clarification concerning the proposed change of the City Clerk’s Office Department Assistant to City Manager’s Office Administrative Assistant. City Manager Grace Leung responded that the incumbent in the current position retired, and the proposed change was made in the interest of customer service, as the position could also provide assistance in the City Manager’s Office. To effectuate the change, a position reclassification is proposed to ensure the position is at the same level as the position in the City Manager’s Office, therefore having the ability to seamlessly provide better support to the City Council. The $6,000 increase is to address the slightly higher classification. Chair O’Neill opened public comments. Charles Klobe inquired as to the schedule for Mesa and Irvine Ranch water billing. Utilities Director Mark Vukojevic stated he believed Mesa was bi-monthly and Irvine Ranch is monthly. Historically, water billing by various agencies has been on a bi-monthly basis, however, more agencies are now converting to monthly billing. Seeing no others, Chair O’Neill closed public comments. This item was received and filed and there was no further action taken. B. PERFORMANCE METRICS Recommended Action: Review and discuss the performance metrics evaluated in this report and provide any recommendations for consideration by the City Manager and City Council. Finance Director/Treasurer Al-Imam provided a summary of the proposed performance metrics. Finance Director/Treasurer Al-Imam noted that over the past three to four months the Finance Department has worked closely with each City Department to identify performance metrics which will be incorporated within the final budget document upon adoption. Workload indicators have also been incorporated, as long as each Department identified at least two or three performance metrics, which are slightly different. Since this is the first year performance metrics are included, it is expected that Departments will continue to build on their performance metric foundation in subsequent years and that they demonstrate the City’s commitment to providing high quality and efficient delivery of programs and services. Committee Member Collopy commented the Finance Committee has been pressing for performance metrics for many years and he is supportive of staff’s efforts in this regard. He also confirmed that the “Be Well” partnership is included in the City Manager’s Office budget, and he expressed concern with unexpected, unacceptable response times concerning previous incidents. He would like to see performance metrics related to “Be Well’s” response times. City Manager Grace Leung indicated that she would follow-up with Committee Member Collopy to better understand the facts and circumstances surrounding these incidents. Committee Member Collopy confirmed with Public Works Director Dave Webb that Public Works staff negotiates with subcontractors as it relates to City construction projects, and the City is the contracting agency. He suggested that Public Works incorporate performance Finance Committee Regular Meeting Minutes May 9, 2024 Page 4 of 6 metrics on the cost and schedule for City construction projects, commenting that contractors may have to return funds back to the City in event of non-performance. Public Works Director Webb responded the City performs due diligence in determining the schedule and costs related to each project, and explained how liquidated damages are used to ensure performance with each contract. Committee Member Collopy expressed support for performance metrics designed to hold contractors to agreed-upon schedules and costs. Public Works Director Webb provided detail as to how his department provides projections and schedules concerning awarded projects, which he places in his master schedule and then incorporates applicable metrics. The majority of projects are completed on-time and within costs, and he explained the typical 10% contingency amounts that are included in most contracts. Public Works Director Webb stated the best performance measurement is how a project ends, because the majority typically start as “low-bid” awards. He also elaborated on the required bidding process, which is specified by State law and the municipal code. It was indicated that the City has more flexibility when awarding professional services agreements, which are not solely based on cost but also factor in qualifications and experience. Committee Member Collopy commented on the “Invitation for Bid” (IFB) process as compared to the RFP process, and any other options available to the City, for large scale projects such as the future Police Station. Public Works Director Webb spoke concerning other options, including “design-build”, in which the City has not frequently initiated, and pre-qualifying contractors, which may result in fewer change orders, but not necessarily lower costs. Assistant City Attorney Yolanda Summerhill suggested “design-build” as an option that would allow the City to avoid the low-bid requirements of the Public Contracts Code. For more sophisticated projects, such as the future Police Station, the City could potentially pursue “design-build” options, which may provide better outcomes. Chair O’Neill commented positively concerning the percentage of 911 calls responded to within 15 seconds, noting that it is an amazing metric. He further commented that he is uncertain about the City needing to target certain Police Department items, such as having a certain amount of calls or total calls for service, as it should really reference what is typically expected in terms of volume. He said his target is the Police Department should be responding within 15 seconds, 90% of the time. Deputy Director, Newport Beach Police Jonathan Stafford responded some of the targets are actually Statewide standards, such as the response within 15 seconds. Chair O’Neill requested the investigative clearance rate of 100 should remain in the document and the percentage on the social media posts for information/preventative and crime alerts should be classified separately. Deputy Director Stafford responded the public information metrics are internal objectives and targets, but not necessarily as informative for the public. Discussion ensued among the Committee and staff concerning the performance metrics and that they will continue to evolve over time as they are reviewed year over year. Chair O’Neill opened public comments. Seeing none, Chair O’Neill closed public comments. This item was received and filed and there was no further action taken. C. THIRD QUARTER BUDGET UPDATE Recommended Action: Review and discuss the performance metrics evaluated in this report and provide any recommendations for consideration by the City Manager and City Council. Acting Deputy Finance Director Burguan provided a summary and presentation of the Fiscal Year 2023-24 third quarter budget update. Finance Committee Regular Meeting Minutes May 9, 2024 Page 5 of 6 Acting Deputy Finance Director Burguan noted third quarter revenues are projected to be $1.1 million lower compared to the second quarter primarily due to decreases in sales tax, transient occupancy tax, and service fees and charges, which is partially offset by an increase in projected investment earnings. Committee Member Collopy inquired as to the timing of receipt of information from the City’s sales tax consultants. Finance Director/Treasure Al-Imam stated that for the March 31 quarter, the numbers should be in within the next three to four weeks. Acting Deputy Finance Director Burguan continued, noting that property tax revenue is the City’s largest source of revenue and is projected to increase by $5.2 million (3.8%) over last fiscal year. The current forecast for property tax revenue is consistent with the amount previously forecasted. Sales tax revenue is the City’s second largest source of revenue and is projected to be $0.7 million (1.5%) lower than the amount reported in the second quarter budget update. However, the forecast is consistent with the amount reported to the Finance Committee in March 2024. A slide was presented which illustrated the decrease in sales tax revenues in the autos and transportation, general consumer goods, and State and County pools sectors, but noting an increase in restaurants and hotels category. Discussion ensued among the Committee and staff concerning the impacts of various auto dealerships on City sales tax, noting that one dealership is closed temporarily and that luxury dealerships are not currently performing as well as mid-range dealerships. Acting Deputy Finance Director Burguan continued, providing detail on sales tax revenue per capita, with a slide illustrating the flattening of sales tax Statewide and that this is not unique to Newport Beach. She continued her presentation, noting that transient occupancy tax (TOT) revenue is the City’s third largest source of revenue and is projected to increase by $1.1 million (3.6%) over the prior year, which is $0.7 million lower than previously forecasted. Gross TOT revenues are projected at $38.2 million. Visit Newport Beach (VNB) receives 18% (or approximately $6.9 million), which brings TOT revenues to $31.3 million, net of amounts remitted to VNB. A chart was displayed which breaks down TOT revenues by residential and commercial over the past 5 years. Revenue from hotels has increased substantially post pandemic. Residential saw significant increases year over year but is projected to be lower in the current fiscal year. Committee Member Collopy confirmed with Finance Director/Treasurer Al-Imam that the Porsche dealership is scheduled to be open in February 2025. Acting Deputy Finance Director Burguan continued stating that other general fund revenues are projected to exceed budget by $0.2 million with service Fees and Charges projected to come in $0.8 million lower than projected at the second quarter due to lower volumes of plan check fees and investment earning projected to exceed budgeted amounts by $1 million. The general fund expenditure budget totals $310 million and the projected actuals are expected at $301.7 million, which reflects an expenditure budget savings of $8.3 million. The majority of savings are in the salary and benefits category, and there are some vacancies as well as lower than budgeted costs and benefits. There are a few budget amendments that will be recommended to the City Council, including an increase for recreation fee-based classes, as well as transfers related to CIP projects. It is currently anticipated the City will end the current year with $8.9 million in unrestricted fund balance based on the third quarter update. Approximately $3.1 million of this will be used to fund the contingency reserve which will leave $5.7 million uncommitted for City Council consideration with respect to the use of surplus funds. Chair O’Neill inquired about the level of funding in the current year to paydown the pension liability. Finance Director/Treasurer Al-Imam stated the appropriation has already been “front-loaded for 2023-24 for a full payment of $45 million. It was also noted that since there is still one quarter remaining in the fiscal year, there may be additional growth in the surplus. Chair O’Neill opened public comments. Seeing none, Chair O’Neill closed public comments.