HomeMy WebLinkAboutS17 - Outside Counsel Expense (Special Litigation)CITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. S17
May 25, 2010
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Leonie Mulvihill, Acting City Attorney
Imulvihillonewportbeachca.aov
(949) 644 -3131
SUBJECT: PROPOSED BUDGET AMENDMENT RE OUTSIDE COUNSEL
EXPENSE (SPECIAL LITIGATION)
ISSUE:
Should the budgets for outside counsel expense be augmented in the amount of
$650,000 to provide for forecasted outside counsel costs that are likely to accrue before
the end of the Fiscal Year?
RECOMMENDATION:
Approve the request to transfer a combined total of $650,000 from the General Fund
and General Liability reserve funds to cover forecasted outside counsel cost related to
special litigation allocating: (1) $450,000 from the General Fund reserve fund to the
Office of the City Attorney's ( "OCA ") budget line item 0510/8657; and (2) $ 200,000
from the General Liability reserve fund to the General Liability Non -Tort litigation budget
line item 6021 -8654.
SUMMARY:
Billings through the first three quarters of FY 2009/2010 for outside counsel services for
special litigation have exceeded the budgeted amount. Using the expenses incurred to
date, combined with knowledge of the current status of matters being handled by
outside legal counsel, we have forecast a total needed budget augmentation for the
balance of the fiscal year at $650,000. These funds are needed to defend the City in
what is deemed to be special litigation which includes the defense of the group home
ordinance and litigation related to the Sunset Ridge Park project.
DISCUSSION:
At present our budget line items for outside counsel expense have been exceeded. We
recommend the budget adjustments as noted below to address the issues for the
balance of FY 2009/2010.
Proposed Budget Amendment
Re Outside Counsel Expense (Special Litigation)
May 25, 2090
Page 2
Expenses for general outside counsel services for special litigation are handled out of
the OCA budget line item 0510/8657. This line item is referred as to special litigation
because it does not involve advisory services or code enforcement, rather it reflects the
legal services needed to defend and commence litigation. This line item was allocated
$590,000 in the FY 2009/2010. The City has incurred approximately $885,000.00
though the three quarters of FY 2009/2010 in this line item.
Costs estimates were exceeded mainly because of new cases filed against the City and
the progression of the group homes cases to trial.
The City budgeted $350,000 at the outset of the fiscal year to address anticipated legal
expenses related to its defense of litigation challenging the City's 2008 ordinance
regulating residential uses including group homes. In addition to involving three
separate group home operators, progression towards trial has involved a lengthy and
contentious discovery process. Trial is currently set for August 10, 2010. Before the
end of the fiscal year we anticipate extensive pre -trial motions including cross - motions
for summary judgment/summary adjudication.
Based on our analysis of the present status of special litigation matters, we recommend
an augmentation to FY 2009/2010 budget line item 051018657 in the amount of
$450,000 and an augmentation to FY 2009/2010 budget line item 6021 -8654 in the
amount of $200,000.00. These funds would be used to cover the special litigation
expenses that are incurred before the end of the fiscal year.
The OCA has been taking an active role in all special litigation matters. That role,
however, is restricted as to the 2008 ordinance due to the need to maintain a strict
ethical wall between the use permit/reasonable accommodation administrative hearing
process and issues related to these matters. We are doing all we can at present to
minimize outside counsel expense and will continue to take appropriate action along
those lines. Unfortunately, however, based upon fees and costs incurred through this
fiscal year and the status of these matters, we must recommend the augmentation of
these budget line items. We will continue to oversee all outside counsel services and
approve additional services consistent with Council direction. Established OCA billing
guidelines are relied upon to ensure that the City's expense is reasonable given the
complexity of the matters.
CONCLUSION:
The City has incurred outside counsel expenses during the first three quarters of FY
2009/2010 that exceed budgeted amounts. With the current workload in the areas
handled by outside counsel, we are compelled to recommend a budget amendment to
Proposed Budget Amendment
Re Outside Counsel Expense (Special Litigation)
May 25, 2010
Page 3
allocate $450,000 from the General Fund reserve and allocate this amount to the OCA's
budget line item 0510/8657 and allocate $200,000.00 from the City's General Liability
reserve fund and allocate this amount to budget line item 6021 -8654.
Prepared and Submitted by:
C oni hi
Acting City Attorney
Attachment: Budget Amendment
A09 -00413 fM &CC from LM 05.25.10 re OCA OC Budget Amendment]
City of Newport Beach NO. BA- 10BA -048
BUDGET AMENDMENT
2009 -10 AMOUNT: $650,000.00
EFFECT ON BUDGETARY FUND BALANCE:
Increase Revenue Estimates - Increase in Budgetary Fund Balance
Increase Expenditure Appropriations AND Decrease in Budgetary Fund Balance
Transfer Budget Appropriations No effect on Budgetary Fund Balance
SOURCE:
from existing budget appropriations
from additional estimated revenues
PX from unappropriated fund balance
EXPLANATION:
This budget amendment is requested to provide for the following:
To increase expenditure appropriations from General Fund unappropriated fund balance in the amount of $450,000 and from
General Liability unappropriated fund balance for outside counsel expenditures.
ACCOUNTING ENTRY:
BUDGETARY FUND BALANCE
Amount
Fund Account Description
Debit Credit
010 3605 General Fund - Fund Balance
$450,000.00
605 3605 General Liability - Fund Balance
$200,000.00
REVENUE ESTIMATES (3601)
Fund /Division Account Description
EXPENDITURE
APPROPRIATIONS (3603)
Description
Division
Number 0510 City Attorney
Account
Number 8657 Litigation Expense
$450,000.00
Division
Number 6021 General Liability - Non Tort
Account
Number 8654 Outside Counsel
$200,000.00
Division
Number
Account
Number
` Automatic System Entry .
Signed: (
lG
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Financial Appr I: Administrative Services Director
Date
Signed:
Admi istrat a Approval: City Manager
Date.
Signed:
City Council Approval: City Clerk
Date