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HomeMy WebLinkAboutApproved Minutes - June 4, 2020Finance Committee Meeting Minutes June 4, 2020 Page 1 of 5 CITY OF NEWPORT BEACH FINANCE COMMITTEE JUNE 4, 2020 MEETING MINUTES I. CALL MEETING TO ORDER The meeting was called to order at 3:03 p.m. via teleconference. II. ROLL CALL PRESENT: Mayor /Chair Will O’Neill, Council Member Diane Dixon, Committee Member William Collopy, Committee Member John Reed (attending remotely), Committee Member Joe Stapleton, Committee Member Larry Tucker (attending remotely) ABSENT: Council Member Joy Brenner STAFF PRESENT: City Manager Grace Leung, Finance Director/Treasurer Dan Matusiewicz, Deputy Director/Finance Steve Montano, Budget Analyst Amy Lewis, and Senior Pool Lifeguard Caitlin McCourt MEMBERS OF THE PUBLIC: Jim Mosher and Phillip Bettencourt III. PUBLIC COMMENTS Jim Mosher reported the Planning Commission will be meeting to consider a Mixed-Use project by the airport which will be paying the City $6-$7 million for building rights. He commented that the net cost to the City in perpetuity would be approximately $620,000 per year. Mr. Mosher reported he requested review of the Moss-Adams Risk Assessment but was advised it would not be made public. He commented while he understands some items in the report may be for internal users only, the public should be able to understand the clear idea of the risk for the City. IV. CONSENT CALENDAR MINUTES OF MAY 21, 2020 Recommended Action: Approve and file. MOTION: Chair O’Neill moved to approve the minutes, seconded by Committee Member Collopy. The motion carried 6 ayes – 0 noes, 1 absence (Brenner). V. CURRENT BUSINESS A. RECOMMENDATION FY 2020-21 BUDGET Summary: Make final recommendation to the City Council on the City Manager's Proposed FY 2020-21 Operating and CIP Budgets. Recommended Action: Review, discuss, and make a recommendation to the City Council regarding the City Manager's Proposed FY 2020-21 Budget. Finance Committee Meeting Minutes June 4, 2020 Page 2 of 5 Chair O’Neill provided opening remarks and noted one of the primary functions of the Finance Committee is to make a recommendation to the City Council on the budget proposed by the City Manager. He commented the current proposed budget has gone through several iterations due to the current financial crisis and was discussed during the joint Finance Committee-City Council meeting after Memorial Day weekend. He thanked the City Manager and Finance Director for clarifying the fund transfer issue during the discussion. In response to Chair O’Neill’s inquiry, Finance Director/Treasurer Matusiewicz reported there would be minor changes to the FY 2020-21 Proposed Budget for the Capital Improvement Projects (CIP). He explained that carry forward balances from encumbered CIP projects will not be known until closer to the fiscal year-end. Adjustments will be made at that time. Additionally, he noted there is a position amendment that has a zero-dollar impact to the budget. In response to Committee Member Collopy’s inquiry, Finance Director/Treasurer Matusiewicz reported Property Tax Revenue is projected to be on target, Sales Tax Revenue is projected to have a $6 million shortfall and Transient Occupancy Tax (TOT) currently has a $5 million shortfall for the current budget. Finance Director/Treasurer Matusiewicz advised May and June TOT payments have not been received. In response to Chair O’Neill, Finance Director/Treasurer Matusiewicz clarified when looking at collections to date, May and June TOT payments still need to be added to the total. He also clarified Property Tax Revenue is on target and there has only been a small increase in delinquencies. He explained it will be difficult to determine Sales Tax Revenues. City Manager Grace Leung interjected and commented it will be difficult to determine the shortfall until the clean-up payment is received in August. In response to Chair O’Neill’s inquiry, City Manager Leung responded that any budget surplus can be used to plug the revenue shortfall. Chair O’Neill recommended reviewing the budget in September once the August numbers are received. In response to Committee Member Tucker, Finance Director/Treasurer Matusiewicz confirmed the $35 million annual payment to Unfunded Pension Liabilities remains in the budget. He also confirmed there is an additional $5 million in the budget to address increases to our unfunded pension liabilities that may result from the next CalPERS experience study that reviews actual experience of the system in relation to the current actuarial assumptions. Committee Member Tucker suggested City Council review the policy for how much Contingency Reserve is used before covering shortfalls in other categories. In response to Committee Member Tucker’s request, Finance Director/Treasurer Matusiewicz agreed to prepare a schedule of incoming and outgoing transfers for the Finance Committee. In response to Council Member Diane Dixon’s inquiry, City Manager reported General Fund Reserves currently stand at $52 million. Finance Director/Treasurer Matusiewicz clarified the General Fund would only be drawn down if necessary. Council Member Dixon commented the City has been conservative in terms of financial management and has strong General Fund Reserves going into the FY 2020-21 Proposed Budget. In response to Council Member Dixon’s inquiry, Finance Director/Treasurer Matusiewicz explained the plan was to draw $2.1 million from General Fund Reserves but the amount could be more or less. Council Member Dixon stated for the record and for any residents who are observing the meeting, the City has solid financial security and has the funds available to absorb the shortfall. Committee Member Stapleton thanked the staff for their efforts during these unusual times. He applauded the efforts of the City in exercising conservative fiscal practices in the last few years which will help it get through the crisis. Finance Committee Meeting Minutes June 4, 2020 Page 3 of 5 In response to Committee Member Reed’s inquiry, Finance Director/Treasurer Matusiewicz explained staff will be reviewing the budget regularly and could potentially propose cuts on the expenses side to make up some financial ground. City Manager Leung explained the tiers were developed so they could be replenished. The Contingency Fund would be replenished first, then the CIP, and then last, long-term funds. City Manager Leung reported the City is currently on an annualized budgeting system and the Executive Team is being convened to review the impact of service reductions for the City. In response to Council Member Dixon’s inquiry, City Manager Leung confirmed step increases and cost of living increases will continue moving forward as the City is contractually obligated in those areas. Chair O’Neill opened public comments. Mr. Mosher commented the process and budget itself is confusing including what the Finance Committee is doing today. He referenced page 13 of the staff report, which states per Council Resolution 2018-71, the Finance Committee is responsible for reviewing and recommending the operating portion of the City Manager’s proposed budget excluding the proposed budget revisions. He is interpreting this as the Finance Committee is making recommendations regarding the budget that has been published on the City’s website and completely ignoring revisions that might be made to it. He stated it may be difficult or meaningless to make that recommendation because revisions to the published budget are quite large. Mr. Mosher referenced page 12 of the staff report, which states the FY 2020-21 Proposed Budget is balanced and feels the statement references the entire budget. He explained the definition of a balanced budget, in particular as related to a governmental agency, is one where revenues are equal or exceed expenses and the proposed budget has substantially larger expenses than revenue. He commented declaring the budget balanced is confusing to the public. Philip Bettencourt inquired if budget refinements have impacted the Housing Element budget assumptions and any consultant contract commitments due to the delay in the kick-off process for the Housing Element Advisory Update Committee. In response to Mr. Bettencourt’s inquiry, Chair O’Neill confirmed the City will be able to meet its budgetary contractual obligations. In response to Mr. Mosher’s comments, Finance Director/Treasurer Matusiewicz explained that all appropriations in the Capital Improvement Budget for projects currently underway and remaining unexpended as of June 30, 2020, as approved by the City Council in prior years, will be appropriated (carried forward) to the 2020-21 Fiscal Year. Funding for these prior year projects are held in reserves. This may seem to inflate the budget relative to revenues that are expected in FY 2020-21, but there are sufficient funds in reserves to cover prior year projects. In response to Mr. Mosher’s comments, Chair O’Neill acknowledged there is not a budget checklist this year, and explained it is normally used for policy decisions at the City Council level. City Manager Leung explained that in-lieu of the budget checklist there will be proposed budget revisions but will not include changes in service levels or resources. Chair O’Neill closed public comments. MOTION: Council Member Dixon moved, and Committee Member Collopy seconded, to recommend the proposed budget to the City Council as prepared by staff. The motion carried 6 ayes – 0 noes, 1 absence (Brenner) Finance Committee Meeting Minutes June 4, 2020 Page 4 of 5 In response to Committee Member Collopy’s inquiry, City Manager Leung explained any projects removed from the budget would need to be appropriated by City Council action if funding were to become available. B. WORK PLAN REVIEW Summary: Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Recommended Action: Receive and file. Finance Director/Treasurer Matusiewicz recommended a Finance Committee meeting in mid- to late July. Chair O’Neill reminded the Finance Committee their terms of service expire on June 30, 2020, and explained an item needs to be placed on the City Council agenda to initiate the appointment/reappointment process. He advised once the Finance Committee members are confirmed, the Finance Committee can then set up meetings. Chair O’Neill opened public comments. Committee Member Tucker recommended a review of the Resolution establishing the Finance Committee to evaluate whether to recommend a change to the Resolution to be more consistent with the manner in which the Finance Committee operates. He also suggested the Finance Committee have a discussion about maximizing revenues and minimizing costs as its founding Resolution contemplates. He expressed concern that the focus on encouraging more housing could mean less revenue being generated from Development Agreements. Lastly, he recommended a review of the future sources of funding the Facilities Financial Plan to which Chair O’Neill agreed. Chair O’Neill closed public comments. Chair O’Neill thanked the Finance Committee and staff for their service. There was no further action taken on this item. VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) None VII. ADJOURNMENT The Finance Committee adjourned at 3:47 p.m. until the next regular meeting of the Finance Committee. Filed with these minutes are copies of all materials distributed at the meeting. The agenda for the Regular Meeting was posted on June 1, 2020, 1:51 at p.m., in the binder and on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic Center Drive. Attest: