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HomeMy WebLinkAboutApproved Minutes - February 18, 2021Finance Committee Meeting Minutes February 18, 2021 Page 1 of 11 CITY OF NEWPORT BEACH FINANCE COMMITTEE FEBRUARY 18, 2021 MEETING MINUTES I. CALL MEETING TO ORDER The meeting was called to order at 3:00 p.m. via teleconference. II. ROLL CALL PRESENT: Chair Will O’Neill, Mayor Brad Avery, Council Member Noah Blom, Committee Member William Collopy, Committee Member John Reed, Committee Member Joe Stapleton, and Committee Member Larry Tucker ABSENT: None STAFF PRESENT: City Manager Grace K. Leung, Finance Director/Treasurer Scott Catlett, Deputy Director/Finance Steve Montano, Administrative Specialist to the Finance Director Marlene Burns, Senior Accountant Theresa Schweitzer, Public Works Finance/Administrative Manager Angela Crespi, Utilities Director Mark Vukojevic, Budget Manager Shannon Espinoza, Public Works Administrative Analyst Raymund Reyes, Fire Administrative Manager Mary Locey, IT Manager Jackie Luengas-Alwafai, Senior Budget Analyst Amy Lewis, Utilities Operations Support Superintendent Casey Parks, Public Works Administrative Manager Chris Miller, Public Works Senior Civil Engineer David Keely, Utilities Senior Management Analyst Joshua Rosenbaum, Harbormaster Kurt Borsting, and Lifeguard Operations Fire Assistant Chief Mike Halphide MEMBERS OF THE PUBLIC: Charles Klobe, Jim Mosher, Nancy Scarbrough, and Jill Johnson-Tucker OTHER ENTITY: Erin Payton, MGT of America Consulting, LLC III. PUBLIC COMMENTS None IV. CONSENT CALENDAR MINUTES OF JANUARY 21, 2021 Recommended Action: Approve and file. Chair O’Neill called for public comments and hearing none, closed the public comments. MOTION: Mayor Avery moved to approve the minutes, as amended, seconded by Committee Member Stapleton. The motion carried 6 ayes – 0 noes, 1 abstention: Council Member Blom. V. CURRENT BUSINESS A. FISCAL YEAR 2020-21 SECOND QUARTER FINANCIAL REPORT Summary: Staff will present results as of the quarter ending December 31 to the Finance Finance Committee Meeting Minutes February 18, 2021 Page 2 of 11 Committee, and subsequently will present it to the City Council. Recommended Action: Review and discuss this report and provide any recommendations for consideration by the City Manager and City Council. Finance Director/Treasurer Scott Catlett presented an update on the General Fund budget status through the conclusion of the second quarter in December. He provided an economic overview, which indicates things are moving in a positive direction but still below levels where they were before the pandemic and does not expect economic activity to get back to pre-pandemic levels this calendar year. He reported Transient Occupancy Tax (TOT) revenue rebounded to 60% of pre-pandemic levels in October before dropping due to the new Stay-At-Home Order but expects it to rebound again. He expects some positive impacts relative to sales tax as a result of the return to the State’s purple tier. Finance Director/Treasurer Scott Catlett presented the Year-To-Date General Fund Revenue performance and noted the City is seeing $11.5 million of net positive variance, so far, this fiscal year. He advised the City is seeing a bright spot relative to TOT and Sales Tax in the City’s revenues versus the City’s original budget. Finance Director/Treasurer Catlett presented an overview of projected General Fund Revenues, which looks forward through June 30, 2021. He reported the City adopted a conservative $200 million revenue budget and expects it to increase to $218 million by the end of the year, predominately fueled by growth in Sales Tax and TOT. He noted although the numbers are a nice contrast to what was originally budgeted, the City has not recovered to levels seen before the pandemic. He provided a brief overview of historical General Fund Revenues to show what would have happened hypothetically if revenue had grown on a trend as though the pandemic had not occurred. Finance Director/Treasurer Catlett reported Property Tax, is a bright spot in the City’s budget. He advised 50% of the City’s budget comes from Property Tax which has been largely insulated from the pandemic’s effects and noted the number has grown over the last two fiscal years despite the pandemic challenges. He does not recommend any adjustment to the budget that was adopted. Finance Director/Treasurer Catlett reported Sales Tax was sharply impacted by the pandemic-related restrictions and a decline in tourism. He advised that the City is seeing positive trends as businesses pivoted in creative ways to reach customers and the fact that customers have become more comfortable going back into the business community. He advised there are strong Sales Tax pool revenues due to online sales. He noted Sales Tax is seeing a $6 million or 20% projected improvement versus the adopted budget. Finance Director/Treasurer Catlett reported TOT was the most severely impacted revenue in the City as a result of the pandemic. He reported the City’s hotels have worked hard to adapt to the current environment and while business travelers have largely not returned, leisure travelers have returned to an extent. He has heard from the hotel community that more visitors are driving versus flying into the area. He reported TOT revenues are projected to go back to 60% of pre-pandemic levels by the end of the year. He advised that the City budgeted conservatively, which resulted in a projection that is $8.8 million higher than the adopted budget. Finance Director/Treasurer Catlett reported on Other General Fund Revenues that is approximately $1.5 million above budget through December, which is being driven partly by higher parking revenues. He also advised that the City is seeing growth in Property Transfer Tax, which is higher than expected and is offsetting a reduction in fees primarily from recreation programs. Finance Committee Meeting Minutes February 18, 2021 Page 3 of 11 Finance Director/Treasurer Catlett reported on projected General Fund Expenditures and expects to achieve at least $0.5 million in expenditure savings and noted it may be slightly reduced this year versus prior years due to some of the cuts made in the budget process. He believes the savings will be larger as the year goes on. He reported all departments are performing as expected. Lastly, he advised, the $5 million additional pension payment was made bringing the total to $40 million. Finance Director/Treasurer Catlett reported on projected General Fund Expenses and noted that there have been some additional costs related to responses to the pandemic that have been offset entirely by other savings. He expects to recognize some additional Coronavirus Aid, Relief, and Economic Security (CARES) Act reimbursements in the General Fund of approximately $800,000 that would further improve the budget situation. He also expects to receive approximately $600,000 in Federal Emergency Management Agency (FEMA) reimbursements in the future and with changes from the Biden Administration expects that number to increase. In response to Chair O’Neill’s inquiries, Finance Director/Treasurer Catlett confirmed most of the reimbursement from the CARES Act fund would return to the General Fund and the majority of the FEMA reimbursement would also return to the General Fund with a small portion returned to enterprise funds for COVID-19 response costs. He advised the current stimulus package is up in the air but the most recent data he received was that funds would be allocated directly to cities with over 75,000 in population rather than through the State. He advised the money that could be used for revenue replacement, is more flexible than the CARES Act funds previously received, and anticipates the City to potentially receive $8.5 million under the current proposal that would be General Fund money available for use at the City Council’s discretion. In response to Committee Member Collopy’s inquiry, Finance Director/Treasurer Catlett reported the FEMA reimbursement is for several things but mostly has to do with direct pandemic response costs such as enhanced facility cleaning or supply purchases. He noted there is a list of items that FEMA has deemed eligible. Finance Director/Treasurer Catlett reported on General Fund Reserves and reported the net of the expenditure savings and the additional revenue expected would yield a projected net unrestricted fund balance of $27 million at the end of the year. He advised that is dependent on many factors that could change such as another Stay-At-Home Order, changes in the State’s restrictions, or faster implementation of the vaccine. He advised that the Unrestricted Fund Balance is, resources in the General Fund in excess of the Contingency Reserve. He reported the true delta between the money coming in and money going out in the current fiscal year is $3.3 million and not the $27 million from the prior slide. He advised the difference is that $24 million was from FY 2018-19 surplus and $12 million was from FY 2019-20 surplus used to balance this year’s budget. He also advised it does not take into account the fact that there are $30 million in budget reductions implemented this year that have not yet been restored. Finance Director/Treasurer Catlett reported on the Tiered Budget Balancing Framework and reported the City Council approved restoring $3 million in budget cuts in the first quarter that took the $33 million down to $30 million. He believes the Tier 1 and Tier 2 budget cuts will be achieved in the current year’s budget and will not need to be restored even if the City has the resources to do so at this time. He reported it was mentioned to the City Council during the planning session to evaluate the Tier 4 cuts at the end of the fiscal year and possibly restore some of them with a year-end surplus. He advised the Public Works Department discussed Deferred Capital Expenses during the planning session, and there is a good portion of the $20 million of Tier 3 cuts being carried forward to the next fiscal year’s budget or being deferred. He reported recommendations are being presented to the City Council next week. In response to Chair O’Neill’s inquiries, Finance Director/Treasurer Catlett clarified the $3.3 million is a projected surplus. He explained departments are submitting their budgets to the Budget Division to review the number and expect to have some preliminary numbers to Finance Committee Meeting Minutes February 18, 2021 Page 4 of 11 determine if there is enough projected revenue to build a balanced budget without needing to use any of the $24 million that was carried forward. He believes once that question is answered on a preliminary basis, there could be a discussion about where it makes sense to use some of the funds for capital improvement projects. In response to Chair O’Neill’s inquiries, Finance Director/Treasurer Catlett clarified the table on Page 14 assumes the $24 million does not exist and should revenues improve enough in the current fiscal year to cover expenses the $24 million should remain unspent in the current fiscal year. Committee Member Tucker clarified it is a cumulative budget surplus for the prior two years about which the City Council would have normally made a decision at budget time about what to do and noted that there is a policy that half goes to unfunded pension liabilities and half goes to CIP. Finance Director/Treasurer Catlett explained the reason he believes that caution is prudent for next year is that if the $30 million of budget cuts were restored the $3 million surplus would turn into a shortfall. He noted next year’s budget will look different but once the pieces are put together staff will be able to make an informed recommendation to the Finance Committee. In response to Committee Member Tucker’s inquiry, Chair O’Neill confirmed his understanding that it looks like City Council will have some additional surplus funds to allocate. Mayor Avery commented that City Council would want to take a look at the numbers fairly soon to reassess essential projects that were deferred. In response to his inquiry, City Manager Leung reported Public Works Director Dave Webb would be providing an overview of priority projects at the March 9, 2021, City Council meeting. Chair O’Neill reported that the City will see substantial increases in cost due to the City’s partnership with Costa Mesa on the homeless shelter and trash fees that will be increased dramatically due to state mandates. He also noted expenditure increases will occur based on labor agreements, which will probably be projected higher than the expanded revenue projections. He advised those should be taken into consideration when discussing CIP. Committee Member Stapleton commented that he is glad the City took a conservative position and concurred with Mayor Avery’s comments. In response to Committee Member Reed’s inquiry, Finance Director/Treasurer Catlett reported Public Works is recommending deferring some of the CIP projects to be considered in the next budget process. He noted if there is a surplus of $24 million some of that could be returned to CIP. Chair O’Neill referenced the Tiered Budget Balancing Framework slide and explained the Contingency Reserves and transfers out to internal service funds have been rolled back but the $2 million in Insurance and $2.5 million in Equipment Replacement have not been rolled back. In response to his inquiry, Finance Director/Treasurer Catlett explained Tier 4 insurance transfers may not need to be restored to the budget because those funds were doing very well. He recommended taking a closer look at the Equipment Replacement amounts and determining what needs to be restored if the funds are available. He advised the Tier 1 and Tier 2 cuts have been achieved in the current year’s budget and should be restored in the upcoming fiscal year's budget if possible but there is no need to restore them in the current fiscal year. Chair O’Neill suggested a different kind of framework may be needed for discussing the next budget cycle as it seems some of the funds will not need to be rolled back. He feels it is worth working through and determining the approach to present to City Council because the tiered system worked well this year. Finance Committee Meeting Minutes February 18, 2021 Page 5 of 11 City Manager Leung agreed the tiered approach has served the City well She noted while it has yet to be determined if there are enough revenues with the known expenditure increases to present a structurally balanced budget, it will depend on the circumstances whether the tier system goes away. She explained the City can now take care of the deferred CIP needed because it held back on using surplus funds from the past two years. In response to Committee Member Tucker, City Manager Leung confirmed she would like to see the $5 million contribution to CIP and the $8.5 million to the Facilities Financial Plan (FFP) restored but it looks to be on the trajectory to be restored this year or the next year. In response to Committee Member Collopy’s inquiry, City Manager Leung confirmed the City is under a soft hiring freeze with every job opening is being reviewed to determine if the position is necessary. Chair O’Neill called for public comments. Charles Klobe referenced Slide 12 and noted that it looks like contract labor has increased even though there was a reduction in Recreation, which is where most of the contractors were used. He wonders if the City supplemented the hiring freeze by hiring contractors during this period. Mr. Klobe added that if that was not the case, he would like clarification regarding the increase. Chair O’Neill closed public comments. In response to Mr. Klobe’s inquiry, City Manager Leung reported there is a healthy use of contract services across departments and while it is used in the recreation area, it is also used in the Community Development Department. She noted service demands were high throughout the pandemic for permits so quite a bit of contract services was used there. Chair O’Neill recommended presenting the Fiscal Year 2020-21 Second Quarter Financial Report to the City Council. Mayor Avery concurred. Council Member Blom reported that he is not confident in the TOT numbers and believes there will be a slower climb than the projected 60%. He advised Marriott is looking at 60% improvement by late October with a full recovery coming in 2024 so they are not as optimistic. Committee Member Collopy highlighted that the City was able to see $5 million in the Unfunded Pension Liability restored. Mayor Avery expects there would be some continuing hangover going into the new fiscal year across the board and it is simply a question of targeting what that would look like. Chair O’Neill reported City Council has directed staff to provide a quarterly update to the Finance Committee and to the City Council with the thought process of making sure the tiers were being reviewed to determine what could be rolled back and what could be accelerated. He was encouraged to see two tiers rolled back. He complimented Finance Director/Treasurer Catlett’s ability to show the Finance Committee where the City is financially as opposed to where it should be. In response to Committee Member Stapleton’s inquiry, Finance Director/Treasurer Catlett confirmed speaking with Newport Beach and Company about the TOT numbers. He also noted the short-term rental market has not been impacted to the same degree as hotels and that is also included in the TOT numbers. The item was received and filed. Finance Committee Meeting Minutes February 18, 2021 Page 6 of 11 B. FEE STUDY UPDATE Summary: Staff will present the Master Fee Schedule to the Finance Committee and subsequently will present it to the City Council. Recommended Action: Receive and file. Senior Accountant Theresa Schweitzer provided a brief overview of the Fee Study Update. She reviewed the difference between a tax and a fee, which is a cost of service or charge for the person using the service and cannot exceed the cost of service. She reported the authority for Cost of Service Fees comes from the Fiscal Sustainability Plan and Council Policy. She advised that the Municipal Code mandates 100% cost recovery. She advised that MGT of America Consulting performs the cost of service analysis of developing user fees and presented their scope of work. She provided a brief overview of the fee calculation which is reviewed for accuracy and reasonableness. Senior Accountant Schweitzer provided a brief overview of the Fee Study results and reported the impact is $216,000 in additional revenues for the Water and Sewer Funds and a decrease in revenues of approximately $65,000 in the General Fund. She noted the Fee Study was calculated based on information that was available and does not include any fees where there were no volume statistics. She advised any kind of change in cost, staffing or time would cause a fee to increase or decrease and noted fees can be combined if there are some efficiencies. Senior Accountant Schweitzer provided a brief overview of fees including fee changes and new fees for the Finance, Harbor, Public Works, and the Utilities Departments. She noted a new update that was not included in the staff report which is a proposed Electric Vehicle Surcharge for EV chargers to charge $0.10 per minute after a 10-minute grace period and is intended to encourage turnover of vehicles charging. She noted an additional update that proposes removing the subsidy that is currently set for the Junior Lifeguard fee. In response to Chair O’Neill’s inquiry, Senior Accountant Schweitzer reported the City is currently charging per kilowatt-hour for pass-through costs of EV charging. She advised other cities charge a surcharge or space charge and she can check with the City Attorney’s Office to see if there is a reason the City should not be charging for this. Public Works Finance/Administrative Manager Angela Crespi reported the original grant was for the purchase of the EV charger replacements at the Civic Center and is unaware of any restriction that would prevent the City from charging the fee and noted it is keeping in line with what other communities are doing with their Air Quality Management District grant funds. Committee Member Tucker confirmed Tesla is charging an overstay charge at their charging stations. He noted the grant came from a governmental source and should be used efficiently. Committee Member Reed commented that charging a parking cost seems to be the way to invoke this. Chair O’Neill explained that if the Junior Guard Program subsidy is rolled back to increase the cost to generate revenue, he does not want the revenue to just go back into the General Fund. He understands the rollback is tied to trying to make sure the City is set up to defer cots for the future Junior Lifeguard Building but would like to turn that amount into a restricted fund of some kind for that purpose so the public understands where the money is going. In response to Chair O’Neill’s inquiry, City Manager Leung explained her thought was to budget an annual appropriation to go toward the project but will need to think it through further if it is a separate fund. Chair O’Neill noted it will need details when it comes to City Council. City Manager Leung advised staff was working on finalizing a potential MOU with the Junior Lifeguard Foundation and felt it was important to consider since it is going before City Council on March 9. She advised she could have the details finalized before that date. Finance Committee Meeting Minutes February 18, 2021 Page 7 of 11 Mayor Avery expressed concern regarding the Dredging Permit Fee and noted the City is charging $1,900 but the full charge is $3,200. He explained these are fees for one-time fees for someone who wants to trench their slip and he feels the City should realize full recovery costs. Senior Accountant Schweitzer advised staff is proposing to charge the full cost of the fee at $3,200. Finance Director/Treasurer Catlett explained the reason for the increase may be that it has been some time since it was reviewed and perhaps the consultant's review indicates there is a difference in what it costs now and the last time it was studied. Senior Accountant Schweitzer reported the last time it was studied the consultants cost for the Regional General Permit (RGP) was divided over 10 years and is now divided over five-years and also included significantly more staff time than the prior study. Mayor Avery believes the studies require different levels of complexity based on his experience at the Harbor Commission. Chair O’Neill opened public comments. Jim Mosher inquired about the recent increase in Photocopy Fees and noted Slide 15 of the agenda packet indicated the current fee, which is three cents per page for black and white copies, including for public records requests is going up from $0.03 to $0.35. He requested clarification if that is correct or if the decimal point was misplaced. Senior Accountant Schweitzer clarified the per copy pages increases are specific to the Library costs and noted the library copiers have a different cost than the Public Records Request fees. She reported the library costs currently are $0.25 for black and white and $0.75 for color and are changing to $0.35 and $0.45 respectively. Chair O’Neill closed public comments. The item was received and filed. C. LONG RANGE FISCAL FORECAST (LRFF) Summary: Staff will provide an update to the latest version of the LRFF. Recommended Action: Receive and file. Deputy Director/Finance Steve Montano provided an update to the latest version of the Long Range Financial Forecast (LRFF). He advised the report covers Fiscal Years 2022 through 2041 to make sure the City has efficient resources for its existing and emerging commitments and programs over the long run and to appropriately identify funding strategies to meet those commitments. Deputy Director/Finance Montano reported this is the fourth year using Synario, which is a SaaS-based financial modeling platform. He provided a brief overview of model hierarchy and development that includes baseline scenarios based on FY 2020-21 Original Budget, Revenue and Expenditure Impacts, and Scenarios. Deputy Director/Finance Montano provided an overview of Property Tax Baseline Assumptions and reported average annual growth of 5% but there may be a slowdown over the next few years as a result of current economic conditions. He advised the City will only receive 1% of Proposition 13 funds and there may be potential for delinquencies that have yet to be seen. He advised there is an 18-month lag in receiving Property Tax funds. He advised there is the potential of seeing Proposition 8 reductions. Deputy Director/Finance Montano provided an overview of Sales Tax Baseline Assumptions and reported Sales Tax seems to be on the road to recovery and the City’s Sales Tax consultant Finance Committee Meeting Minutes February 18, 2021 Page 8 of 11 who reported strong online and auto sales. He advised the City is seeing the effects of the gradual implementation of the Wayfair decision which requires online sellers to remit taxes to the County pool and the City receives a portion of those funds. He projects a more rapid growth coming out of this economic period than the historic average which is 3%. Deputy Director/Finance Montano provided an overview of TOT baseline assumptions and is predicting a solid recovery due to the rollout of the vaccine and the likelihood of more travel by the end of the year. He reported Gary Sherwin, President, and CEO of Visit Newport Beach, expects leisure travel in the spring and summer and the return of business meetings in the fall. He also reported the Fashion Island Hotel will open in late summer or fall of this year. Deputy Director/Finance Montano provided an overview of Other Revenue baseline assumptions and reported the future project growth is 2.5% and anticipates a steeper climb out of the decrease in the recent months. Deputy Director/Finance Montano provided an overview of General Fund expenditure baseline assumptions, which show how much progress the City has made towards increasing its additional discretionary payment funding for pensions. He noted future projected growth of 3.7% is included in the model. Deputy Director/Finance Montano reported the City has and will continue to face significant fiscal impacts associated with providing Permanent Supportive Housing for the homeless. He expects the City to commit approximately $27 million towards this initiative over the next 20 years. He anticipates significant future financial commitments on the horizon related to refuse and recycling and noted if the City is not successful in increasing the City’s Recycling Fee it is looking at costs of approximately $70 million over the next 20 years. Deputy Director/Finance Montano provided the results of Baseline scenario 1 and scenario 2, which includes the Homeless Strategy and Refuse Option 1. He reported on the impact of continuing to pay the unfunded accrued liability payments through 2035. He noted pension investments are sensitive to investment earnings and the City should consider anticipatory pre-funding options. Deputy Director/Finance Montano reported any projected deficit in the model is not reflective of likely and typical budget performance. He advised the General Fund is projected to be in a financially sound position for the next 20-year period. He noted short term deficits can be absorbed without long-term reliance on Contingency Reserve. Lastly, he noted the City does have fiscal challenges including near-term revenue impacts related to COVID, the potential for significant increases to CalPERS pension plans, homelessness funding strategies, refuse/recycling mandates, and the need to ramp-up savings to meet substantial near-term harbor improvements by the Harbor & Beaches Master Plan. Mayor Avery commented he does not see Sacramento changing with their mandates and encouraged the City to be as solvent as it can. He expressed concern about the potential collapse of CalPERS. Committee Member Collopy noted the extra $5 million payment was in anticipation of CalPERS not achieving their return and echoed Mayor Avery’s comments. In response to Committee Member Collopy’s inquiry, Chair O’Neill reported that through a Citizen Initiative Process the trash fees are paid for by the City. He advised the City is allowed to pass through the recycling costs, but the trash costs are required to be paid for the Citizen Initiative Process and are born by the City out of the General Fund. He explained the Recycling Fee is being increased because it has not been increased in 10-years. He explained the City and Newport Coast have two separate trash contracts. He explained for the Proposition 218 notice the costs had to be analyzed differently. Finance Committee Meeting Minutes February 18, 2021 Page 9 of 11 Committee Member Tucker commented there is a risk because of the size of the City’s fund in CalPERS and it is important that City Council consider having limited if any subsidies for the City to break even and be prepared for the future. He is encouraged by the Property Tax revenue, which is $5 million per year. Chair O’Neill opened public comments. Nancy Scarbrough inquired how the Citizen Initiatives for trash paid by the City can be unwound if the City wants to completely remove those subsidies outside of the City’s expenditures. Chair O’Neill explained there could be another Citizen Initiative or City Council could put it on a ballot for a vote of the public. Ms. Scarbrough inquired how the City would start to consider in its budget the increased infrastructure costs associated with the Regional Housing Needs Assessment (RHNA), such as water, trash, sewer, additional police and fire facilities, and additional staff. Chair O’Neill closed public comments. In response to Ms. Scarbrough’s inquiry, City Manager Leung expressed her frustration that the State is so focused on the housing units and not taking into consideration the ancillary needs that go along with those units. She advised the City is discussing zoning and looking at impact fees as the Housing Element process continues. She agrees it is a complex and challenging issue. Chair O’Neill commented that as the City moves through the Housing Element it needs to also plan for additional infrastructure. Committee Member Tucker expressed his frustration that the State is fast-planning instead of good-planning and believes the State is going about this backward. The item was received and filed. D. DEEP DIVE OF UTILITIES DEPARTMENT BUDGET Summary: Discussion of the budget for the Water and Wastewater Enterprise Funds’ and other Utilities Department functions. Recommended Action: Receive and file. Utilities Director Mark Vukojevic provided a brief overview of the Utilities Department Budget and reported there are 53 employees with the department and three managers. He reported the City has 300 miles of water pipe and 26,000 service connections and noted everything is foundationally based upon the Master Plan and the CIP for all of our replacements and planning. Utilities Director Vukojevic reported there are three main divisions, which are the Water Production Division, the Maintenance and Repair Division, and the Water Meter Division. He reported on the overall financials for the last few years. He reported that the City is on track to use 15,500-Acre-Footage (AF) of water this last year. Utilities Director Vukojevic reported the target reserve is 50% of operating expenses, which is approximately $15 million and noted Utilities had drawn down on that fund substantially by the CIP increase last year. He reported they will be dropping below the target level over the next few years. He explained even though they will be going below the target level the CIP will not be able to spend all of the money this year that will result in inherent savings. Finance Committee Meeting Minutes February 18, 2021 Page 10 of 11 Utilities Director Vukojevic provided a comparison of groundwater cost versus imported water costs and noted there is an incentive to maximize the City’s groundwater usage because it is less expensive and is higher quality water. Utilities Director Vukojevic reported on the big project is the installation of the new AMI Digital Water Meters which will save $300,000 per year in meter reading costs and early leak detections. He reported an overview of costs the department incurs including credit card billing feels, fire hydrant replacement, and the lack of development “buy-in” or “impact fees”. Utilities Director Vukojevic reported on the Wastewater (Sewer) Division and noted the primary goal is sewer spill prevention. He reported the average wastewater bill is $13 per month. He provided an overview of the Wastewater (Enterprise Fund) and reported they are well below their target reserves. He advised there will need to be another rate study completed in FY 2022-23. Utilities Director Vukojevic reported on Storm Drains and advised the key goal is protecting the Harbor Water Quality. He reported there are 87 miles of storm drains, channels, and ditches and 89 tide valves that require almost daily turning. He reported Street Sweeping occurs weekly and is a contracted service as of 2020. He reported Graffiti Removal is also a contracted service and added that contract costs have increased especially in Street Sweeping. He reported contracted overtime is less expensive than in-house over time. Utilities Director Vukojevic reported on Streetlights and indicated they added a staff member to take care of emergency generators and streetlight replacements. He reported expenses in Street Lights are stable and LED replacement helps decrease costs. Utilities Director Vukojevic reported on Oil & Gas and advised 16 oil wells have been in operation since 1950 and produce about 17,000 barrels per year. He advised crude oil is sold and natural gas is sent to Hoag. He reported oil prices have been very low and are not enough for the City to break even financially. Utilities Director Vukojevic reported on the Old City Landfill which housed the City’s landfill back in the 1950s and 1960s and that the City shares maintenance costs with the HOA. Chair O’Neill thanked Utilities Director Vukojevic for his hard work financially. Mayor Avery thanked Utilities Director Vukojevic for his solid administration of the Utilities Department. He commented that the City should not be paying for credit card processing fees and will investigate alternatives. Chair O’Neill opened public comments. Ms. Scarbrough was unable to be heard and Chair O’Neill requested she submit her inquiry directly to Utilities Director Vukojevic. Chair O’Neill closed public comments. E. WORK PLAN REVIEW Summary: Staff and Finance Committee to review the proposed work plan and adjust as necessary. Recommended Action: Receive and file. Chair O’Neill reported there are no comments. Chair O’Neill called for public comments and hearing none, closed public comments.