Recording in progress. >> Welcome to the city council special
meeting this Monday evening, February 23rd. City clerk, please call the role.
» Certainly. Mayor Lorraine, council member Nome
» here. >> Council member Sphere Gaditzki
» here. >> Council member Nash
» here. >> Deputy Mayor Fernandez
» here. >> And Mayor Lorraine
» here. Thank you and welcome. We're excited to
be here in person with options for those who choose not to be in person to
participate virtually. Thank you for your cooperation and for helping us
maintain an efficient and accessible meeting environment. There are several
ways to participate. For those attending in person, you may complete a yellow
request to speak slip and hand it to the city clerk. If you are participating
remotely, use the raise your hand feature in Zoom
and you will be called on at the appropriate time.
If you're calling in via phone, press star 9 to raise your hand and when
called upon, press star six to unmute. These options for public comment will
remain available until I close public comment period for each specific item.
For members of the public who might be watching us on YouTube who wish to
provide live public comment, please note that you must join the meeting through
the Zoom webinar using the access information listed on the agenda as we
don't currently have a public comment feature available in YouTube.
And with that, we have one item in our special meeting, a study session, the
fiscal year 202526 midyear budget update with a presentation from our finance
director, Abby Viser. Good evening, Abby.
» Good evening, honorable mayor and city council. As you mentioned, I'm Abby
Viser, the finance director, and I'll be doing a brief overview of where we are
with fiscal year 2526, uh, looking at our midyear. Um to give
you a sense of what we're going to walk through today, um we will be talking
mostly about our general fund, which is of course our main operating fund. Um
we'll look real quickly at the 2425 actuals, how we ended that year. We'll
look at how we're doing for fiscal year 2526, digging down more into revenues,
um as well as expenditures, looking what our general fund balance is looking
like. Um, we'll give an update on where we are with our financial sustainability
plan and we'll also take a look at the sewer fund to see um, where that main
enterprise fund how that's doing at this mid year.
Um, to do kind of a refresher, this is the information that was presented in
our annual comprehensive financial report. So, as of the end of the year of
2425, um, you can see we adopted a budget of
with a deficit of about 10.6 6 million but by the end um at midy year we had
projected 6.4 um as a deficit we ended with our
auditing of 1.5 million in surplus and then when we look at our kind of
budgetary um controls we ended up having a deficit of about 3 million 2.9
million. So that's how we ended uh fiscal year 2425
and then we'll go into what we're expecting for 2526.
Uh back in June, the city council adopted our budget with a $12 million
deficit. That was with the 175.8 in revenues and 187.8 in expenditures.
At this point at about 20 for the 2526 midyear, we're expecting closer to 6.9
as our deficit. Um again, that is kind of just looking at our spending um
halfway into the year. And again, I'll kind of take a closer look at that. So,
first let's look at our general fund revenues. uh for 25 26 um as you can see
um we've had some um deductions. So in property tax we're seeing lower and this
is because of the reduction in our VLF shortfall. We did receive that in August
and because we only received 67% of our $6.6 million shortfall. We are showing a
we we got 4.4 million and we're showing the $2.2 million deficit. So, I've
revised the estimates in our property tax due to that VLF shortage. Um, we
only got that 2.2 represents 33% of the shortfall. Uh, sales tax is looking a
little lower. Um, real property transfer tax um is looking better and I'll kind
of go into that. And then interest earnings are a little higher. And so,
we're expecting at the end of the year about a million more in revenues. And
again, this is a conservative estimate um kind of based on what we know at this
time. Um, in terms of our revenue sources,
property tax of course is our number one revenue source. It's very stable. Um,
other than the portion of course that is VLF. So, you'll see here that it's been
rising steadily over time. Um, but like I mentioned, we had anticipated 89.4
million in property tax and only saw 87 million because of the VLF shortfall
that was reduced this year. Um to talk a little bit more about
property tax, I want to show um on this chart the blue bands kind of represent
our secured based property tax. This is our really most consistent source. And
although we've had higher levels of growth in the past, um this year we're
seeing about 3.8%. Um which is is not bad. That's kind of what we budgeted. Um
and it was it's showing consistent increases. In addition, in the red bar,
we have our excess E-RF as well as other revenues that are property tax related.
Those are also increasing steadily. And then you have VLF, um, which is kind of
the green bar, which you can see it's kind of cyclical. It's going up and
down. And again, that has to do with the shortfalls.
So, [clears throat] I thought it'd be good just to take another moment to look
at why property tax in lie, the vehicle license fee, um, is such an inconsistent
source of funding. Um so you can see from here um that VLF is a major portion
of our property tax. It's an important section um and it rises traditionally
with the rest of property tax. But because VF is funded by excess ERF and
property tax from our non-basic aid schools, we are not always getting that
full allocation to the city of Sonteo as well as the other cities and the county.
Um, right now of the 23 school districts that are within Sonteo County, five of
them are non-basic aid. Um, and if that changes, our allocation goes down even
more. But right now, this um, for this fiscal year, we're estimating 6.9 would
be our total VLF entitlement. Um, with that only five school districts in the
non-basic aid category, we would be getting 7 million less in that uh, VLF
entitlement. And then we also usually get the shortfall from the previous two
years because it takes two years to get that shortfall back. So this year we
should have gotten the 6.6 million which was from 2324 and instead of course we
got the 4.4 million which was 67% of that. So as you can see this year we're
estimating about 14.2 in VLF. But there are some concerns
because we don't know for sure if that 7.1 is actually going to be um the
shortfall we're going to see and also of course whether we're going to get that
funding from the state. So um I think you all are aware that the city is
working with the county as well as all the other cities within Sonteo on
several fronts to see how we can recover this shortfall both for this year and
into future years because it is a significant portion of our funding.
So, um, next I want to talk about our second largest, um, source of revenues,
our sales tax. Um, this one I'm showing the trend line here because it has been,
uh, fairly flat. Um, it's looking good, but it's also just not increasing at
what we had expected it to increase. So, in yellow, you see the measure S sales
tax. That's budgeted at about 6.8 million, and that's what we're expecting
still for this year. Um, and then the remaining is the 1%. Um, and that's kind
of sticking steadily with what we received last year. Um, but we did lower
expectations just a little bit because we weren't yet seeing the growth we were
hoping to see. Um, we'll wait another quarter to see if we get better data and
we might be able to revise that up a bit. Um, but this is again our second
largest source of funding and although measure [clears throat] S hasn't been
increasing, it has been a stable at about $6.8 to 7 million.
Uh the next source of funds I want to talk a little bit more about is our real
property transfer tax. Um this is important because this is um definitely
what helped us to not hit the deficit um last fiscal year and it is coming in
pretty strong for this year as well. So if you can see the the red bar here is
the portion of measure C uh portion of our real property transfer tax that
comes from measure CC. So last year it was 6.2 million. This year we're
expecting about 1.9 million. Um, and this again is the extra 1% on the
regular property transfer tax which is in blue. This is voted in by Sonteo city
voters. And again, it has provided an excellent one-time revenue source to
help us especially when we're reaching those deficit years. But, um, we're very
conservative in how we budget it because you can see that this, um, revenue
source is quite volatile. it moves up with how the housing and commercial um
real estate market moves and we can't count on it. Last year we had an a
really nice chunk of measure CC, but I can't count that that will come in again
this year. Um so I've moved that up to about 11 million in our budget. So
that's up a bit and so is helping to offset our losses in property tax.
Um now to move to general fund expenditures for fiscal year 2526.
Um we are conservatively expecting that we will see some savings within our
salaries and benefits. So I've adjusted that down about 2 million. Um and then
also we're expecting some savings in our transfers out. So I've budgeted that at
2.1 million. Um the other major expenditure areas we're kind of keeping
where they are because expendit expenses especially on the operating side are
still fairly up given um the high cost of operating expenses.
» What's transfers out? >> So transfers out Oh yeah. So transfers
out are typically um items to our capital improvement projects. And so
that it's budgeted items, but if they don't, so for measure S, example, we
don't move it out until the projects are spent. So we don't some some funds we
move right into our capital spending, but measure S we don't. So if we're if
we still have measure S at the end of the year, then that's still in our
general fund bank basically. So that's what that represents. Um, so this one,
as you can see, I'm estimating a savings at the end of the year um to be
expenditures closer to 183.7 million. And then again, just to refresh, that
then leads us into expecting about a $6.9 million deficit as at the end of
this year if we kind of realize the savings and that the revenue comes in as
expected. Let's see. One thing I wanted to share
kind of as we're looking at that is kind of our general fund trends. This is what
it looks like with our operating expenses in green, our contributions to
the CIP, those transfers out in purple, and then we have kind of this revenue
line item that is fairly flat this year. Um, so that's where you can see the
revenues are not rising with the expenses and that has kind of been
unfortunately the story over time. So that's why we're always kind of trying
to keep up um with where expenses are going.
Um the other thing I want to talk to is the general fund balance. Um as you can
see from this, we're expecting a slightly lower general fund balance. Um
if that deficit of 6.9 million comes through. Um the good news is though at
the end of 2425 we ended um that fiscal year with 119.5
million in our our general fund reserve. Um thus showing you know how this
council as well as councils before have been disciplined in their spending.
We've really put away um that rainy day fund. So this careful spending from last
fiscal year has really helped to keep the runway open as we work through our
fiscal sustainability plan. So although we anticipate we could be down to 113
million if this deficit comes to fruition, we still have that that's a
pretty significant um reserve still. Um so talking through then what is going on
with the fiscal sustainability plan because we are trying to make headway in
that um given that we know this deficit spending is the deficits are still out
in the next couple of fiscal years. Um I want to highlight kind of some of the
levers that we're using around um the financial sustainability p plan. Uh the
first one of course is expenditure control. That is an important one. The
city um all the different departments are kind of looking at belt tightening
and where we can be efficient in our spending and save money. Um so within
that category um we have um about eight frozen positions within the city right
now that we're holding um from recruitments and that's saving us
funding. We also are trying our best to um charge to capital projects where it
makes sense as well as move funding out of the general fund where it makes
sense. We've been looking at benefit savings. So, we've moved some of the
charges from the workers comp out of the general fund because that that fund has
a healthy balance right now. So, we think we can go a year or two or or
maybe even three without charging quite as much as we've been charging. And with
operating budget savings, we've been also looking to see where we can cut
corners, um, make new agreements, and save money. Right now, we're estimating
that that's about 3.2 million in savings if we reach those goals. I've been more
conservative in what I put forward in in my end ofear estimate, but that's what
we're shooting for in terms of how we're looking to um save money within the
departments. At the same time, we have looked at the other levers. We are
looking at revenue enhancements. Uh, of course the council has asked us to look
into the sales tax measure. So, we're doing um more research on that and doing
some education. Um, we're looking at revenue agreements where we can to bring
in more revenue as we did with the downtown parking. We're looking at cost
recovery and cost allocation. Uh, parks and recreation updated their cost
recovery plan um for their fees last year and so this year their revenues are
coming in higher because those new fees were put in place before this fiscal
year. We'll be doing a citywide cost allocation through the finance
department to make sure that general fund costs are being properly allocated.
In addition, we're pursuing grant opportunities. Um, as you know, we have
the contract with the grants coordinator and we've been successful with several
grants recently. Um, the 20 20 million about uh grant that we received um for
the um for the Fashion Island Boulevard project as well as the $1.2 $2 million
grant for Lakeshore Community Daycare Center and the 0.55 million grant for
the real time information center. Um so those are all uh projects that are
moving forward on grants. And then we also have economic development. Uh the
city council recently adopted that work plan for the next three years and we're
looking at items to expand and diversify revenues through that economic
development work plan. Um an example would be the billboard policies that'll
be coming to the council in another month or two. Um so these again are the
kind of levers that we continue to work on um in order to kind of re reduce um
to reduce our expenditures and improve the uh revenues within our financial
sustainability plan. And then the next thing I want to talk
about before we finish is the sewer fund. Uh this of course is the city's
main enterprise fund. Um and I wanted to give you an update on where that is.
This is again based on um all the customers within the sewer fund
enterprise. So the mid-year projection for their revenues is we're estimating
about 96.3 million um in revenues for them. That is a little bit of an
increase from what we've budgeted at the beginning of the year. At the same time,
we do anticipate seeing some um savings due to salary vacancies. So we're
estimating expenditures at about 62.8 million. Um, CIP expenditures were
amended and they're looking to be the same right now at 31.4.
And then that gets us to an unrestricted fund balance of about $34 million.
This is not unexpected. There's a couple of things that have been added to our
reserve. Um, for example, in last fiscal year and then also in this fiscal year,
we are now seeing the state revolving loan funds come in. And so that is a big
infusion of cash that is coming to reimburse us for our clean water program
expenditures. So that has boosted our unrestricted fund balance. And at the
same time um you know this fund balance is really going to help us maintain
ongoing operations of the sewer fund. It's going to help cover future CIP and
it's also going to provide the robust debt coverage ratio that we need to
maintain given the amount of financing that we will be paying for the clean
water program improvements that were conducted. So um this is a a good
balance to see in terms of for our sewer enterprise fund.
Then finally just to give you an overview of what we'll be doing on the
budget process right now. Um we're working on the two-year budget for
fiscal year 2628. Uh departments have submitted their operating budget. We're
working on the personnel costs and so we'll be prepared for a budget study
session on the operating budget um on April 20th. We'll be also bringing a
preview of the capital improvement five-year plan at that meeting. Then
we'll have our um first hearing on the budget on June 1st. That'll be our 2628
proposed budget. And then at June 15th will be the second scheduled public
hearing for the 2628 budget adoption. Oh, and then the other thing that um
will be coming forward is we are doing some midyear fiscal year 2526 CIP
adjustments. So, it's only capital projects, but we'll be bringing that
most likely at the March 16th city council meeting. That'll be a consent
item. And with that, if there's any additional
questions, I'm here um for those questions.
» Thank you very much. This time we'll start with public
comment. If anyone in the room has public comment, they can give a yellow
request to speak slip to the city clerk. [clears throat]
City clerk, can you please tally how many speakers you have?
» U Mayor Lorraine, we have one request to speak and that is in our virtual
environment. Um our one and only speaker will be Thomas Morgan and we'll set the
timer at three minutes.
Tom, Thomas, please go ahead and unmute your mic.
Uh, good evening. Thank you for the opportunity to speak. Um, I I was just
doing a search of the internet and not too long ago and I came across a state
controllers report that indicated the county the controller had miscalculated
the excess raff over a multi-year period. So, I was just wondering if
we're done uh if that's completely flushed itself out or if we still have
any impacts from that. Thank you.
» Okay. Thank you, Mayor Lorraine. That concludes public comment.
» Thank you very much. I think I might just check with uh Director Viser to see
if um you happen to have any any response to
public comment. >> I mean, I think my response is right now
we haven't gotten anything from the county saying that our excess raff is
going to be different than budgeted. that our most recent communication from
the county um was um very in target um in in line with our estimates. So if
there's additional communications, I haven't had any in that front.
» Thank you. At this time, uh I would like to ask my fellow council members if they
have questions or comments. Council member Diaz Nash, please go
ahead. >> Thank you through the mayor and thank
you Director Viser. That was clear and understandable and well done very
quickly. So, thank you very much to you and your team. Uh, just a couple of
questions. One for the public. Why is VLF
categorized under property tax? [laughter]
» Just you're clear and concise as always. Yes.
» So, let's see. I'm trying to think. I mean, yes, there's a there's there's
quite a backtracking that we could go through to say why VLF is part of
property tax, but in general, um, this I'm trying to think what's the best
way to describe this. Um, this is an entitlement that the city is
supposed to have from a former source of vehicle license fees. uh that were again
a consistent source that we got and yes they have been backfilled by um excess
raff and property tax that went through the school districts. Um so VLF is kind
of a probably a misnomer really in the end result. Um, but again because it's
the because of I mean again I probably need a whole slideshow to go through the
triple flip of where how we got here. But in general because um it's funded by
um the RAF and property tax that comes from the non-basic aid. That is where
that funding goes. It goes into the property tax bucket because it's really
part of the Sanonteo County's overall uh property tax assessment.
» Okay. >> Is [clears throat] that helpful? I just
wanted you to share so that anybody listening to this or looking at it later
on >> probably would have that question
without going through the 500 slides. >> Yeah.
» High level conception. I think that makes total sense. So, thank you.
» Well, and I do think it's, you know, I've seen that the county has been
trying to work on some messaging to show how VLF has come about and it's actually
it's a two-page handout. So, even in a short handout, it is hard to get that
messaging consolidated down, but we're working on it. Yes. Good. Thank you. Um,
and what is the city's thinking in terms of future budgeting of how we handle
VLF? >> So, at the moment, um, for this coming
fiscal year, I'm going to potentially be putting zero in to see what that looks
like >> for the VLF shortfall. So, again, to be
clear, and I don't know if you want to pull up the VLF's funding slide. I think
I have it on my screen. Um, so to be clear, we do if we get 16.9 million
about right now, 7.1 is estimated as the shortfall. So if we were not going to
budget to receive the shortfall, that would be $7 million. 7.1 potentially
that we would not be putting in as revenues. So just to jump in a little
bit just about what the future of VLF is and how we're approaching it here. Uh
director Viser is correct that I'm looking at right now uh budgeting zero
in for VLF which is going to hurt us significantly when you're looking at on
top of this doesn't account for the $5 to7 million structural deficit that
we're dealing with in our forecast. So when you look at a 10-year forecast it
did not anticipate completely losing VLF. And so um right now we're working
with the county. I am part of a city manager group working with the county
manager and uh real real team. We were just on a call [clears throat] with
assembly member Diane Pap and she'll continue to you know put forth
legislation as we've done in previous years. It's just getting harder and
harder every year um to make that happen. This past year we only received
I believe 67%. That's why you're seeing that $2.2 million uh deficit which
equates to 33% of that VLF. We're also actively the council gave direction to
enter into a lawsuit against the state of California because we're fighting on
behalf of our residents and for our money on that 33%. Uh and with that the
department of finance, you know, and how things shake out and I'm not going to
get out out ahead of my wills here with my city attorney right next to me, but
you know, we'll be working through that. So, that's a long- winded way of saying
we're going to be, you know, looking at zero, you know, but hopefully something
can come in with our annual legislation or budget um approval process. You know,
hopefully some of the member happen and Senator Becker and our Sanonteo
contingent up in the state can make something happen again uh this upcoming
year, but honestly, it's we're it's not something that we can depend on as as
you're seeing and it is a true threat and this is an existential threat for us
and the county will say it too if you talk to our county manager overall and
we are the largest city in the county. Therefore, we have the largest piece of
VF amongst any of the 20 cities. >> Great. Thank you very much for sharing
that both of you. Uh, third question. How does our $113 million general fund
reserve compare as a rough rough percentage to general fund reserves in
other cities? >> You know, I don't know off the top of my
head kind of what other cities are looking at in their general fund
reserve, but I it's I would say it's very healthy for us. I mean if you think
about when we went through the general fund reserve policy update um we talked
about the different components that we had within that and if you put like most
people for the kind of um kind of the emergency fund they have like 25%
of expenditures set aside and we have that and we were able to put them aside
the 25 million in capital. So if you look at that 113 million figure, it
includes that 25 million NCIP reserve that we put aside, it includes a 25%
reserve. It also includes a 25% contingency reserve. So we have a couple
of different buckets and a lot of cities have a target of just that one 25%
target. So I do think that um we're doing well in that we have several
buckets that we can use to to stabilize um different against different things.
So just to jump in a little further on our reserve policy as you guys approved
and so uh we have a pension stabilization reserve. We have also the
budget contingency reserve. So there's all pieces it's not you know we look at
the total and we're looking at 113 million but it's actually broken up into
bits and pieces of our overall reserve policy itself. Um so it's not just a
stack of just you know the the dollars as just overall reserve. um you've been
very deliberate in making sure that there's specific amounts set aside for
specific uh rainy day issues and we're having to tap into those. We are in
rainy days right now and so we're having to tap into that currently. Um you know
depending on how financial markets look on the outlook in the future we've been
lucky uh right now the last couple years with Kalpers on our pension uh that
they've had really good positive returns. The minute we go and below I
think it's about the 6 and a half% right I think is 6.8
» 6.8% 8% reserve. The city has to fill that difference
» uh in that pot of money. And so that's where having that $10 million will help
us to be able to bear that burden in in the future as well.
» Thank you. And I think that's a great example for the public of how one number
does not tell the story and how we're really prepared for contingencies of of
many many different natures. And then my final question is
the city is putting a lot more emphasis on streamlining processes you using
using technology to improve uh reduce costs or improve improve return to
residents. Could we see that that eventually could uh turn into savings
that we could actually book or is that just something that we're going to try
and be as efficient as we possibly can be and see what happens?
» I mean, I think there's a couple of different ways we can look at that. I do
think the efficiencies can help us save money in the long run, but more likely
it will help allow folks to spend their time on higher value activities that
will get to more things that potentially we haven't gotten to before. Um, but
again, I think it depends on which technologies that we're talking about.
But in in terms of overall, I think it's it's hard to blanket statement it,
right? So, so keep adding a little bit more
color here, but I think our police chief can attest to this just about technology
and the usage of it. You know, right now we've had uh a lot of special events or,
you know, protests and whatnot. And so having our drone program, our our our
real-time information center has been huge. Uh right, Chief. I think just
overall being able the amount of bodies or police officers it would take uh in
order to you know make sure that it's a safe event. We're able to um use these
drones and our real-time information center to help uh reduce the amount of
police presence uh because we're limited on the amount of resources. But we're
trying to, you know, use technology to be able to help uh blunt those uh
resources and and just overall making sure that our officers are safe, our
community is safe. Um or even AI report writing. I know that's something that
we're working on too. And so that allows our police officers to be out on the
street more. Um, you know, they still got to review all these reports, but it
still helps uh reduce time so that we have officers out there not having to um
utilize as many officers uh downtime at the station, having to write these
reports and being out there in police in our community.
» Right. And I think that kind of messaging is be really important to
continue to share with the public as we move forward. So, thank you very much
for the clear, concise answers. >> Thank you. Anyone else have?
» I do. >> Deputy Mayor Nicole Fernandez.
» Thank you. >> Um, so
to the city manager, um, can you talk a little bit Oh,
» turn the mic on. Hi. To the city manager, can you talk a little bit, you
have taken a leadership role in trying to find a resolution to the VLF issue?
Can you talk a little bit about what that process has been like and what
we've done to explore a permanent solution? I know that there have been um
it's it's a it's a coalition effort. So would you talk a little bit about that?
» Yes. So part of a VLF committee of basically the county and city managers
and so we meet every month actually and we've been meeting even uh more
frequently and I know that the county is uh really working to put together a
great team to really advocate on the county's behalf and all US 20 cities as
well. um because the county, you know, 70 million is their impact. We're we're
7 million. So, just on top of that, but um what we're having to do is really put
San Monteo County on the map in the cities of San Monteo. And so, we're also
going to have to articulate what does that mean for us if we don't get that 7
million overall. And so with that right now, the call to action from the county
is to ask all the cities to kind of start putting together what those plans
would be if that money does not come through in the future. And so we're
working on that, but there's also advocacy, lobbying efforts from the
political side of things to the governor's office. Um, but also just
bringing greater awareness to uh this this VLF issue and the the funding
shortfalls that all 20 cities in the county are going to experience.
» Thank you. And I know that you've been hard at work in taking a leadership role
on that resol that solution a potential solution. So I'm grateful for your
leadership, Alex. Um this I also just want to make sure that we highlight for
this for this that in some ways this is a narrative issue in the fact that San
Monteo County I mean this is a a crux of the budget challenges that we have is
the fact that V that we're not getting this VLF money. Um we're [clears throat]
we're in a unique situation where we are the I think one of three counties who
has this problem, but we're really the the the county the most urban county
that really is seeing the full effects of this. Is that right?
» Yes. The only other two counties are Mono and Alpine, which are very small
counties. And so we are the largest county experiencing this. But there are
a couple other counties that on the horizon as you know the property uh the
assessed value of the properties and more schools go from uh nonb non-basic
aid to basic aid. Um you're going to start seeing these impacts. But we're
kind of singled out right now because no other county is really experiencing uh
this issue. And so that's why we're continually trying to raise awareness of
this issue. >> Right. Thank you very much. And the
other sort of crux in us getting receiving the reimbursement and again
just to highlight for where we are politically as a city and county is that
previously we've had budget chairs from San Monteo County for both budget
committees that would usually allow this to go into the draft documents for the
legislature. Is that right, Alex? >> You had filtering on these side.
» We had friendly Yes, we had friendly legislators that would look to this
issue. And with the changes in leadership recently, we've lost in some
ways we've lost that that friendly immediiacy. Is that my understanding?
» Okay. I just want to make sure that we sort of build the narrative. And um a
few weeks ago, uh Mayor Lorraine and I were able to uh attend a county briefing
on this matter along with a couple of other matters. I know either one of one
of us will report out on it um during news and announcements, but this was a a
big part of that discussion. And so I don't know how we are going to in San
Monteo because this affects us the most. We're the largest city. I don't know
what the plan is for us to build the nar to help build the communication around
the VLF issue so that our constituents are activated for this but I would like
us to take action on that point whether it's a letter a subcommittee something
that where we're pulling in our new communications director communicate
community engagement director but this is this is a job one in my mind. Thank
you. >> That's exactly what we're working on.
» Thank you both. Anyone else? Council >> member mayor, just a few follow-up
questions. Thank you for your presentation. Um,
you were mentioning the real time real real transfer tax is volatile. What are
some of the volatilities or what are some of the reasons why for example we
saw such a large dip from 6.2 two down to 1.9.
» So again, the real property transfer tax is is especially the the 0.5% which is
our was on the blue. Actually, let me open it up so I'm not talking at it.
So um the blue uh 0.5% real property transfer tax is dependent really on the
housing market since it is a transfer of the housing property. So, as the as
there's been issues with the housing market, then we see less property
transfer tax. Um, what's interesting is last year, you know, they were like, oh,
the housing market's not moving because interest rates are high, but we did have
significant movement still in the housing market, but then the 6.2 is
really the commercial market. So um that um is the new piece that kind of came in
with measure CC is there's been excuse me there's been a lot of commercial
property transitions especially last year and some in this year and that is
what's leading to kind of those big swings because you're having the over
$10 million transfers that are triggering the 1% to measure CC but in
general because it's based on the the housing market predominantly given our
base that's really kind of it shows the eb and flow of the housing market.
» So just the basic you're seeing the volatility here on this graph and so we
when we budget our budgeting principle is basically we use
ongoing revenues for ongoing costs and then one-time monies for one-time costs.
And so really when you look at those red bars over there, you know, it can
fluctuate to zero all the way up to it could be even higher than that depending
on what commercial real estate uh transfers because this is measure CC
which is a 1% on any property over $10 million that's is sold here in the city.
And so typically we you know we've been fortunate last year um where that 6.2 2
million really helps close the gap um with our deficits, but we can't
continually budget at those um amounts. We can comfortably, I think, budget at
about what Abby $10 million is what we're doing right now or even that is
kind of it's probably 8 million, seven or eight million.
» We can do about 8.5 million. >> Yeah. That that we actually look at that
we feel confident about the real property transfer tax. So, I just want
to be clear. >> Thank you. Um my next question if you
could go one slide up there which line slide six no seven maybe
I was trying to find the fire JPA um >> oh the expenditure side
» one back. >> Yes. So I asked you this but just for
public record um I was asking what percentage is is real operation versus
legacy costs and if it was hoping you could
» right and so when you look at the SMC fire and legacy cost line you see that
it's 38.8 million and so that represents about
31.7 is the fire operating and about what
does that make that about 7.7 is the legacy costs. Um, so when we um take the
budget to the fire board, uh, the Sato Consolidated Fire Board for approval,
that's typically got the city's contribution in that. And so that's why
this number doesn't change because we agreed to that at the beginning of the
year. And again, that's and the legacy costs are also um, they don't change. So
that's why the total gets you to 38.8. >> And will legacy costs eventually change?
Meaning I I do we have to wait for firefighters not to retire but to to
pass to to be no longer with us before uh that drops off or
» I mean I I guess what I'm asking too is also we we haven't had our own fire
department. We've been part of a JPA for like five and a half years now. So
» already we're not we're not continuing the legacy, right? So it seems like that
will contract at some point or are the costs going up so that they're kind of
offsetting? So this is really the fire's kind of unfunded liability section. So
it does have to do with costs incurred prior to and you know we have the
benefit of we kind of extend that over time so we don't have to pay those
unfunded liabilities right away. So this that legacy cost is really going to be
ongoing for quite a while because we're catching up with what we didn't put
aside for those costs that we had already committed to back in the day. So
um and again as Alex mentioned it does have to do with how the markets are
doing right. So our unfunded liability with the city's pension as well as the
fire legacy costs um changes depending upon if the contributions have increased
in value based on the market value there >> and just overall
actuarials. There's a whole science to this uh and formula and so it is uh
council member Nuome it goes with your life expectancy.
» Yeah. Um and so you'll see that probably in 2040 2041 is when we start uh you
know going back to the positive overall because there's a wave of life
expectancy at that point. >> Sorry I didn't mean to be grim. Uh
[laughter] like my last question was I think you
mentioned that there were currently eight frozen positions roughly. What
does that represent in in um cost per year? And
» are those positions spread across the city or are we finding that like one or
two departments are carrying the the heavy lift of that?
» So that represents about 08 or $800,000 um8 million. Um so that's about what we
expect in general fund savings from those positions. Um we have spread them
out across a couple of different departments. Um public works, parks and
recreation, finance. So we're trying there's a couple others. So we we're
trying to spread them out, but it's really based on opportunity, too. It's
kind of when the right vacancy that can be held that has general fund funding
can can be frozen is kind of how we're approaching it right now.
» Thank you. Thank you, Mr. Mayor. Of course, council members cooker.
» Um, this question is probably for the city manager. Um, if we don't get the
VLF and we aren't able to pass something like a sales tax, what would happen?
So what basically happens is that we're looking at so right now our 10-year
forecast which typically includes 100% backfill of our VLF we're at about a5
to7 million structural deficit but then when you add the VLF you're looking at 7
million and that'll continually grow each year even more so. So you're
looking at just next year if um we're not able to get a revenue measure we
have our regular starting structural deficit. So you're looking between what
Abby probably 14 million at least as a floor.
» Mhm. >> And then that quickly. So that's where
we say at least we have a runway because you know leadership from the council and
from the administration of being able to you know have reserves. We're able to
float um the next few years but we have to work through that financial
sustainability plan. Um, and then just an idea to throw out there. Um, happy to
do follow-up. But the same way we have a G JPA for fire, have we have we ever
talked to other cities about doing something like that for maintenance or
public works across
» since I since I've been here or even in Sano County, I have not uh had seen that
» okay >> model
» just because it seems like every city in the county has their own departments.
But maybe there would be opportunities to collaborate or consolidate.
Um, all right. Great presentation. Thank you
very much.
» Yes, thank you very much, Director Viser.
And, uh, I appreciate the update. It is uh, a bit sobering. Um, but
I'm glad to know that we are uh, you know, putting multiple irons in
the fire to see what we can do uh, to project better going forward. We're not
just, uh, putting all our eggs in one basket. Uh, I appreciate learning about
um, some savings that we found and uh, some other opportunities to uh, consider
revenue opportunities, including the billboard item you mentioned, which will
be coming up soon. And uh I recommend everybody uh join us for the upcoming
sessions beginning in April for the the next budget to stay updated with where
we are. And with that, I believe I will close the item
and adjourn the special meeting uh until around 7 o'clock at which time
we'll have our general special regular meeting not special. Thank you. All
right.