[0:00] Recording in progress.
>> Welcome to the city council special
[0:05] meeting this Monday evening, February
23rd. City clerk, please call the role.
[0:10] » Certainly. Mayor Lorraine, council
member Nome
[0:13] » here.
>> Council member Sphere Gaditzki
[0:16] » here.
>> Council member Nash
[0:18] » here.
>> Deputy Mayor Fernandez
[0:20] » here.
>> And Mayor Lorraine
[0:21] » here.
Thank you and welcome. We're excited to
[0:26] be here in person with options for those
who choose not to be in person to
[0:30] participate virtually. Thank you for
your cooperation and for helping us
[0:34] maintain an efficient and accessible
meeting environment. There are several
[0:38] ways to participate. For those attending
in person, you may complete a yellow
[0:43] request to speak slip and hand it to the
city clerk. If you are participating
[0:48] remotely,
use the raise your hand feature in Zoom
[0:52] and you will be called on at the
appropriate time.
[0:55] If you're calling in via phone, press
star 9 to raise your hand and when
[1:00] called upon, press star six to unmute.
These options for public comment will
[1:06] remain available until I close public
comment period for each specific item.
[1:11] For members of the public who might be
watching us on YouTube who wish to
[1:15] provide live public comment, please note
that you must join the meeting through
[1:18] the Zoom webinar using the access
information listed on the agenda as we
[1:23] don't currently have a public comment
feature available in YouTube.
[1:28] And with that, we have one item in our
special meeting, a study session, the
[1:33] fiscal year 202526 midyear budget update
with a presentation from our finance
[1:39] director, Abby Viser. Good evening,
Abby.
[1:43] » Good evening, honorable mayor and city
council. As you mentioned, I'm Abby
[1:46] Viser, the finance director, and I'll be
doing a brief overview of where we are
[1:51] with fiscal year 2526,
uh, looking at our midyear. Um to give
[1:56] you a sense of what we're going to walk
through today, um we will be talking
[1:59] mostly about our general fund, which is
of course our main operating fund. Um
[2:03] we'll look real quickly at the 2425
actuals, how we ended that year. We'll
[2:09] look at how we're doing for fiscal year
2526, digging down more into revenues,
[2:14] um as well as expenditures, looking what
our general fund balance is looking
[2:18] like. Um, we'll give an update on where
we are with our financial sustainability
[2:22] plan and we'll also take a look at the
sewer fund to see um, where that main
[2:26] enterprise fund how that's doing at this
mid year.
[2:31] Um, to do kind of a refresher, this is
the information that was presented in
[2:35] our annual comprehensive financial
report. So, as of the end of the year of
[2:39] 2425,
um, you can see we adopted a budget of
[2:43] with a deficit of about 10.6 6 million
but by the end um at midy year we had
[2:48] projected 6.4
um as a deficit we ended with our
[2:53] auditing of 1.5 million in surplus and
then when we look at our kind of
[2:58] budgetary um controls we ended up having
a deficit of about 3 million 2.9
[3:03] million. So that's how we ended uh
fiscal year 2425
[3:08] and then we'll go into what we're
expecting for 2526.
[3:12] Uh back in June, the city council
adopted our budget with a $12 million
[3:17] deficit. That was with the 175.8
in revenues and 187.8 in expenditures.
[3:23] At this point at about 20 for the 2526
midyear, we're expecting closer to 6.9
[3:30] as our deficit. Um again, that is kind
of just looking at our spending um
[3:34] halfway into the year. And again, I'll
kind of take a closer look at that. So,
[3:39] first let's look at our general fund
revenues. uh for 25 26 um as you can see
[3:45] um we've had some um deductions. So in
property tax we're seeing lower and this
[3:51] is because of the reduction in our VLF
shortfall. We did receive that in August
[3:56] and because we only received 67% of our
$6.6 million shortfall. We are showing a
[4:03] we we got 4.4 million and we're showing
the $2.2 million deficit. So, I've
[4:08] revised the estimates in our property
tax due to that VLF shortage. Um, we
[4:13] only got that 2.2 represents 33% of the
shortfall. Uh, sales tax is looking a
[4:19] little lower. Um, real property transfer
tax um is looking better and I'll kind
[4:23] of go into that. And then interest
earnings are a little higher. And so,
[4:27] we're expecting at the end of the year
about a million more in revenues. And
[4:30] again, this is a conservative estimate
um kind of based on what we know at this
[4:34] time.
Um, in terms of our revenue sources,
[4:38] property tax of course is our number one
revenue source. It's very stable. Um,
[4:43] other than the portion of course that is
VLF. So, you'll see here that it's been
[4:48] rising steadily over time. Um, but like
I mentioned, we had anticipated 89.4
[4:53] million in property tax and only saw 87
million because of the VLF shortfall
[4:58] that was reduced this year.
Um to talk a little bit more about
[5:03] property tax, I want to show um on this
chart the blue bands kind of represent
[5:08] our secured based property tax. This is
our really most consistent source. And
[5:13] although we've had higher levels of
growth in the past, um this year we're
[5:17] seeing about 3.8%. Um which is is not
bad. That's kind of what we budgeted. Um
[5:22] and it was it's showing consistent
increases. In addition, in the red bar,
[5:27] we have our excess E-RF as well as other
revenues that are property tax related.
[5:31] Those are also increasing steadily. And
then you have VLF, um, which is kind of
[5:36] the green bar, which you can see it's
kind of cyclical. It's going up and
[5:40] down. And again, that has to do with the
shortfalls.
[5:44] So, [clears throat] I thought it'd be
good just to take another moment to look
[5:47] at why property tax in lie, the vehicle
license fee, um, is such an inconsistent
[5:53] source of funding. Um so you can see
from here um that VLF is a major portion
[5:59] of our property tax. It's an important
section um and it rises traditionally
[6:04] with the rest of property tax. But
because VF is funded by excess ERF and
[6:09] property tax from our non-basic aid
schools, we are not always getting that
[6:15] full allocation to the city of Sonteo as
well as the other cities and the county.
[6:20] Um, right now of the 23 school districts
that are within Sonteo County, five of
[6:26] them are non-basic aid. Um, and if that
changes, our allocation goes down even
[6:30] more. But right now, this um, for this
fiscal year, we're estimating 6.9 would
[6:35] be our total VLF entitlement. Um, with
that only five school districts in the
[6:42] non-basic aid category, we would be
getting 7 million less in that uh, VLF
[6:48] entitlement. And then we also usually
get the shortfall from the previous two
[6:54] years because it takes two years to get
that shortfall back. So this year we
[6:58] should have gotten the 6.6 million which
was from 2324 and instead of course we
[7:03] got the 4.4 million which was 67% of
that. So as you can see this year we're
[7:08] estimating about 14.2
in VLF. But there are some concerns
[7:15] because we don't know for sure if that
7.1 is actually going to be um the
[7:20] shortfall we're going to see and also of
course whether we're going to get that
[7:24] funding from the state. So um I think
you all are aware that the city is
[7:28] working with the county as well as all
the other cities within Sonteo on
[7:31] several fronts to see how we can recover
this shortfall both for this year and
[7:35] into future years because it is a
significant portion of our funding.
[7:40] So, um, next I want to talk about our
second largest, um, source of revenues,
[7:44] our sales tax. Um, this one I'm showing
the trend line here because it has been,
[7:50] uh, fairly flat. Um, it's looking good,
but it's also just not increasing at
[7:55] what we had expected it to increase. So,
in yellow, you see the measure S sales
[7:59] tax. That's budgeted at about 6.8
million, and that's what we're expecting
[8:03] still for this year. Um, and then the
remaining is the 1%. Um, and that's kind
[8:08] of sticking steadily with what we
received last year. Um, but we did lower
[8:12] expectations just a little bit because
we weren't yet seeing the growth we were
[8:16] hoping to see. Um, we'll wait another
quarter to see if we get better data and
[8:19] we might be able to revise that up a
bit. Um, but this is again our second
[8:25] largest source of funding and although
measure [clears throat] S hasn't been
[8:28] increasing, it has been a stable at
about $6.8 to 7 million.
[8:34] Uh the next source of funds I want to
talk a little bit more about is our real
[8:38] property transfer tax. Um this is
important because this is um definitely
[8:43] what helped us to not hit the deficit um
last fiscal year and it is coming in
[8:48] pretty strong for this year as well. So
if you can see the the red bar here is
[8:53] the portion of measure C uh portion of
our real property transfer tax that
[8:58] comes from measure CC. So last year it
was 6.2 million. This year we're
[9:03] expecting about 1.9 million. Um, and
this again is the extra 1% on the
[9:08] regular property transfer tax which is
in blue. This is voted in by Sonteo city
[9:14] voters. And again, it has provided an
excellent one-time revenue source to
[9:19] help us especially when we're reaching
those deficit years. But, um, we're very
[9:24] conservative in how we budget it because
you can see that this, um, revenue
[9:27] source is quite volatile. it moves up
with how the housing and commercial um
[9:33] real estate market moves and we can't
count on it. Last year we had an a
[9:37] really nice chunk of measure CC, but I
can't count that that will come in again
[9:41] this year. Um so I've moved that up to
about 11 million in our budget. So
[9:46] that's up a bit and so is helping to
offset our losses in property tax.
[9:52] Um now to move to general fund
expenditures for fiscal year 2526.
[9:58] Um we are conservatively expecting that
we will see some savings within our
[10:03] salaries and benefits. So I've adjusted
that down about 2 million. Um and then
[10:08] also we're expecting some savings in our
transfers out. So I've budgeted that at
[10:12] 2.1 million. Um the other major
expenditure areas we're kind of keeping
[10:17] where they are because expendit expenses
especially on the operating side are
[10:22] still fairly up given um the high cost
of operating expenses.
[10:27] » What's transfers out?
>> So transfers out Oh yeah. So transfers
[10:31] out are typically um items to our
capital improvement projects. And so
[10:36] that it's budgeted items, but if they
don't, so for measure S, example, we
[10:41] don't move it out until the projects are
spent. So we don't some some funds we
[10:46] move right into our capital spending,
but measure S we don't. So if we're if
[10:50] we still have measure S at the end of
the year, then that's still in our
[10:53] general fund bank basically. So that's
what that represents. Um, so this one,
[10:59] as you can see, I'm estimating a savings
at the end of the year um to be
[11:04] expenditures closer to 183.7 million.
And then again, just to refresh, that
[11:11] then leads us into expecting about a
$6.9 million deficit as at the end of
[11:17] this year if we kind of realize the
savings and that the revenue comes in as
[11:21] expected.
Let's see. One thing I wanted to share
[11:25] kind of as we're looking at that is kind
of our general fund trends. This is what
[11:30] it looks like with our operating
expenses in green, our contributions to
[11:34] the CIP, those transfers out in purple,
and then we have kind of this revenue
[11:38] line item that is fairly flat this year.
Um, so that's where you can see the
[11:44] revenues are not rising with the
expenses and that has kind of been
[11:48] unfortunately the story over time. So
that's why we're always kind of trying
[11:51] to keep up um with where expenses are
going.
[11:55] Um the other thing I want to talk to is
the general fund balance. Um as you can
[12:00] see from this, we're expecting a
slightly lower general fund balance. Um
[12:05] if that deficit of 6.9 million comes
through. Um the good news is though at
[12:10] the end of 2425 we ended um that fiscal
year with 119.5
[12:16] million in our our general fund reserve.
Um thus showing you know how this
[12:22] council as well as councils before have
been disciplined in their spending.
[12:25] We've really put away um that rainy day
fund. So this careful spending from last
[12:30] fiscal year has really helped to keep
the runway open as we work through our
[12:35] fiscal sustainability plan. So although
we anticipate we could be down to 113
[12:40] million if this deficit comes to
fruition, we still have that that's a
[12:45] pretty significant um reserve still. Um
so talking through then what is going on
[12:50] with the fiscal sustainability plan
because we are trying to make headway in
[12:55] that um given that we know this deficit
spending is the deficits are still out
[13:00] in the next couple of fiscal years. Um I
want to highlight kind of some of the
[13:05] levers that we're using around um the
financial sustainability p plan. Uh the
[13:11] first one of course is expenditure
control. That is an important one. The
[13:14] city um all the different departments
are kind of looking at belt tightening
[13:17] and where we can be efficient in our
spending and save money. Um so within
[13:22] that category um we have um about eight
frozen positions within the city right
[13:27] now that we're holding um from
recruitments and that's saving us
[13:31] funding. We also are trying our best to
um charge to capital projects where it
[13:36] makes sense as well as move funding out
of the general fund where it makes
[13:40] sense. We've been looking at benefit
savings. So, we've moved some of the
[13:44] charges from the workers comp out of the
general fund because that that fund has
[13:47] a healthy balance right now. So, we
think we can go a year or two or or
[13:51] maybe even three without charging quite
as much as we've been charging. And with
[13:55] operating budget savings, we've been
also looking to see where we can cut
[13:58] corners, um, make new agreements, and
save money. Right now, we're estimating
[14:03] that that's about 3.2 million in savings
if we reach those goals. I've been more
[14:08] conservative in what I put forward in in
my end ofear estimate, but that's what
[14:12] we're shooting for in terms of how we're
looking to um save money within the
[14:16] departments. At the same time, we have
looked at the other levers. We are
[14:21] looking at revenue enhancements. Uh, of
course the council has asked us to look
[14:24] into the sales tax measure. So, we're
doing um more research on that and doing
[14:28] some education. Um, we're looking at
revenue agreements where we can to bring
[14:32] in more revenue as we did with the
downtown parking. We're looking at cost
[14:36] recovery and cost allocation. Uh, parks
and recreation updated their cost
[14:40] recovery plan um for their fees last
year and so this year their revenues are
[14:46] coming in higher because those new fees
were put in place before this fiscal
[14:49] year. We'll be doing a citywide cost
allocation through the finance
[14:53] department to make sure that general
fund costs are being properly allocated.
[14:57] In addition, we're pursuing grant
opportunities. Um, as you know, we have
[15:00] the contract with the grants coordinator
and we've been successful with several
[15:04] grants recently. Um, the 20 20 million
about uh grant that we received um for
[15:11] the um for the Fashion Island Boulevard
project as well as the $1.2 $2 million
[15:18] grant for Lakeshore Community Daycare
Center and the 0.55 million grant for
[15:22] the real time information center. Um so
those are all uh projects that are
[15:27] moving forward on grants. And then we
also have economic development. Uh the
[15:31] city council recently adopted that work
plan for the next three years and we're
[15:35] looking at items to expand and diversify
revenues through that economic
[15:39] development work plan. Um an example
would be the billboard policies that'll
[15:43] be coming to the council in another
month or two. Um so these again are the
[15:47] kind of levers that we continue to work
on um in order to kind of re reduce um
[15:54] to reduce our expenditures and improve
the uh revenues within our financial
[15:58] sustainability plan.
And then the next thing I want to talk
[16:03] about before we finish is the sewer
fund. Uh this of course is the city's
[16:07] main enterprise fund. Um and I wanted to
give you an update on where that is.
[16:13] This is again based on um all the
customers within the sewer fund
[16:17] enterprise. So the mid-year projection
for their revenues is we're estimating
[16:21] about 96.3 million um in revenues for
them. That is a little bit of an
[16:26] increase from what we've budgeted at the
beginning of the year. At the same time,
[16:30] we do anticipate seeing some um savings
due to salary vacancies. So we're
[16:36] estimating expenditures at about 62.8
million. Um, CIP expenditures were
[16:42] amended and they're looking to be the
same right now at 31.4.
[16:47] And then that gets us to an unrestricted
fund balance of about $34 million.
[16:54] This is not unexpected. There's a couple
of things that have been added to our
[16:58] reserve. Um, for example, in last fiscal
year and then also in this fiscal year,
[17:04] we are now seeing the state revolving
loan funds come in. And so that is a big
[17:09] infusion of cash that is coming to
reimburse us for our clean water program
[17:12] expenditures. So that has boosted our
unrestricted fund balance. And at the
[17:17] same time um you know this fund balance
is really going to help us maintain
[17:21] ongoing operations of the sewer fund.
It's going to help cover future CIP and
[17:26] it's also going to provide the robust
debt coverage ratio that we need to
[17:30] maintain given the amount of financing
that we will be paying for the clean
[17:35] water program improvements that were
conducted. So um this is a a good
[17:39] balance to see in terms of for our sewer
enterprise fund.
[17:43] Then finally just to give you an
overview of what we'll be doing on the
[17:47] budget process right now. Um we're
working on the two-year budget for
[17:52] fiscal year 2628. Uh departments have
submitted their operating budget. We're
[17:57] working on the personnel costs and so
we'll be prepared for a budget study
[18:01] session on the operating budget um on
April 20th. We'll be also bringing a
[18:07] preview of the capital improvement
five-year plan at that meeting. Then
[18:11] we'll have our um first hearing on the
budget on June 1st. That'll be our 2628
[18:18] proposed budget. And then at June 15th
will be the second scheduled public
[18:23] hearing for the 2628 budget adoption.
Oh, and then the other thing that um
[18:29] will be coming forward is we are doing
some midyear fiscal year 2526 CIP
[18:35] adjustments. So, it's only capital
projects, but we'll be bringing that
[18:38] most likely at the March 16th city
council meeting. That'll be a consent
[18:42] item.
And with that, if there's any additional
[18:46] questions, I'm here um for those
questions.
[18:53] » Thank you very much.
This time we'll start with public
[18:57] comment. If anyone in the room has
public comment, they can give a yellow
[19:02] request to speak slip to the city clerk.
[clears throat]
[19:05] City clerk, can you please tally how
many speakers you have?
[19:09] » U Mayor Lorraine, we have one request to
speak and that is in our virtual
[19:13] environment. Um our one and only speaker
will be Thomas Morgan and we'll set the
[19:18] timer at three minutes.
[19:22] Tom, Thomas, please go ahead and unmute
your mic.
[19:25] Uh, good evening. Thank you for the
opportunity to speak. Um, I I was just
[19:29] doing a search of the internet and not
too long ago and I came across a state
[19:33] controllers report that indicated the
county the controller had miscalculated
[19:39] the excess raff over a multi-year
period. So, I was just wondering if
[19:44] we're done uh if that's completely
flushed itself out or if we still have
[19:49] any impacts from that.
Thank you.
[19:53] » Okay. Thank you, Mayor Lorraine. That
concludes public comment.
[19:59] » Thank you very much. I think I might
just check with uh Director Viser to see
[20:06] if um
you happen to have any any response to
[20:11] public comment.
>> I mean, I think my response is right now
[20:17] we haven't gotten anything from the
county saying that our excess raff is
[20:20] going to be different than budgeted.
that our most recent communication from
[20:23] the county um was um very in target um
in in line with our estimates. So if
[20:30] there's additional communications, I
haven't had any in that front.
[20:34] » Thank you. At this time, uh I would like
to ask my fellow council members if they
[20:41] have questions or comments.
Council member Diaz Nash, please go
[20:45] ahead.
>> Thank you through the mayor and thank
[20:48] you Director Viser. That was clear and
understandable and well done very
[20:53] quickly. So, thank you very much to you
and your team. Uh, just a couple of
[20:57] questions. One for the public. Why is
VLF
[21:02] categorized under property tax?
[laughter]
[21:09] » Just you're clear and concise as always.
Yes.
[21:16] » So, let's see. I'm trying to think. I
mean, yes, there's a there's there's
[21:22] quite a backtracking that we could go
through to say why VLF is part of
[21:28] property tax, but in general, um,
this I'm trying to think what's the best
[21:35] way to describe this. Um,
this is an entitlement that the city is
[21:42] supposed to have from a former source of
vehicle license fees. uh that were again
[21:49] a consistent source that we got and yes
they have been backfilled by um excess
[21:56] raff and property tax that went through
the school districts. Um so VLF is kind
[22:03] of a probably a misnomer really in the
end result. Um, but again because it's
[22:09] the because of I mean again I probably
need a whole slideshow to go through the
[22:14] triple flip of where how we got here.
But in general because um it's funded by
[22:20] um the RAF and property tax that comes
from the non-basic aid. That is where
[22:24] that funding goes. It goes into the
property tax bucket because it's really
[22:28] part of the Sanonteo County's overall uh
property tax assessment.
[22:32] » Okay.
>> Is [clears throat] that helpful? I just
[22:34] wanted you to share so that anybody
listening to this or looking at it later
[22:39] on
>> probably would have that question
[22:42] without going through the 500 slides.
>> Yeah.
[22:45] » High level conception. I think that
makes total sense. So, thank you.
[22:48] » Well, and I do think it's, you know,
I've seen that the county has been
[22:51] trying to work on some messaging to show
how VLF has come about and it's actually
[22:56] it's a two-page handout. So, even in a
short handout, it is hard to get that
[23:00] messaging consolidated down, but we're
working on it. Yes. Good. Thank you. Um,
[23:06] and what is the city's thinking in terms
of future budgeting of how we handle
[23:14] VLF?
>> So, at the moment, um, for this coming
[23:20] fiscal year, I'm going to potentially be
putting zero in to see what that looks
[23:25] like
>> for the VLF shortfall. So, again, to be
[23:28] clear, and I don't know if you want to
pull up the VLF's funding slide. I think
[23:32] I have it on my screen. Um, so to be
clear, we do if we get 16.9 million
[23:39] about right now, 7.1 is estimated as the
shortfall. So if we were not going to
[23:45] budget to receive the shortfall, that
would be $7 million. 7.1 potentially
[23:50] that we would not be putting in as
revenues. So just to jump in a little
[23:55] bit just about what the future of VLF is
and how we're approaching it here. Uh
[24:00] director Viser is correct that I'm
looking at right now uh budgeting zero
[24:05] in for VLF which is going to hurt us
significantly when you're looking at on
[24:08] top of this doesn't account for the $5
to7 million structural deficit that
[24:12] we're dealing with in our forecast. So
when you look at a 10-year forecast it
[24:15] did not anticipate completely losing
VLF. And so um right now we're working
[24:20] with the county. I am part of a city
manager group working with the county
[24:23] manager and uh real real team. We were
just on a call [clears throat] with
[24:29] assembly member Diane Pap and she'll
continue to you know put forth
[24:32] legislation as we've done in previous
years. It's just getting harder and
[24:35] harder every year um to make that
happen. This past year we only received
[24:40] I believe 67%. That's why you're seeing
that $2.2 million uh deficit which
[24:45] equates to 33% of that VLF. We're also
actively the council gave direction to
[24:50] enter into a lawsuit against the state
of California because we're fighting on
[24:53] behalf of our residents and for our
money on that 33%. Uh and with that the
[24:58] department of finance, you know, and how
things shake out and I'm not going to
[25:00] get out out ahead of my wills here with
my city attorney right next to me, but
[25:03] you know, we'll be working through that.
So, that's a long- winded way of saying
[25:07] we're going to be, you know, looking at
zero, you know, but hopefully something
[25:11] can come in with our annual legislation
or budget um approval process. You know,
[25:16] hopefully some of the member happen and
Senator Becker and our Sanonteo
[25:20] contingent up in the state can make
something happen again uh this upcoming
[25:24] year, but honestly, it's we're it's not
something that we can depend on as as
[25:29] you're seeing and it is a true threat
and this is an existential threat for us
[25:32] and the county will say it too if you
talk to our county manager overall and
[25:35] we are the largest city in the county.
Therefore, we have the largest piece of
[25:38] VF amongst any of the 20 cities.
>> Great. Thank you very much for sharing
[25:42] that both of you. Uh, third question.
How does our $113 million general fund
[25:49] reserve compare as a rough rough
percentage to general fund reserves in
[25:55] other cities?
>> You know, I don't know off the top of my
[25:59] head kind of what other cities are
looking at in their general fund
[26:01] reserve, but I it's I would say it's
very healthy for us. I mean if you think
[26:05] about when we went through the general
fund reserve policy update um we talked
[26:11] about the different components that we
had within that and if you put like most
[26:16] people for the kind of um kind of the
emergency fund they have like 25%
[26:22] of expenditures set aside and we have
that and we were able to put them aside
[26:26] the 25 million in capital. So if you
look at that 113 million figure, it
[26:31] includes that 25 million NCIP reserve
that we put aside, it includes a 25%
[26:38] reserve. It also includes a 25%
contingency reserve. So we have a couple
[26:42] of different buckets and a lot of cities
have a target of just that one 25%
[26:48] target. So I do think that um we're
doing well in that we have several
[26:52] buckets that we can use to to stabilize
um different against different things.
[26:57] So just to jump in a little further on
our reserve policy as you guys approved
[27:01] and so uh we have a pension
stabilization reserve. We have also the
[27:05] budget contingency reserve. So there's
all pieces it's not you know we look at
[27:08] the total and we're looking at 113
million but it's actually broken up into
[27:12] bits and pieces of our overall reserve
policy itself. Um so it's not just a
[27:18] stack of just you know the the dollars
as just overall reserve. um you've been
[27:23] very deliberate in making sure that
there's specific amounts set aside for
[27:27] specific uh rainy day issues and we're
having to tap into those. We are in
[27:31] rainy days right now and so we're having
to tap into that currently. Um you know
[27:35] depending on how financial markets look
on the outlook in the future we've been
[27:39] lucky uh right now the last couple years
with Kalpers on our pension uh that
[27:43] they've had really good positive
returns. The minute we go and below I
[27:47] think it's about the 6 and a half% right
I think is 6.8
[27:50] » 6.8% 8% reserve. The city has to fill
that difference
[27:55] » uh in that pot of money. And so that's
where having that $10 million will help
[27:58] us to be able to bear that burden in in
the future as well.
[28:04] » Thank you. And I think that's a great
example for the public of how one number
[28:09] does not tell the story and how we're
really prepared for contingencies of of
[28:14] many many different natures. And then my
final question is
[28:19] the city is putting a lot more emphasis
on streamlining processes you using
[28:24] using technology to improve uh reduce
costs or improve improve return to
[28:31] residents. Could we see that that
eventually could uh turn into savings
[28:39] that we could actually book or is that
just something that we're going to try
[28:43] and be as efficient as we possibly can
be and see what happens?
[28:49] » I mean, I think there's a couple of
different ways we can look at that. I do
[28:52] think the efficiencies can help us save
money in the long run, but more likely
[28:59] it will help allow folks to spend their
time on higher value activities that
[29:05] will get to more things that potentially
we haven't gotten to before. Um, but
[29:09] again, I think it depends on which
technologies that we're talking about.
[29:12] But in in terms of overall, I think it's
it's hard to blanket statement it,
[29:17] right?
So, so keep adding a little bit more
[29:20] color here, but I think our police chief
can attest to this just about technology
[29:24] and the usage of it. You know, right now
we've had uh a lot of special events or,
[29:29] you know, protests and whatnot. And so
having our drone program, our our our
[29:34] real-time information center has been
huge. Uh right, Chief. I think just
[29:38] overall being able the amount of bodies
or police officers it would take uh in
[29:43] order to you know make sure that it's a
safe event. We're able to um use these
[29:48] drones and our real-time information
center to help uh reduce the amount of
[29:52] police presence uh because we're limited
on the amount of resources. But we're
[29:56] trying to, you know, use technology to
be able to help uh blunt those uh
[30:02] resources and and just overall making
sure that our officers are safe, our
[30:07] community is safe. Um or even AI report
writing. I know that's something that
[30:10] we're working on too. And so that allows
our police officers to be out on the
[30:13] street more. Um, you know, they still
got to review all these reports, but it
[30:18] still helps uh reduce time so that we
have officers out there not having to um
[30:23] utilize as many officers uh downtime at
the station, having to write these
[30:27] reports and being out there in police in
our community.
[30:28] » Right. And I think that kind of
messaging is be really important to
[30:32] continue to share with the public as we
move forward. So, thank you very much
[30:36] for the clear, concise answers.
>> Thank you. Anyone else have?
[30:43] » I do.
>> Deputy Mayor Nicole Fernandez.
[30:45] » Thank you.
>> Um, so
[30:49] to the city manager, um, can you talk a
little bit Oh,
[30:52] » turn the mic on. Hi. To the city
manager, can you talk a little bit, you
[30:55] have taken a leadership role in trying
to find a resolution to the VLF issue?
[30:59] Can you talk a little bit about what
that process has been like and what
[31:02] we've done to explore a permanent
solution? I know that there have been um
[31:09] it's it's a it's a coalition effort. So
would you talk a little bit about that?
[31:13] » Yes. So part of a VLF committee of
basically the county and city managers
[31:19] and so we meet every month actually and
we've been meeting even uh more
[31:23] frequently and I know that the county is
uh really working to put together a
[31:28] great team to really advocate on the
county's behalf and all US 20 cities as
[31:32] well. um because the county, you know,
70 million is their impact. We're we're
[31:37] 7 million. So, just on top of that, but
um what we're having to do is really put
[31:42] San Monteo County on the map in the
cities of San Monteo. And so, we're also
[31:47] going to have to articulate what does
that mean for us if we don't get that 7
[31:51] million overall. And so with that right
now, the call to action from the county
[31:56] is to ask all the cities to kind of
start putting together what those plans
[32:00] would be if that money does not come
through in the future. And so we're
[32:04] working on that, but there's also
advocacy, lobbying efforts from the
[32:07] political side of things to the
governor's office. Um, but also just
[32:11] bringing greater awareness to uh this
this VLF issue and the the funding
[32:17] shortfalls that all 20 cities in the
county are going to experience.
[32:21] » Thank you. And I know that you've been
hard at work in taking a leadership role
[32:24] on that resol that solution a potential
solution. So I'm grateful for your
[32:28] leadership, Alex. Um this I also just
want to make sure that we highlight for
[32:33] this for this that in some ways this is
a narrative issue in the fact that San
[32:39] Monteo County I mean this is a a crux of
the budget challenges that we have is
[32:43] the fact that V that we're not getting
this VLF money. Um we're [clears throat]
[32:48] we're in a unique situation where we are
the I think one of three counties who
[32:51] has this problem, but we're really the
the the county the most urban county
[32:54] that really is seeing the full effects
of this. Is that right?
[32:57] » Yes. The only other two counties are
Mono and Alpine, which are very small
[33:01] counties. And so we are the largest
county experiencing this. But there are
[33:05] a couple other counties that on the
horizon as you know the property uh the
[33:10] assessed value of the properties and
more schools go from uh nonb non-basic
[33:16] aid to basic aid. Um you're going to
start seeing these impacts. But we're
[33:21] kind of singled out right now because no
other county is really experiencing uh
[33:25] this issue. And so that's why we're
continually trying to raise awareness of
[33:29] this issue.
>> Right. Thank you very much. And the
[33:33] other sort of crux in us getting
receiving the reimbursement and again
[33:36] just to highlight for where we are
politically as a city and county is that
[33:41] previously we've had budget chairs from
San Monteo County for both budget
[33:45] committees that would usually allow this
to go into the draft documents for the
[33:49] legislature. Is that right, Alex?
>> You had filtering on these side.
[33:53] » We had friendly Yes, we had friendly
legislators that would look to this
[33:57] issue. And with the changes in
leadership recently, we've lost in some
[34:01] ways we've lost that that friendly
immediiacy. Is that my understanding?
[34:05] » Okay. I just want to make sure that we
sort of build the narrative. And um a
[34:08] few weeks ago, uh Mayor Lorraine and I
were able to uh attend a county briefing
[34:13] on this matter along with a couple of
other matters. I know either one of one
[34:16] of us will report out on it um during
news and announcements, but this was a a
[34:21] big part of that discussion. And so I
don't know how we are going to in San
[34:27] Monteo because this affects us the most.
We're the largest city. I don't know
[34:30] what the plan is for us to build the nar
to help build the communication around
[34:34] the VLF issue so that our constituents
are activated for this but I would like
[34:40] us to take action on that point whether
it's a letter a subcommittee something
[34:43] that where we're pulling in our new
communications director communicate
[34:47] community engagement director but this
is this is a job one in my mind. Thank
[34:52] you.
>> That's exactly what we're working on.
[34:56] » Thank you both. Anyone else? Council
>> member mayor, just a few follow-up
[35:01] questions. Thank you for your
presentation. Um,
[35:07] you were mentioning the real time real
real transfer tax is volatile. What are
[35:13] some of the volatilities or what are
some of the reasons why for example we
[35:17] saw such a large dip from 6.2 two down
to 1.9.
[35:22] » So again, the real property transfer tax
is is especially the the 0.5% which is
[35:28] our was on the blue. Actually, let me
open it up so I'm not talking at it.
[35:33] So um the blue uh 0.5% real property
transfer tax is dependent really on the
[35:40] housing market since it is a transfer of
the housing property. So, as the as
[35:45] there's been issues with the housing
market, then we see less property
[35:49] transfer tax. Um, what's interesting is
last year, you know, they were like, oh,
[35:54] the housing market's not moving because
interest rates are high, but we did have
[35:57] significant movement still in the
housing market, but then the 6.2 is
[36:01] really the commercial market. So um that
um is the new piece that kind of came in
[36:07] with measure CC is there's been excuse
me there's been a lot of commercial
[36:11] property transitions especially last
year and some in this year and that is
[36:15] what's leading to kind of those big
swings because you're having the over
[36:19] $10 million transfers that are
triggering the 1% to measure CC but in
[36:25] general because it's based on the the
housing market predominantly given our
[36:29] base that's really kind of it shows the
eb and flow of the housing market.
[36:33] » So just the basic you're seeing the
volatility here on this graph and so we
[36:39] when we budget our budgeting principle
is basically we use
[36:44] ongoing revenues for ongoing costs and
then one-time monies for one-time costs.
[36:49] And so really when you look at those red
bars over there, you know, it can
[36:54] fluctuate to zero all the way up to it
could be even higher than that depending
[36:59] on what commercial real estate uh
transfers because this is measure CC
[37:02] which is a 1% on any property over $10
million that's is sold here in the city.
[37:08] And so typically we you know we've been
fortunate last year um where that 6.2 2
[37:13] million really helps close the gap um
with our deficits, but we can't
[37:18] continually budget at those um amounts.
We can comfortably, I think, budget at
[37:24] about what Abby $10 million is what
we're doing right now or even that is
[37:28] kind of it's probably 8 million, seven
or eight million.
[37:29] » We can do about 8.5 million.
>> Yeah. That that we actually look at that
[37:34] we feel confident about the real
property transfer tax. So, I just want
[37:38] to be clear.
>> Thank you. Um my next question if you
[37:42] could go one slide up there which line
slide six no seven maybe
[37:48] I was trying to find the fire JPA um
>> oh the expenditure side
[37:52] » one back.
>> Yes. So I asked you this but just for
[37:56] public record um I was asking what
percentage is is real operation versus
[38:02] legacy costs and if it was hoping you
could
[38:05] » right and so when you look at the SMC
fire and legacy cost line you see that
[38:09] it's 38.8
million and so that represents about
[38:13] 31.7
is the fire operating and about what
[38:18] does that make that about 7.7 is the
legacy costs. Um, so when we um take the
[38:25] budget to the fire board, uh, the Sato
Consolidated Fire Board for approval,
[38:30] that's typically got the city's
contribution in that. And so that's why
[38:35] this number doesn't change because we
agreed to that at the beginning of the
[38:37] year. And again, that's and the legacy
costs are also um, they don't change. So
[38:43] that's why the total gets you to 38.8.
>> And will legacy costs eventually change?
[38:48] Meaning I I do we have to wait for
firefighters not to retire but to to
[38:52] pass to to be no longer with us before
uh that drops off or
[38:56] » I mean I I guess what I'm asking too is
also we we haven't had our own fire
[39:01] department. We've been part of a JPA for
like five and a half years now. So
[39:04] » already we're not we're not continuing
the legacy, right? So it seems like that
[39:08] will contract at some point or are the
costs going up so that they're kind of
[39:12] offsetting? So this is really the fire's
kind of unfunded liability section. So
[39:18] it does have to do with costs incurred
prior to and you know we have the
[39:23] benefit of we kind of extend that over
time so we don't have to pay those
[39:27] unfunded liabilities right away. So this
that legacy cost is really going to be
[39:32] ongoing for quite a while because we're
catching up with what we didn't put
[39:35] aside for those costs that we had
already committed to back in the day. So
[39:40] um and again as Alex mentioned it does
have to do with how the markets are
[39:43] doing right. So our unfunded liability
with the city's pension as well as the
[39:47] fire legacy costs um changes depending
upon if the contributions have increased
[39:52] in value based on the market value there
>> and just overall
[39:57] actuarials. There's a whole science to
this uh and formula and so it is uh
[40:03] council member Nuome it goes with your
life expectancy.
[40:06] » Yeah. Um and so you'll see that probably
in 2040 2041 is when we start uh you
[40:14] know going back to the positive overall
because there's a wave of life
[40:19] expectancy at that point.
>> Sorry I didn't mean to be grim. Uh
[40:23] [laughter]
like my last question was I think you
[40:26] mentioned that there were currently
eight frozen positions roughly. What
[40:31] does that represent in in um cost per
year? And
[40:35] » are those positions spread across the
city or are we finding that like one or
[40:40] two departments are carrying the the
heavy lift of that?
[40:43] » So that represents about 08 or $800,000
um8 million. Um so that's about what we
[40:51] expect in general fund savings from
those positions. Um we have spread them
[40:55] out across a couple of different
departments. Um public works, parks and
[40:59] recreation, finance. So we're trying
there's a couple others. So we we're
[41:03] trying to spread them out, but it's
really based on opportunity, too. It's
[41:07] kind of when the right vacancy that can
be held that has general fund funding
[41:12] can can be frozen is kind of how we're
approaching it right now.
[41:16] » Thank you. Thank you, Mr. Mayor. Of
course, council members cooker.
[41:20] » Um, this question is probably for the
city manager. Um, if we don't get the
[41:26] VLF and we aren't able to pass something
like a sales tax, what would happen?
[41:34] So what basically happens is that we're
looking at so right now our 10-year
[41:39] forecast which typically includes 100%
backfill of our VLF we're at about a5
[41:44] to7 million structural deficit but then
when you add the VLF you're looking at 7
[41:49] million and that'll continually grow
each year even more so. So you're
[41:53] looking at just next year if um we're
not able to get a revenue measure we
[41:57] have our regular starting structural
deficit. So you're looking between what
[42:02] Abby probably 14 million at least as a
floor.
[42:05] » Mhm.
>> And then that quickly. So that's where
[42:08] we say at least we have a runway because
you know leadership from the council and
[42:12] from the administration of being able to
you know have reserves. We're able to
[42:17] float um the next few years but we have
to work through that financial
[42:21] sustainability plan. Um, and then just
an idea to throw out there. Um, happy to
[42:29] do follow-up. But the same way we have a
G JPA for fire, have we have we ever
[42:34] talked to other cities about doing
something like that for maintenance or
[42:40] public works
across
[42:43] » since I since I've been here or even in
Sano County, I have not uh had seen that
[42:49] » okay
>> model
[42:50] » just because it seems like every city in
the county has their own departments.
[42:56] But maybe there would be opportunities
to collaborate or consolidate.
[43:01] Um,
all right. Great presentation. Thank you
[43:05] very much.
[43:09] » Yes, thank you very much, Director
Viser.
[43:13] And, uh, I appreciate the update. It is
uh, a bit sobering. Um, but
[43:21] I'm glad to know that we are
uh, you know, putting multiple irons in
[43:27] the fire to see what we can do uh, to
project better going forward. We're not
[43:33] just, uh, putting all our eggs in one
basket. Uh, I appreciate learning about
[43:39] um, some savings that we found and uh,
some other opportunities to uh, consider
[43:45] revenue opportunities, including the
billboard item you mentioned, which will
[43:48] be coming up soon. And uh I recommend
everybody uh join us for the upcoming
[43:54] sessions beginning in April for the the
next budget to stay updated with where
[44:00] we are. And with that, I believe I will
close the item
[44:07] and adjourn the special meeting
uh until around 7 o'clock at which time
[44:15] we'll have our general special regular
meeting not special. Thank you. All
[44:18] right.