CLOSED SESSION: See attached Brown Act Checklist.

ADJOURNMENT: Adjourn to Monday, May 15^th at 9:00 A.M. for a Budget Work Session to be held in the Community Room, City Hall.

Based on Government Code Section 54954.5

(All statutory References are to California Government Code Sections)

Anticipated Litigation:

(G.C. 54956.9(b)

_X_A point has been reached where, in the opinion of the City Council/ Agency on the advice of its legal counsel, based on the below-described existing facts and circumstances, there is a significant exposure to litigation against the City Council/Agency based on

OR

1. 2000 Five-Year Financial Model

Recommendation: Review and file the 2000 Five-Year Financial Model.

To receive, review and file the 2000 Five-Year Financial Model.

The Five-Year Financial Model (the "Model") is a financial schedule prepared by the Finance Department under the supervision of the City Manager. City Council Policy No. 18 requires the Model to be updated and reviewed annually.

Prior to the preparation of the 1999 Model, the Model included a presentation of the General fund, Gas Tax fund and the CIP fund only. Beginning in 1999, the Model was revised to include all funds of the City and its component units (i.e. Redevelopment Agency and Improvement Authority). The Five-Year Capital Improvement Plan (prepared annually by the Public Works Department) is an integral part of the Model. The figures from the Public Works Department’s draft of the Five-Year Capital Improvement Plan have been incorporated into the 2000 Model.

Section 3.30.180 of the Municipal Code requires the City Manager to submit an analysis of revenues derived from the City’s Utility Users Tax (UUT) in connection with the preparation of the City’s annual budget. The 2000 Model includes the projection of UUT revenue, as well as all other revenues and expenditures for the City and its component units. Therefore, the submittal of the 2000 Model (inclusive of the UUT revenue trend) satisfies the requirements of Section 3.30.180 of the Municipal Code. Staff will report its findings later in the Discussion section of this report.

The City Council has assigned the Finance Advisory Committee to review the Model each year. The Finance Advisory Committee has completed its review of the 2000 Model. Staff will report the findings of the Committee later in the Discussion section of this report.

The 2000 Model includes the presentation of the FY 1998-99 revenue, expenditures and ending fund balances for all funds. The FY 1998-99 financial statements were audited by the City’s independent auditors, who expressed an unqualified (clean) opinion regarding the fair presentation of the statements. The 2000 Model includes an estimate of revenues, expenditures and ending fund balances for the FY 1999-00. The proposed budget for FY 2000-01 is the basis for the first year of the 2000 Model. The following four years of the 2000 Model are based upon the factors and assumptions described below.

Significant Assumptions Considered during the Preparation of the 2000 Model

The following assumptions are used in the preparation of the 2000 Model:

• Most expenditures have been increased annually by an inflation factor of 3.0%, the same factor used in the 1999 Model.

• Most revenues have been increased annually based upon various factors, including the inflation factor, projected changes in permit activity and retail sales, staff’s expectations, etc. The factors (% rate of change) are presented on Page 1 of the 2000 Model using an alphabetical index (a through k) and are referenced throughout the 2000 Model.

• The 2000 Model does not include any new services or programs and assumes that "one-time" projects (i.e. NCCP and the Update of the City’s Housing Element) will be replaced by other similar "one-time" projects in future years.

• It is assumed that the State will not take additional tax revenues from the City (i.e. the possible abolishment of Motor Vehicle in Lieu Fee revenue).

• It is assumed that the City's share of property tax will remain constant at 6.2% of the one-percent rate assessed by the County.

• The 2000 Model assumes the continuation of the 3.0% utility user tax through FY 2004-05.

• Revenue from the proposed hotel and golf course at Long Point has not been included in the 2000 Model, nor was it included in the 1999 Model.

• The proposed budget for the FY 2000-01 does not include the expectation of golf fee revenue. The exclusion of golf fee revenue follows the concept of conservative and prudent budget practices. The 2000 Model includes golf fee revenue totaling nearly $1,400,000 from the operation of the golf course for the four years beginning July 1, 2001 through June 30, 2005. The golf fee revenue was based upon 10% of green fee revenue @ $150 per round. The Model includes conservative assumptions (i.e. the number of rounds) for this revenue source for the four years ending FY 2004-05.

• Staff has recommended the inclusion of an additional $2,000,000 appropriation in the CIP fund for soil remediation at the Point Vicente Interpretive Center (PVIC) in the FY 2000-01 budget. The actual cost for soil remediation and other related costs are not known. Nothing has been included in the 2000 Model for any additional costs or possible reimbursement from county, state or federal agencies.

• Though the PVIC expansion project will not be continued until after the soil remediation is completed, the unexpended project funds for the construction of the facility have been included in the "Projected FY 1999-00" column of the 2000 Model. As part of the year-end budget review, the full amount of unexpended appropriations will be carried forward to subsequent years until the expansion project is completed or cancelled.

• The City has been allocated $4,5000,000 of Measure A County grant funds, restricted for the sole purpose of acquiring open space land. The 2000 Model includes the receipt and expenditure of the grant proceeds in FY 2001-02. It is anticipated that the restricted funds will be used to purchase open space land in conjunction with the City’s NCCP plan.

• The City has entered into an agreement to participate in a senior housing development. In accordance with the agreement, the City purchased a tract of land in March 2000 with a total cost of approximately $748,000 (including professional services related to the acquisition). The purchase was made using RDA Low and Moderate-Income Housing Set-Aside funds. The City’s investment in the project is not expected to exceed $1,900,000. The 2000 Model includes the anticipated project expenditure of $352,000 from the RDA Set-Aside fund in FY 2000-01 and an additional $800,000 from the City Affordable Housing fund in FY 2001-02.

• The 2000 Model assumes that the RDA - Portuguese Bend projects will continue to be funded by General Fund loans totaling $700,000 from FY 2001-02 through FY 2004-05. The 2000 Model assumes that no additional developer revenue will be received by the City to offset future project costs.

• The adopted budget for FY 1999-00 included the formation of a Building Replacement fund (BRF) funded with a lump sum transfer of $782,000 from General fund reserves. The proposed budget for the FY 2000-01 includes a provision for an additional transfer of $52,000 from the General fund. The 2000 Model includes additional transfers from the General fund to the Building Replacement fund of about $55,000 each year from FY 2001-02 through FY 2004-05.

• On May 2, 2000, the Agency Board approved an agreement with the Abalone Cove Landslide Abatement District (ACLAD), whereby, the Improvement Authority will participate in funding the operating costs of ACLAD. Participation is limited to a maximum of $60,000 in any year. The 2000 Model includes a provision for $60,000 annually from FY 2000-01 through FY 2004-05.

It should be noted that future economic activity, legislation and policy decisions, as well as any other unforeseen circumstances could affect the City's revenue stream and expenditures during any of the years presented in the 2000 Model.

The 2000 Model assumes that future UUT revenues will increase over the next five years at a rate equal to a 3% inflation factor. However, the City recently received a letter from Southern California Edison informing staff that they have filed for a 17% rate reduction with the California Public Utilities Commission (CPUC). If approved, the proposed rate reduction would likely take effect no later than March 31, 2002. City staff estimates that such a rate reduction would decrease the City’s UUT by approximately $85,000 annually. Due to its uncertainty, the possible decrease has not been considered in the 2000 Model.

The Finance Advisory Committee met twice with City staff and has completed its review of the 2000 Model. Staff generally agrees with comments of the Committee (summarized below) and commends the Committee for a job well done in a very short window of time since its appointment. Though the Committee approved the 2000 Model, its members asked staff to include several concerns that may have an impact of the findings of the 2000 Model as follows:

• As discussed in the "Significant Assumptions" section of this report, the 2000 Model includes approximately $1,400,000 of golf fee revenues. While the Committee has no reason to doubt whether the golf course will open, it would like to remind the City Council that the amount of golf fee revenue included in the 2000 Model is a material amount. In the event the golf fee revenue is not realized, its fiscal impact will be significant.

• The Committee expressed a couple of concerns about the possible impact of the PVIC soil remediation project on the 2000 Model. The Committee understands that staff will propose to include $2,000,000 in the FY 00-01 budget for PVIC remediation. The Committee also understands that staff is in the preliminary stages of the remediation project (i.e. a written remediation plan has not been completed). The Committee wishes to remind the City Council that no additional provision for additional remediation costs (i.e. unforeseen legal costs) is included in the 2000 Model. The amount of additional remediation costs is unknown, but may be significant. Also, the Committee respectively reminded staff to immediately and actively investigate all possible funding sources, including the Funds for Unused Defense Sites (FUDS).

• The Committee informed staff that it will volunteer to assist the City Council and staff with the review of any proposed building project using the Building Replacement fund (i.e. financing strategies for any proposed ideas for the renovation of City Hall).

• As you already know, the City Council informed the Committee that the City Council will explore the possibility of undergrounding utility connections throughout the City. Staff advised the Committee that the City Council has appointed an Ad-Hoc committee to begin consideration. Staff also informed the Committee that the inclusion of any amounts in the 2000 Model for undergrounding utilities would be premature. The Committee agrees with staff’s assessment, but respectively reminds the City Council to consider this omission when reviewing the 2000 Model.

Respectfully submitted,

Dennis McLean

Finance Director

Reviewed:

Les Evans

City Manager

2.Budget Policy Issues for FY 2000-2001

Recommendation: Discuss the budget policy issues and provide staff with direction regarding the inclusion of these items or others identified by Council in the proposed budget for FY 2000-2001.

Discuss the budget policy issues and provide staff with direction regarding the inclusion of these items or others identified by Council in the proposed budget for FY 2000-2001.

In 1999, the City prepared its first two-year budget document for Fiscal Years 1999-2000 and 2000-2001. Even though the budget document covers two fiscal years, the City Council has only adopted the budget for FY 99-00. The budget for FY 00-01 is shown as "proposed" in the budget document. This was purposely done so that during the second year of the two-year budget cycle, the Council can make any necessary adjustment or amendments predicated on changes that may have occurred over the last year.

As in past years, staff has prepared a summary of possible policy issues to assist the City Council in the budget deliberation process. The purpose of this workshop is to allow the Council the opportunity to discuss the issues prior to the budget hearing in June. The Council should not feel limited by the items listed in this memorandum. Each Council member may have policy issues that they wish to discuss at this time. In addition, a decision to place any of these items in the FY 00-01 budget does not preclude their removal prior to the adoption budget resolution.

Each policy issue identifies whether the item is currently included in the "proposed" FY 00-01 budget. This is particularly relevant for items proposed to be funded by the General Fund. The General Fund balance is expected to be $5,208,713 at the end of FY 99-00 budget year. With the inclusion of the items discussed in the report, the General Fund balance is projected to be approximately $3,894,995 at the end of FY 00-01 budget year. This represents a projected General Fund Reserve of approximately 32% of total General Fund expenditures (including transfers out) for that fiscal year.

The following is a list of the budget policy issues discussed in this report:

Respectfully submitted:

Carolynn Petru

Assistant City Manager

Reviewed,

Les Evans

City Manager

Attachments:

Letter from Ann Shaw, Peninsula Seniors, dated April 12, 2000

Letter from Roger Wolff, Palos Verdes Symphonic Band, dated February16, 2000

• $6,250 included in proposed budget

In 1995, an outside firm conducted a comprehensive compensation study for the City. The findings of the study were used to establish the City’s salary schedule, which replaced a salary step system with salary ranges. This same study recommended that the City regularly review and update its compensation plan to ensure strong ties to the labor market conditions. For the City to attract and retain well-qualified personnel, it is necessary to establish a compensation plan that is competitive with those of comparable employers.

In 1998, as an alternative to conducting another comprehensive study, the City conducted a salary survey modeled after the 1995 study, using the same survey pool of public agencies and, when possible, the same comparable positions. The 1998 salary survey provided a snapshot of the City’s salary schedule in comparison with the labor market of 21 other public employers. Although the City’s 1998 salary schedule reflected the labor market more closely than in 1995, there were several positions or job classifications, which were substantially below the market median salary (more than 5% below the market median salary). As a result, 16 positions received salary range adjustments in 1999, including one salary range reduction. With the exception of two management staff positions, the salary ranges for all other City positions fell within approximately 5% of the market median salary.

Experts in the field of personnel, both in the private and public sector, report that the success of any compensation plan depends on keeping it updated to reflect market conditions. Rather than completely update the salary study each year, it is possible to make periodic adjustments to the ranges based upon the CPI or other factors. In the intervening years between the 1995 and 1998 salary studies, the Council has made adjustments to the salary ranges based on the CPI at that time. For example, the City Council made a 1.5% change in FY 98-99 and a 2% increase in FY 99-00. The CPI for the twelve-month period ending March 2000 is equal to 3.4%

It should be noted that any adjustment to the ranges does not immediately impact employee salaries. Rather, it simply allows the possibility of an increase for those employees who are currently at or near the top of their salary range, dependent upon the time of an employee's performance rating and their overall job performance rating. Actual salary increases are only granted at the time of an employee's annual review. It should be noted that nine employees are currently within the top 5% of their salary range. A CPI increase to the salary ranges would have the potential of impacting only these nine employees over the next year. Over a longer term, the range increase could affect other employees.

Recommendation: Staff recommends including in the FY 00-01 a 3.4% adjustment to the salary ranges, without adjusting any employee salaries

Fiscal Impact: An increase of 3.4% in the formal salary ranges would not have an immediate impact on any salaries. However, it might increase the salaries received by approximately nine employees at the time of their next performance review. Therefore, $6,250 has been included in the proposed budget to cover these possible salary increases.

• $200 for an actuarial valuation study from CalPERS to determine the fiscal impact of the 2% @ 55 retirement formula and the one-year final compensation factor.

• $0 for the next three years to increase the 1959 Survivor Benefit from Level 1 to Level 4. After the third year, the City may be required to pay $2,650 per year to provide this benefit.

Like most cities in California, instead of participating in Social Security, the City of Rancho Palos Verdes contracts with the California Public Employees’ Retirement System (CalPERS) to provide retirement benefits for its 69 eligible employees. Under this system, there are two types of retirement accounts. The first are individual employee accounts into which payments are made equal to 7% of the employee’s salary. The second is the City’s account into which payments are made based on an annual actuarial study.

When an employee is eligible to retire, their retirement benefit is based upon a formula, which includes four factors:

• the employee’s age at retirement
• the number of years of service credit the employee has with CalPERS
• the employee’s final rate of compensation
• the designated benefit factor (multiplier)

Local agencies can contract with CalPERS for different retirement benefit formulas for its employees. Adjustments made to one or more of the factors listed above effect the amount an employee will ultimately receive in retirement benefits. The formula that the City currently uses to calculate retirement benefits for its eligible employees is the "2% @ 60" formula. Under the current formula, the retirement benefit for a Rancho Palos Verdes employee who is 60 years old with 30 years in the CalPERS system would be 60% of the average of their highest 36 consecutive month’s salary. The 70% factor is derived from multiplying the benefit factor (2%) by the number of years of service credit (30). The amount of final compensation is typically derived from the employee’s final three years of employment, since this is usually the time when they received the highest rate of pay. Therefore, if the employee’s final rate of compensation were $50,000 per year, their retirement benefit would be 60% of this amount or $30,000 annually.

In addition to the retirement benefit, the City also contracts with CalPERS to provide employees with a survivor death benefit. This benefit is called the 1959 Survivor Benefit because 1959 was the year that it was first established. If an employee dies before they reach retirement age, CalPERS pays the employee’s eligible survivors a monthly benefit to compensate for the loss of the employee’s retirement benefit.

The CalPERS Board invests the member’s retirement funds in a variety of markets, but has recently invested heavily in publicly traded stocks. Over the past few years, CalPERS retirement accounts have grown significantly due to the robust performance of the stock market. This has resulted in a surplus between the retirement assets and the expected retirement liabilities. As a result of the unexpected growth of CalPERS assets, cities have continued to pay the 7% employee’s contribution to the program, but they have not been required to pay the corresponding employer’s contribution. This has been the situation in Rancho Palos Verdes for the last two years. Although not a guarantee, CalPERS expects this situation to continue for the next three years. In the June 30, 1998 actuarial report prepared for the City’s retirement plan, the actuarial value of the plan’s assets was $5,431,577. The assets exceeded the City’s actuarial accrued liability by $1,448,230. Again, the plan’s assets result from contributions made on behalf of each employee equaling 7% of gross payroll and the employer contributions, which in the six years prior to the surplus averaged approximately 5.431% of gross payroll. By state law, the use of this surplus is limited to either funding of CalPERS retirement benefits or offsetting annual pension contributions.

The last time the City made a change in its CalPERS contract was in January 1993, when the City granted two years of additional service credit to employees who retired after being laid-off by the City. This change affected one employee who retired after being laid-off by the City during the recession. The only other significant change the City has made was in 1996 when the Personnel Rules were amended so that the City paid the full 7% of an employee’s contribution to CalPERS from the initial hire date. This change was made because the City was one of the few remaining local agencies that required employees to pay all or part of their contribution and this practice was weakening the City’s ability to compete for new employees in the marketplace.

Last year, the CalPERS Board adopted a policy that temporarily changed its actuarial methodology in an effort to make benefit improvements more affordable and attractive to public agencies. For agencies that amend their contract with CalPERS and provide its workers with a benefit improvement that increases the present value of benefits, CalPERS will value assets on a one-time basis at 95% of the actuarial value of the plan assets. This one-time change to 95% of actuarial value of the plan applies to agencies that amend their contracts during fiscal years 1999-00 or 2000-01. The City’s assets included in the June 30, 1998 actuarial report were calculated at 90% of market value. It is expected that the actuarial report for 1999 will be calculated using 95% of market value.

If the City were to improve its retirement benefits, our annual pension contribution would only increase if the actuarial accrued liability (i.e. the increased by the cost of any new benefits selected) exceeded the actuarial value of the plan’s assets (based on 95% of the actuarial valuation of the plan). Furthermore, any net increase in the City’s unfunded liability would be amortized over 20 years.

In light of this situation, it may be a good time for the City to review its contract and determine if there is an opportunity to improve our employee’s retirement benefits. Staff has identified three CalPERS benefits that could be improved at potentially minimal or no additional cost to the City. They are the Retirement Formula, the final compensation calculation and 1959 Survivor Benefit Program. Each option is discussed in detail below.

Before presenting the proposed benefit enhancements, a word of caution is in order concerning the proposed difference in valuations (90% vs. 95%). As indicated above, CalPERS’ successful investment strategy and the resulting robust growth of its retirement accounts have resulted in a surplus of earnings. Some argue that contracting agencies have been paying higher rates than they should have been, while others claim that cities have been receiving a benefit from the surplus by not having to pay the employer’s contributions over the last few years. If the City chooses not to enhance benefits, these assets would remain in the City’s plan for future use, perhaps during an economic downturn. In the event that enhanced benefits are contracted for under the proposed 95% valuation, and the investment market turns sour, cities may actually see increased costs for these enhanced benefits. However, every city’s situation is slightly different. Therefore, if the Council authorizes staff to proceed, the City should compare rates for the enhanced benefits at both the 90% and 95% actuarial valuation of assets to determine the true cost of these benefits enhancements.

As discussed above, the City currently contracts with CalPERS for the 2% @ 60 retirement formula. An alternative formula offered by CalPERS that is becoming very popular with local cities is the "2% @ 55" formula.

Under both formulas, an employee is eligible to retire at age 50 with a minimum of 5 years of service credit. In both systems, if an employee chooses to work beyond the specified retirement age (55 or 60) the benefit factor will increase slightly each year of additional service until it tops out at 2.418 at age 63 or older. If the employee retires before the specified retirement age, the benefit factor is less than 2. The 2% @ 55 formula is considered to be an enhancement because it provides a better benefit factor for employees who retire between the ages of 50 and 62. For example, an employee retiring at age 50 under the 2% @ 60 formula would be required to use a benefit factor of 1.092. The same employee retiring under the 2% @ 55 formula would use a benefit factor of 1.426 in determining their retirement benefit. The trade off for the employee is that by retiring earlier they do not add in as many years of service as they would have and thereby reduce the amount of their retirement benefit. For this reason statewide averages have indicated that the modification of this benefit does not result in significantly more retirements. It does, however, provide a better retirement for those employees who can no longer work due to physical problems or other reasons.

Many cities have or are in the process of amending their contracts to switch from the 2% @ 60 to the 2% @ 55 formula. CalPERS estimates that 60% of the local cities in California are currently using the 2% @ 55 formula. In most cases, cities see this change as a way to improve employee benefits at little or no cost to the city, while providing an important tool in recruiting new employees.

As discussed above, the retirement formula is used to determine what percentage of an employee’s salary they will receive as their retirement benefit. Therefore, in addition to the years of service multiplier (2%) and target retirement age (age 55 or 60), the average monthly pay rate used in calculating retirement benefits is also extremely important. Currently, the City’s contract with CalPERS uses the 36 highest paid consecutive months to arrive at employee’s final compensation rate. However, CalPERS also offers the final compensation rate to be determined by using the employee’s 12 highest paid consecutive months. Because salaries typically increase from year to year due to merit increases or promotions, averaging over a one-year period rather than a three-year period is clearly more advantageous to the employee by providing them with the highest possible final rate of compensation.

The 1959 Survivor Benefit Program provides a monthly allowance to eligible survivors of CalPERS members who die before retirement. CalPERS has created new benefit levels three times since the plan was originally created in an effort to keep pace with the increases in the cost of living that have occurred since the program was first established in 1959. Currently, there are four different benefit levels to this program. The applicable level for local public agency members depends on the contract the employer has with CalPERS. The chart below shows the monthly amounts payable under each level depending on the number of eligible survivors:

* These levels are closed for new agency contract amendments after January 1, 1994.

The City currently provides Level 1 Survivor Benefits to its employees. Because Level 2 has been closed for contract amendment since January 1994, the City could consider providing Level 3 or Level 4 benefits for the employees. In November 1999, staff requested an actuarial valuation for Levels 3 and 4. The results, which are summarized below, are based on the 95% market valuation currently being offered by CalPERS.

Level 3 provides the greatest amount of survivor benefits at no additional initial or future cost to the employee or the City. In comparison, Level 4 would provide the maximum benefit with no additional cost to the employee. However, while there would be no initial cost to the City, there is a potential for a future cost to the City in the event the City’s retirement account assets no longer exceed its liabilities.

As discussed above, staff has investigated three possible enhancements to the City’s employee retirement benefits: 2% @ 55 retirement formula, one-year final compensation and improved 1959 Survivor Benefits. Staff also surveyed the other South Bay cities to determine what level of benefits they are currently providing to their employees. The results of the survey are presented in the chart below:

* El Segundo is currently considering providing the 2% @ 55 formula

Of the fourteen cities surveyed, including Rancho Palos Verdes, eight cities are currently using the 2% @ 55 formula, one city is using both formulas depending on the employee’s date of hire and five cities are using the 2% @ 60 formula. One of the cities currently using the 2% @ 60 formula is considering changing to the 2% @ 55 formula starting in the next fiscal year.

Eight cities are currently using the single highest year’s salary in computing the employee’s final compensation factor, one city is using both formulas depending on the employee’s date of hire and five cities are using the highest three-year average.

Regarding 1959 Survivor Benefits, two cities provide Level 1 benefits, five cities provide Level 3 benefits, two cities provide Level 4 benefits and four cities do not provide this type of benefit for their employees.

Fiscal Impact: CalPERS provides one actuarial report to the City each fiscal year at no cost. Any additional reports during the same fiscal year cost $200 for each benefit category requested. The City requested and received a report during FY 99-00 (February 2000) on the 1959 Survivor Benefit. If the City requests additional reports for the 2% @ 55 formula and the one-year final compensation factor during the current fiscal year, they will cost $200 apiece or $400. However, if the City waited until after the start of the next fiscal year (FY 00-01) on July 1, 2000, the first report would be free and the second report would be $200. Either way, the cost of obtaining the actuarial reports is nominal and can be absorbed by either budget.

The fiscal impact of providing the 2% @ 55 formula and the one-year final compensation factor is unknown at this time, but will be determined through the preparation of the actuarial reports. Using a 90% market valuation factor, CalPERS estimates that most local cities would experience an increased cost of roughly equal to 3.3% to 4.9% of its payroll to implement the 2% @ 55 formula and 1.0% to 1.7% for the one-year final compensation allowance. Regardless of the valuation factor used, there would be no additional cost to the individual employee if either or both of these amendments were made to the City’s contract with CalPERS.

Based on the 1959 Survivor Benefits actuarial report the City recently received from CalPERS, the City would pay no additional cost to provide Level 3 benefits, now or in the future. If the City chooses to provide Level 4 benefits, there would be no additional costs incurred for the first three years, assuming that the City continues to have surplus assets in its retirement account. However, if and when the surplus exhausted, the City will be required to pay $2,650 per year for this benefit. The monthly cost currently paid by each employee would not change for either Level 3 or Level 4.

Recommendation: Authorize staff to:

1.Request an actuarial reports from CalPERS on the 2% at 55 retirement benefit formula and the one-year final compensation calculation using both 90% and 95% of market value. Staff will report the results to the City Council when they are available. Once requested, an actuarial report typically takes several months to complete.

2.Prepare a contract amendment with CalPERS to increase the 1959 Survivor Benefit from Level 1 to Level 4. Final approval of the contract amendment will be brought back to the City Council on a future agenda.

• $6,285 to be added to the proposed budget

Over the past several years, the Council has provided grant funding to certain non-profit agencies in the South Bay area. The following chart indicates the amounts that the City has provided for the last three fiscal years and the amounts included in the proposed FY 00-01 budget:

As indicated in the chart, the grants for two organizations were decreased in the proposed budget for FY 00-01: Peninsula Seniors and Palos Verdes Symphonic Band.

In FY 97-98 and FY 98-99, Peninsula Seniors received a grant of $2,625 each year from the City. In 1999, during the two-year budget process, Peninsula Seniors requested that the grant be increased to $6,810 ($10 per member who was a Rancho Palos Verdes resident) for FY 99-00 and FY 00-01. The reason for the increase was to defray the organization’s increased cost to lease office space. The Council initially requested that, in order to receive a $6,810 grant in FY 99-00 and FY 00-01, Peninsula Seniors establish a tiered membership fee schedule which provided a discount for Rancho Palos Verdes residents and to approach the City of Palos Verdes Estates about also making a contribution. At the budget hearing on June 1, 1999, Peninsula Seniors reported that their efforts to obtain a grant from Palos Verdes Estates had been unsuccessful and the Board had not yet met to discuss the concept of a tiered fee schedule. In light of this, the City Council agreed to grant the organization $6,810 in FY 99-00, but reduced the amount of the grant for FY 00-01 to half of the requested amount or $3,405.

In April 2000, staff received the attached letter from the Peninsula Seniors indicating that the organization’s Board of Directors discussed the issue of tiered membership fees on December 1, 1999. It was the consensus of the Board that the tiered fee scheduled should not be adopted. In the same letter, Peninsula Seniors reported that its membership has increased from 681 members who live in Rancho Palos Verdes in 1999 to 869 members in 2000. Therefore, Peninsula Seniors is requesting a $8,690 grant from the City in FY 00-01 ($10 per member who is a Rancho Palos Verdes resident). The additional grant requests for FY 00-01 represent an increase of $5,285 (about 60%) from what is proposed for the FY 00-01 budget ($3,405).

During last year’s budget policy workshops, the Council included a $1,000 grant to the Palos Verdes Symphonic Band in the budget for FY 99-00. However, the Council decreased the grant amount to $0 in the proposed budget for FY 00-01, pending further discussions regarding the organization’s availability to perform at the City’s July 4^th Country Fair. In February 2000, staff received the attached letter from the Palos Verdes Symphonic Band requesting a $1,000 grant from the City in FY 00-01 in exchange for honoring the City’s request for "time of play" for the July 4^th celebration.

Recommendation: Staff recommends increasing the amount designated for City Grants by $6,285 in FY 00-01: $1,000 for the Palos Verdes Symphonic Band and an additional $5,285 for the Peninsula Seniors. Therefore, the total amount of funds for City Grants for non-profit organizations in FY 00-01 would be increased from $25,205 to $31,490.

Fiscal Impact: If the increases requested by the Palos Verdes Symphonic Band and Peninsula Seniors are approved, the City Grants would reduce the General Fund by $31,490 in FY 00-01. This would be $6,285 or an approximately 16% increase in the proposed budget.

• $100,000 to be added to the proposed budget

As a matter of background information, the City acquired the existing Civic Center property during the mid-1970’s. The facilities on this former U.S. Navy missile site were built in 1953/54. After the City’s acquisition of the property, consultants prepared a Civic Center Master Plan and Feasibility Study on new construction and renovation. The City decided later to table the project and to utilize the existing buildings with minimal remodeling.

Staff has taken another look at the functional purpose of the existing facility as a Civic Center. For decades, the City operations have been accommodated around the building design and available space. Many costly investments, such as air conditioning, a permanent City Council Chamber and an elevator have been postponed for sometime in the future when the City constructs a new Civic Center. For future planning and discussion purposes, staff prepared a sampling of Civic Center improvement options with preliminary cost estimates. Because the potential variations on improvements may be infinite, staff concentrated on five primary options:

1. Basic Improvements and Amenities to the Existing Facility
2. Renovation of the Existing Facility
3. Permanent Council Chamber
4. New Addition to the Existing Facility
5. New Civic Center

These options were prepared upon the following assumptions:

• Built-out population for Rancho Palos Verdes is estimated to be approximately 50,700 people;
• City’s organizational structure will not substantially change in the next 10 years;
• Economy, political environment and funding sources will remain stable;
• Quality of any construction proposed would be comparable to the PVIC project (at $300/sq. ft).

Below is a menu of various improvements and amenities that would address some immediate needs of the existing City Hall, as well as make it more attractive and functional. The list provides rough cost estimates, should the City decide to select specific items along with one of the other Options. This option alone will not address the current space congestion the City is experiencing in some departments.

The cost for some improvements, such as air conditioning and elevator installation, is uncertain due to the unknown structural condition of the existing facility at this time. Since the existing buildings were constructed in 1953/54 and designed according to the standards and requirements of that time, any retrofit modifications to the buildings may yield long pay-back periods and may not be structurally or financially feasible or practical.

This option proposes to renovate the main Administration building and Planning building in order to accommodate a "centralized, one-stop service counter" for the public within the existing facility and/or to alleviate space congestion. As a matter of background information, the centralized public counter concept has been adopted by many Cities to enhance customer service. This one-stop service counter enables the customer to walk in and conduct his/her business at one location rather than being directed through a maze of personnel and departments/buildings. Representatives from each City department/program that conducts regular business directly with the public are envisioned to staff the centralized counter. Ideally, the centralized counter would be within the proximity to the large service departments, such as Planning and Public Works, so staff members can readily assist customers when specifically called upon. Some services provided at the centralized counter might include public information, building permits, plan checks, cashier, etc.

Generally, the cost of renovating an existing facility is considerably more expensive than constructing a new facility because of the complexity involved in renovation. If the City renovated both buildings (approximately 19,000 gross square feet), the estimated cost is $6,650,000 compared with $5,700,000 for new construction. The cost of renovation may be higher if the existing structure is later determined to require seismic retrofitting to be in compliance with current standards.

Currently, the City sets up and tears down the Hesse Park multi-purpose room for the City Council meetings. The "Chamber", including the side alcove for cable TV broadcasting, is approximately 1,900 gross square feet. On occasion, the Chamber reaches full capacity at 50 seated audience members with any remaining audience members forced to either stand or take a seat in the adjacent "overflow room", which seats 20 people.

This option proposes the construction of a separate, permanent Council Chamber, which would enable the City to:

• custom design a City Council Chamber to the City’s needs;
• enhance the overall City Council meeting experience for City officials, staff and the public;
• invest in sophisticated and permanently fixed audio-visual and information technology equipment;
• allow its use to community groups for meetings and organized events; and
• construct a Chamber without impacting the existing buildings.

This stand alone, 100-seat Council Chamber would include a lobby/overflow seating area, public restrooms, refreshment alcove, cable TV broadcasting control room, dais with voting controls, presentation area with audio-visual equipment and storage space. The estimated cost for new construction of a 3,000 square foot building at $300/sqft is $900,000.

If the City builds this new public assembly, the City may be required to install 20 additional parking spaces at an additional cost of approximately $12,000.

An addition between the existing two buildings is proposed to house a 100-seat Council Chamber, centralized public counter, lobby area, public restrooms and additional office space. The public counter and Council Chamber will be conveniently accessibly by both the public and City departmental offices for retrieval of records, documents and services. Assuming the new building will be of the same caliber as the PVIC Expansion Project at $300/sqft, a 6,000 square feet addition may cost approximately $1,800,000. There may be additional renovation cost, unknown at this time, incurred to reorganize selected City department workspaces around the centralized public counter. In addition, the expense of $12,000 for additional parking spaces may also be incurred.

A new Civic Center designed to incorporate a centralized public counter, permanent Council Chamber, and adequate space for storage, offices, meeting areas, etc. is estimated to require approximately 22,000 gross square feet. The estimated construction cost for a new facility at $300/sqft is $6,600,000. This cost does not include temporary relocation during construction; costs for modular office space with utilities would be approximately $100,000 for one year.

An unknown variable is the possibility that the soil surrounding the existing Civic Center may be contaminated with hazardous materials.

Recommendation: Staff recommends the following preliminary work be completed before the City commits itself to a specific project: soil characterization study of the area around the Civic Center complex, seismic evaluation study of the Administration and Planning buildings, and architectural conceptual drawings of proposed improvements to the Civic Center complex. Staff estimates these three items will cost in total approximately $100,000.

Fiscal Impact: $100,000 is requested from the General Fund Reserve

POINT VICENTE INTERPRETIVE CENTER REMEDIATION

At issue is whether the City of Rancho Palos Verdes should proceed with the soil remediation at Point Vicente, or await financial contributions from the County of Los Angeles, and/or the Federal Government. Since July 1999, when lead contaminated soil was first identified at the Point Vicente Interpretive Center the City has taken the following actions, and incurred the following costs:

The actions listed above were generally required to meet a deadline or legal obligation. With respect to the remaining items of work, however, since the site is safely closed and because there are no pending deadlines the City can move in a more deliberate and strategic manner.

Conversations to date with both the Federal Government and the County of Los Angeles regarding their financial participation in the project have been unproductive.

The City has, however, followed the recommendations of the City Attorney’s office and followed established procedures in all our actions to maximize our opportunity to be reimbursed. However, reimbursement is not guaranteed, and if it occurs it may not take place for several years. Moreover it is likely that some of the actions listed will not be eligible for reimbursement, for example the removal soil from the San Pedro site, and the removal of soil form Chandler’s landfill.

With respect to the remaining items of work, the cost to remediate the remaining soil at the site has not been determined with certainty. The actual costs will be highly dependant upon how what types of remediation options are available given the site constraints and how receptive the DTSC and the City of Rancho Palos Verdes are to certain types of remediation options. Staff currently estimates costs between $1 and $2 million.

Recommendation: The City should move forward with the remediation of the soil at Point Vicente, and not wait for a financial contribution from either the County of Los Angeles or the Federal Government. The benefit of proceeding in this manner is that the schedule will be expedited. The negative of this option is that the City of Rancho Palos Verdes will have to advance costs for the remediation, and reimbursement may take several years and may not occur at all.

Alternative Action: Conversely, the City can await financial contributions from both the County and / or Federal Government before proceeding with any remediation. The benefit of this option is that it minimizes the financial exposure for the City. The negative of this option is that it expands the schedule considerably.

Fiscal Impact: $2,000,000 is requested from the General Fund Reserve.

3.Revisions to Proposed Budget for FY 00-01

Recommendation: Review the increases to the FY 00-01 budget proposed by staff and provide staff with any comments.

Review the proposed increases to the FY 00-01 budget and provide staff with any comments.

In 1999, the City prepared its first two-year budget document for Fiscal Years 99-00 and 00-01. Even though the budget document covers two fiscal years, the City Council has only adopted the budget for FY 99-00. The budget for FY 00-01 is shown as "proposed" in the budget document. This was purposely done so that during the second year of the two-year budget cycle, the Council can make any necessary adjustments predicated on changes that may have occurred over the last year.

Staff has reviewed the proposed budget for FY 00-01 and identified six areas where circumstances that have occurred since the final budget document was presented to the City Council in June 1999 which may require an increase to the budget. Each change is summarized in the chart presented on the next page, followed by a brief description of the proposed change. Generally, the proposed budget increases discussed in this report are minor or reflect decisions made by the City Council during FY 99-00. Therefore, they are being presented separately to the City Council than the budget policy issues discussed previously in this agenda.

Staff is requesting that the City Council review and concur with the proposed increases to the FY 00-01 Budget. If these changes are acceptable to Council, staff will prepare a resolution for adoption of the FY 00-01 Budget which includes these amendments, as well as any budget policy items approved by the Council. This resolution is typically presented to the City Council at the first or second regular meeting in June. However, rather than re-print the budget document, the resolution approving the amendments will be inserted into the front of each document instead. This is the typical practice of cities during the second year of a two-year budget cycle.

Each of the proposed budget increase summarized in the chart above is described in more detail below:

Recently, the City and its computer network consultant, Palos Verdes on the Net, completed a major overhaul of the City’s web site and began posting City Council meeting agendas and staff reports on the site. Although City was able to absorb the cost of the update in the FY 99-00 Computer Equipment Fund, the FY 00-01 Budget does not contain sufficient funds to maintain the improved web site since this activity was not contemplated when the two-year budget was prepared. Typical maintenance activities would include the posting of the meeting agendas, City Council staff reports and minutes, press releases and job announcements, etc. on the website. Palos Verdes on the Net has indicated that these services would cost $12,000 per year. Therefore, staff is proposing to increase the budget for Professional/Technical Services in the Community Outreach Fund by $12,000 for FY 00-01.

Since 1998, the City has received state and federal grants that have been used to fund the Special Assignment Officer (SAO) program. Recently, the City received notice from the Sheriff’s Department that next year’s expenditures for this program will exceed the amount included in the proposed FY 00-01 Budget by $9.540. However, there is sufficient grant money available to absorb the proposed increase. Furthermore, these funds are restricted and can only be used for enhanced public safety programs. Therefore, staff is proposing to increase the budget for Professional/Technical Services in the COPS/LLES special fund by $9,540.

1.Palos Verdes Drive South Roadway Project

Staff had previously estimated the cost of the Palos Verdes Drive South Roadway project through the landslide area (formerly named the El Nino Storm Damage Roadway project) to be $600,000. This amount was included in the FY 99-00 Budget. Since that time, a preliminary engineering report has been completed which considered several strategies addressing pavement repair, ride quality and comfort, and drainage deficiencies. The selected strategy has a total cost of $790,000. Of this amount, more than 50% is for replacement of an existing 78" corrugated metal storm drain pipe which has become significantly deformed due to ongoing land movement. Replacement of this pipe will restore efficient drainage out of the landslide area as well as provide a functioning downstream outlet for proposed new longitudinal drainage facilities. In order to accommodate the revisions to the project, staff is proposing to increase the Capital Improvement Fund in FY 00-01 by $190,000. The additional funding will be derived from $50,000 of STIP grant revenues and $140,000 of Gas Tax Funds.

2.25^th Street Roadway Project

The purpose of the original 25^th Street roadway repair project was to address settlement of the roadway at the City’s eastern boundary in two phases. The initial budget for the project was $518,200, which came from Proposition C funds. Phase One involved the installation of a slope drain to handle surface water, horizontal subsurface drains to keep the adjacent slope in a dry condition and monitoring of the movement by the City’s geotechnical consultant. Provided that the settlement in the slope slowed, Phase Two of the project would replace deteriorated storm drains, rehabilitate the roadway with an asphalt concrete overlay and install two slope inclinometers to monitor any future movement of the slope.

The results of the ongoing geologic monitoring of the slope revealed that measures taken during Phase One were not sufficient to adequately reduce the amount of movement to an acceptable level. In response to the continued movement, two slope inclinometers originally planned for installation at the end of Phase Two were installed immediately. The inclinometers are currently being used by the City’s geotechnical consultant to reevaluate the situation and design additional control measures to reduce the possibility of a failure along this section of 25^th Street. This change in circumstances has added a third phase to the project that was not anticipated when the budget was first prepared in 1999.

Staff estimates that the cost for Phase Three will be substantial and recommends increasing the funding for this project by a total of $524,000. Staff is proposing to fund most of this project by transferring $326,000 of Proposition C money that had been previously earmarked in the FY 00-01 Budget for the Annual Arterial Roadway Overlay Project to the 25^th Street Project. In addition, this amount includes funds to obtain CEQA clearances, regulatory permits and to conduct biological monitoring, which were not included in the original budget for the project. Therefore, the actual increase in the FY 00-01 Budget would be an additional $198,000. The increase would be funded by the City’s Gas Tax funds.

In March 2000, P.V. Transit submitted a request for a 9% increase in the City’s FY 00-01 contribution to its local transportation program. The proposed increase from $383,215 to $418,215 is to cover a 4% inflation rate for expenditures and funding of its depleted operating reserve. P.V. Transit’s reserve funds were depleted during FY 99-00 for the purchase a large vehicle to meet the demands of increased ridership. The City provides funding to P.V. Transit from both the Proposition A Transit Fund and the Air Quality Management District Fund. Staff recommends funding the requested increase by including an additional $35,000 of Proposition A Transit funds in the FY 00-01. These funds are restricted and can only be used for public transit projects. There would be no change in the current funding level from the Air Quality Management District Fund. Therefore, the proposed breakdown in funding for P.V. Transit in FY 00-01 would be 377,215 from Proposition A and $41,000 from the Air Quality Management District Fund.

Included in the two-year budget document is a phased plan to replace five of the City’s old analog photocopiers with new digital equipment. The first phase of the replacement was completed during FY 99-00 with the purchase of four digital photocopiers: one high volume machine in Administration, one mid-volume machine in Recreation and Parks and two small counter machines in Planning and Public Works. The second phase is scheduled to take place in FY 00-01 with the replacement of the high volume photocopier used by the Planning, Building and Code Enforcement Department. . The proposed FY 00-01 Budget includes $22,765 to replace this machine. In soliciting bids on the new copiers in late 1999, staff determined that the cost of a new digital copier with the copying speed required by the Planning Department (65 copies per minute) would cost more than the amount currently budgeted. The new copier will cost $30,475 or $7,710 more than anticipated in the proposed budget. The Planning Department needs the faster machine due to the multiple agendas it must copy each week, including the Planning Commission, View Restoration Commission and Equestrian Committee. Therefore, staff recommends that the Equipment Replacement Fund be increased by $7,710 in the FY 00-01 Budget for the purchase of the new photocopier.

As part of the 1987 Horan Settlement, the proceeds from a $1 million bond were set aside in a separate maintenance trust fund. The accrued interest from the bond can only be used for the maintenance of landslide abatement projects. The City also created a Joint Powers Maintenance Authority (JPMA) to oversee and manage the expenditure of these funds. On May 2, 2000, the JPMA Board approved an agreement with the Abalone Cove Landslide Abatement District (ACLAD) to fund a portion of the District’s maintenance costs using some of the JPMA’s maintenance funds. Under the new agreement, ACLAD will receive up to $60,000 per year from the JPMA. However, this amount is not currently included in the proposed Joint Powers Maintenance Authority’s FY 00-01 Budget. Therefore, staff is proposing a $60,000 increase to the Maintenance Services account in the JPMA FY 00-01 Budget.

Staff has identified six areas where increases are proposed to the FY 00-01 budget. The requested increases total $512,250. Of this amount, nearly 76% is for increases in Capital Improvement Project expenditures, which have been previously presented to the City Council. In addition, only the $12,000 for website maintenance would result in increased expenditures from the General Fund. All of the remaining items are funded through grants or restricted funds that can only be used for specific purposes.

Respectfully submitted:

Carolynn Petru

Assistant City Manager

Reviewed,

Les Evans

City Manager

Attachment:

Letter from P.V. Transit dated March 3, 2000

4.2000 Five-Year Information Technology Plan

Recommendation: Receive and file the Year 2000 Five-Year Information Technology Plan (the "2000 IT Plan").

Receive and file the Year 2000 Five-Year Information Technology Plan (the "2000 IT Plan").

BACKGROUND:

• the local area network (LAN) with 55 workstations attached to the server configuration at City Hall;
• three workstations separately connected to the Internet via a T-1;
• three workstations located at three park sites connected to the email server via Palos Verdes on the Net (PVNET); and
• the City’s web site.

The City’s LAN and accounting system were entirely replaced in 1999 at a cost of approximately $290,000. The network replacement included the following:

The network replacement included a new primary file server using the Windows NT 4.0 operating system. Fifty-five workstations using PII 350MHZ processors with 64MB RAM are connected to the primary file server. Three workstations are located at three park sites to enable staff to send and receive email, as well as perform word processing. Three additional workstations are connected to the Internet (but not the LAN). In all, sixty-one workstations are used in the City’s IT system. The application software (including Word 97, Excel 97, Power Point 97, FARES parcel data base of RPV, ACT! 4.0 for contact management and Eudora for email) is installed on nearly every workstation. The HTE CitySoft accounting system is available to read accounting data at designated workstations in every department.

The combination fax/email server, the fiber channel drive bay and the AS400 server (operating the HTE accounting system) are connected to the primary file server. Hence, the primary file server is the hub of the LAN operating at City Hall. In addition to receiving email, the fax/email server serves as a firewall between the Internet and the primary server. Therefore, it protects the rest of the network from intrusion by computer hackers over the Internet, while transferring email messages over the Internet.

The fiber channel drive bay contains two identical 16GB storage drives, one drive which is used strictly for back-up of all data saved on the other drive. The fiber channel drive bay can be easily expanded to provide additional file storage capacity in future years. Additionally, with the installation of a fiber channel switch, the fiber channel drive bay could be used to maintain the data records of another system (i.e. a document imaging system operating on a separate server).

The technology described below is proven and affordable today. It is not "cutting-edge" computer technology. It is already in use at other California cities and agencies. The computer technology described in this report could be put in place, yet cost the General fund only about $36,000 annually over the five years of the IT Plan.

The following ideas would improve services to our residents, improve visual presentations for the City Council (and its Committees and Commissions) during meetings and improve staff efficiency:

• Receives applications and payments over the Internet using e-commerce;
• Provides more interactive information on the City’s web site;
• Enables graphic presentation of information from a laptop computer for viewing by the City Council, committees and commissions and the public;
• Includes digital scanning, saving and retrieval of letters, applications, plans, parcel data and staff reports using a computer document imaging system;
• Enables storage, retrieval and viewing of parcel information, plans, street, sewer and utility data over the network at City Hall;
• Enables staff to post and read information to the City’s web site from workstations connected to the network;
• Provides real-time web broadcasting and replay of public meetings over the Internet;
• Provides video-conferencing between the City Council members, residents, the business community, staff and others over the Internet;
• Merges the telephone and voice message systems with the City’s LAN; and
• Enables printing documents directly to a high speed copier and document imaging system attached to the LAN;

If the following IT ideas were implemented, the fiscal impact would be as follows:

• Lump sum transfers totaling $180,000 (an average of about $36,000 each year) from the General fund to the Equipment Replacement fund to pay for the cost of new equipment over the five years of the IT Plan;
• Approximately $340,000 (an average of $68,000 per year) would be spent directly from the Equipment Replacement fund to replace computer equipment. The Equipment Replacement fund will have already accumulated the necessary funds to pay for the replacement of computer equipment included in the IT Plan;
• Operating costs of the IT system (before depreciation) will increase at an average rate of about ten (10%) percent over the five years of the IT Plan; and
• The ending fund balance of the Equipment Replacement fund would still continue to increase at prudent levels at the end of each year of the IT Plan;

A further description about each idea is offered below. Please note the reference to where the idea appears in the attached Schedules 1 and 2.

Several simple electronic application forms could be developed and posted on the City’s web site. Upon completion, they could be submitted with credit card payment over the Internet. More than one-half of the cities in California either have this payment technology in use or are installing an e-commerce payment system. Providing this technology for filing applications for business licenses, solicitation permits, film permits and other permit applications would be a convenient alternative for the City’s residents and business community.

PVNET, the City’s network consultant, estimates that the cost of developing the electronic applications for the first 2-3 forms would be approximately $5,200 (80 hours @ $65 per hour). No specialized software will be necessary. Transportation funds may be eligible to finance a portion of the cost of this proposed solution.

With the purchase of a portable projector attached to a laptop computer, presentations of visual images could be greatly improved at the meetings of the City Council, its committees and the public. The City Council (or any of its committees) and the public could more effectively view:

• Pictures of view-frames or any other image;
• Tables, financial information, charts and graphs; and
• Scanned and digitally converted information provided by the public.

Staff could make presentations of staff reports using this visual technology. The display technology can also be used for presentations at community meetings (i.e. the Community Leaders Breakfast) as well as employee meetings. The laptop computer is already appropriated in the FY 1999-2000 budget. The estimated cost of a LCD projector is about $8,000.

Graphical image software would be used for the following:

• To view site plans;
• To view architectural drawings;

• To develop a geographic information system database of the City’s infra-structure;
• To perform view-frame analysis;
• To enable staff to view utility lines, the City’s infra-structure, archived building plans and view frames using computer monitors while working with residents and the public at the counter; and
• To archive all of the above;

The scanning equipment described below in Document Imaging and Retrieval System (with an estimated cost of $25,000), would be necessary to establish a completely functional graphical database of the City. The large document scanner would be used to scan and archive images. A couple of examples include:

• Scanning of documents, drawings and pictures, into computer files using Adobe PhotoShop and other software; and
• Using ArcView geographical information system (GIS) software for developing a database to view public drainage systems, sewer systems, zoning matters, transit routes, the location of GPS monitors and de-watering wells in the landslide area, licensed business locations, park facilities and trails and other city facilities.

The cost of installing Adobe PhotoShop and ArcView GIS software on approximately ten workstations, including installation, data and training is approximately $35,000.

The acquisition of a document imaging system was first proposed to the City Council during the budget workshop in May 1999 with an estimated cost of $150,000. Staff recently discovered a solution that will cost approximately $80,000, including the multi-user license, a dedicated file server, two high-speed scanners, a large image scanner (i.e. for site plans) and a plotter printer. The total estimated cost of $80,000 includes about $25,000 of scanning and printing equipment that will be necessary to develop the GIS system and other graphical databases described above. It is anticipated that the annual software and hardware maintenance fees would be approximately $15,000.

The acquisition and maintenance costs could be partially recovered with collection of a document processing charge (i.e. 4,000 applications annually @ $1.50 = $6,000). Additionally, the microfiche of accounting records, permanent records of the City Clerk and large plan drawings will no longer be necessary, saving at least $5,000 annually.

Staff anticipates using the proposed scanning solution for document storage and retrieval of appropriate City document including:

• Signed documents associated with the meetings of the City Council and its committees, including agendas, minutes, resolutions, staff reports and attachments (even large documents like site plans);
• All correspondences between the City Council and/or staff and the public;
• All accounting records;
• All applications filed with the City;
• All site plans provided with applications for permits; and
• Department documents, especially those of the City Clerk’s office;

The imaging software would reside on a dedicated document imaging file server. Once documents were scanned and digitized into files, they would be saved into file directories on the imaging server for archiving and retrieval.

Workstation Access to the Internet (see Schedule 1, Section D, No. 37)

Access to the Internet is not currently available at workstations at City Hall. The Internet is quickly becoming the most popular information and communication media. Certain important information is already being posted on the web sites of federal, state and local agencies, rather than distributed via the postal system. Some regulatory reports can only be filed electronically over the Internet (i.e. State Controllers Report).

PVNET currently provides a T1 Internet connection to the City at a nominal cost of $2,400 per year. A T1 connection provides the fastest transfer of data over the Internet. The workstations attached to the primary server at City Hall could be connected to PVNET’s T1. But prior to doing so, firewall software must be installed on the primary server and every workstation to avoid intrusions by hackers. PVNET estimates that the cost of installing the firewall software will not exceed $30,000.

PVNET estimates that the cost of converting and posting the files of a City Council meeting would cost about $5,200 annually (10 hours x 28 meetings @ $10 per hour). An Intern could be trained to perform the conversion.

Connection of the Planning High Speed Copier to the Network (see Schedule 1, Section D, No. 38)

It is now possible to connect high-speed copiers to the LAN. Direct printing to the copier will speed the processing time for agendas, staff reports, minutes, follow up agendas and other multi-page documents. Staff would like to install this technology in the Planning department to save time while supporting the Planning and View Restoration Commissions and the Equestrian Committee. The Planning department probably reproduces more documents then the rest of City Hall combined. The cost of licensing the direct printing option from the copier vendor is approximately $10,000.

Video-Conferencing (see Schedule 1, Section D, No. 39)

If Internet connection were provided to the workstations at City Hall, adding video-conferencing would cost of less than $100 per workstation. The installation of approximately twenty (20) video cameras and software is proposed in the IT Plan.

Lucent Technologies has recently informed staff that they will discontinue supporting the existing phone system effective December 31, 2001. Though other third party vendors will provide support services, technology is quickly advancing to economically merge voice with data over computer networks. The technology already exists.

If the phone system is replaced with a computer telephony solution, voice data (packets of digitized voice files containing what you say and what you hear) could be transferred over the internal phone lines or the network backbone. Voice and data can share the same lines. Necessary changes to the phone system (i.e. set-up of an extension for a new employee, set-up of a voice mail account) could be performed from any designated workstation. The City will likely migrate to this technology when the existing system is no longer supported, or it becomes economically and administratively advantageous.

Ergonomic Study

Most of the office furniture used at City Hall was acquired before the installation of the computer network. It was not designed for use with computer keyboards and monitors. The City was recently criticized for not maintaining a Repetitive Motion Injury Control (Ergonomic) Program in the Risk Management Evaluation report prepared by the California Joint Powers Insurance Authority. Staff recommends retaining a consultant to perform an ergonomic study of computer work areas. The cost of conducting a study should be less than $5,000 and could be paid from the Administrative Services program of the General fund budget during FY 99-00 or the following year.

The ideas described in the previous paragraphs, titled "A Virtual City Hall of the Future – Several Ideas To Consider", and are not included in the proposed budget for FY 00-01. The proposed FY 00-01 budget does include two necessary computer upgrades: (1) to the Windows 2000 operating system and (2) Office 2000 (including Word, Excel, etc.). Microsoft will discontinue supporting the NT operating system and Office 97 application (currently used by the City) sometime in the future. Regardless of the timing of support discontinuance, significant performance and economic advantages would be derived from the upgrade as described below:

The primary server and workstations currently use the Windows NT 4.0 operating system. The successor operating system to Windows NT 4.0 (NT), Windows 2000, was released near the end of 1999. The optimal time to conduct the necessary upgrade to Windows 2000 will be during the December 2000 break, while City Hall is closed.

A significant amount of time and cost will be saved with the installation of the Windows 2000 operating system on the server and all of the workstations, including:

• The Windows 2000 operating system utilizes the "plug and play" feature. Drivers (communication files) are automatically installed with the attachment of computer equipment (i.e. printer, scanners, ZIP drives). Drivers must be manually installed using the existing NT operating system. Plug and play will enable City staff to install new computer equipment and may save approximately $1,000 each year.
• Windows 2000 supports Universal Serial Bus (USB), while NT does not. USB uses the power source of the computer, rather than a 120-volt outlet. Some computer equipment will require USB connection in the future.
• Currently, the installation of software, as well as the change of standardized settings must be performed at each workstation (i.e. if the FARES Win2Data parcel data base software must be updated to a new version, it must be installed at every workstation). Windows 2000 includes console management of workstations attached to the primary server. Many standardized settings, upgrades, patches and fixes would be performed directly from the primary server, rather than performing the work at every workstation. Therefore, a software upgrade that would take 15 hours to install at workstations (61 workstations @ ¼ hour to install) may take only three hours to install, resulting in savings of about $850 for every system-wide upgrade.

The Budget Document for FY 00-01 includes $6,000 for a console management program. If Windows 2000 is installed, it appears as though the management program will not be necessary, saving $6,000.

• Windows 2000 has been independently tested and found to be more reliable and faster than NT. A test conducted by ZD Labs reported that the "uptime" of Windows 2000 was 17 times NT. Based upon ZD Lab’s findings, Windows 2000 will be 17 times more reliable from computer crashes. The frequency of computer crashes is one of the few complaints that staff has expressed while using NT.
• A new file protection system included in Windows 2000 avoids the risk of accidental removal of essential system files during software installation and removal. It also protects against the errant replacement of Windows 2000 system files with those of the application software being installed, so that a program (i.e. FARES Win2Data parcel software) doesn’t interfere with the operating system. We have detected file conflicts after installing and removing programs.
• A total of $15,000 has been included in the proposed budget for FY 00-01 for the Windows 2000 Professional operating system for workstations. This is based upon acquiring a sixty (60) user license @ $250 per workstation for the upgrade to Windows 2000. An additional $6,000 has been included to upgrade the primary server to Windows Advanced Server 2000 plus $5,000 for installation services.

Office 2000, including Word, Excel, Access, PowerPoint and PhotoDraw was released in April 1999. Microsoft will discontinue supporting Office 97 in the future. No one really knows how soon this will occur. Therefore, staff would like to conduct the upgrade to Office during the December 2000 break, the same time the Windows 2000 upgrade is proposed.

Office 2000 enhancements include the following:

• Improved use of PhotoDraw to incorporate pictures, banners, logos and other graphics into Word;
• More clip art graphics;
• Improved photo editing;
• Ability to copy and paste (either individually or all at once) up to 12 pieces of information from one document to another;
• Improved pasting of tables into Word documents;
• Programs that automatically search for missing or corrupt files and repair them;
• Ability to add columns and rows in Excel without having to manually apply formatting and formulas;
• Ability to use a browser in Access to view and update live data; and
• Improved chart presentation in Excel, referred to as PivotChart and PivotTable.

The costs of new and replacement equipment are budgeted and accounted for in the Equipment Replacement fund. The City’s computer equipment is depreciated over a three-year term in accordance with generally accepted accounting principles. Therefore, the replacement of the computer equipment is funded over the same three-year term. Because most computer equipment is in service for more than three years, its replacement is generally funded long before its actual replacement.

The funding is provided by transfers from the General fund to the Equipment Replacement fund in amounts equal to the annual depreciation. A further explanation about the how the Equipment Replacement fund works can be found on page 217 of the Two Year City Budget 1999-2000 & 2000-2001.

The FY 99-00 budget and FY 00-01 proposed budget are the basis for the first two years of the IT Plan. The computer hardware and software proposed for FY 01-02 through FY 03-04 includes necessary hardware and software updates required to maintain the existing IT system and several of the concepts included in the "Several IT Ideas To Consider Implementing" section of this report.

• As already described above, the Budget for FY 99-00 and the proposed budget for FY 00-01 provides the basis for the first two years of the five year IT Plan;

• No provision has been included in the IT Plan for the cost of unknown technology that may become essential for the operation of the City in the future; and

• It is anticipated that the replacement of the accounting system will occur after FY 03-04, therefore, its replacement is not included in the IT Plan;

Section A – Adopted Budget FY 99-00

Section B – Proposed Budget FY 00-01

Section C – Proposed FY 01 through FY 03-04 (Required to maintain the IT System)

Section D - Proposed FY 01 through FY 03-04 (to improve the IT System)

Summary of TOTAL Hardware and Software

If the IT Plan is adopted:

• Lump sum transfers totaling $180,000 (an average of about $36,000 each year) from the General fund to the Equipment Replacement fund to pay for the cost of new equipment over the five years of the IT Plan;
• Approximately $340,000 (an average of $68,000 per year) would be spent directly from the Equipment Replacement fund to replace computer equipment. The Equipment Replacement fund will have already accumulated the necessary funds to pay for the replacement of computer equipment included in the IT Plan;
• Operating costs of the IT system (before depreciation) will increase at an average rate of about ten (10%) percent over the five years of the IT Plan; and
• The ending fund balance of the Equipment Replacement fund would still continue to increase at prudent levels at the end of each year of the IT Plan;

Respectfully submitted:

Dennis McLean

Finance Director (and IT Co-Coordinator)

Reviewed by:

Les Evans

City Manager

CLOSED SESSION: See attached Brown Act Checklist.

ADJOURNMENT: Adjourn to Monday, May 15^th at 9:00 A.M. for a Budget Work Session to be held in the Community Room, City Hall.

Based on Government Code Section 54954.5

(All statutory References are to California Government Code Sections)

Anticipated Litigation:

(G.C. 54956.9(b)

_X_A point has been reached where, in the opinion of the City Council/ Agency on the advice of its legal counsel, based on the below-described existing facts and circumstances, there is a significant exposure to litigation against the City Council/Agency based on

OR