FEBRUARY 26, 2005 RANCHO PALOS VERDES CITY COUNCIL ADJOURNED M I N U T E S FEBRUARY 26, 2005 RANCHO PALOS VERDES CITY COUNCIL ADJOURNED M I N U T E S

DRAFT

M I N U T E S

RANCHO PALOS VERDES CITY COUNCIL

ADJOURNED REGULAR MEETING

BUDGET POLICY ISSUES WORKSHOP

SATURDAY, FEBRUARY 26, 2005

The meeting was called to order at 10:00 a.m. by Mayor Clark at the City Hall Community Room, 29301 Hawthorne Boulevard, Rancho Palos Verdes.

Roll call was answered as follows:

PRESENT: Long, Gardiner, Stern, Wolowicz, Clark

ABSENT: None

Also present were City Manager Les Evans; Assistant City Manager/City Clerk Carolynn Petru; City Attorney Carol Lynch; Director of Finance Dennis McLean; Director of Planning, Building and Code Enforcement Joel Rojas; Director of Public Works Dean Allison; Accounting Manager Kathryn Downs; and, Minutes Reporter Debra Presutti.

Mayor Clark recognized that nearly the entire City staff was present in the audience and requested that each person introduce himself or herself and remind Council of their positions with the City.

The Pledge of Allegiance was led by members of the Rancho Palos Verdes City staff.

APPROVAL OF AGENDA:

Councilman Stern moved, seconded by Councilman Long, to approve the Agenda.

REGULAR NEW BUSINESS:

With the assistance of a PowerPoint presentation, City Manager Evans provided an overview of the City’s budget, including some preliminary revenue and expenditure figures put together by Director McLean and Accounting Manager Downs. He that indicated staff believed the City had approximately $1.5 million dollars of discretionary funds, saying that Council was being asked to consider about $3.5 million worth of programs and that individual Council members may also like to include additional items on the list.

Mayor Clark said that he thought the City was weaning itself away from the Abalone Cove Sewer District subsidy, noting his recollection that it was supposed to go to zero by fiscal year 05-06.

Director Allison stated that Mayor Clark’s understanding was correct but that there were implications in reducing the subsidy to zero that staff would like to discuss with Council. He indicated that the $10,000 figure was included on the list to highlight the issue and ascertain whether Council wanted to make a deliberate decision to reduce the subsidy to zero.

Councilman Stern commented that it appeared that the City’s revenue estimates did not include any big issues like the Vehicle License Fee, as was the case during the last two years and inquired if any of the other potential revenue streams were in jeopardy.

Accounting Manager Downs advised Council that the revenue estimates presented were conservative but that staff was fairly confident of the numbers, noting that none of the revenue sources had been drastically reduced or eliminated.

Mayor Clark inquired if there was a risk of significant deterioration of the streets if Council continued to defer the comprehensive street paving program. He noted that the City implemented a very successful proactive approach of slurry sealing and overlaying its streets in the late ‘90’s and indicated that he would hate to risk seeing that effort compromised.

Director Allison advised Council that it was far wiser to incur road maintenance costs now rather than later, and analogized that it was far easier to change the oil in a car than it was to replace the engine.

Employee Pension Plan

City Manager Evans presented the staff report and recommended that Council hold the issue of pension plans in abeyance to see if one of the three proposed pension reform plans was formalized and approved. He stated that it was highly unlikely the CalPERS pension plans would not change in some manner, saying that how it would change remained to be seen and, as such, he suggested that Council wait to consider the matter.

Councilman Long inquired if staff had any thoughts on whether Council should continue reviewing the option of contributing 14% per year into the existing CalPERS plan or if that, too, should be held in abeyance pending the State’s decision.

City Manager Evans recommended that, in the event no change occurred, Council consider establishing a rate it would like to contribute to employees’ pension plans and create a fund for that.

Director McLean noted that what was not being proposed by that option was making additional contributions to the City’s plan as part of CalPERS. He explained that what was being proposed was, in years where the employer’s contribution was determined by CalPERS to be less than 7%, the City could put the differential between that 7% and the CalPERS contribution level into an employee benefit fund, which could be used to pay the employer’s contribution in times when the CalPERS level exceeded 7%.

Mayor Clark commented that retirement plans would continue to change in both the private and public sectors in the coming years. He indicated that the current discussion was not a reflection on the value and importance of staff but rather the fiscal responsibility of Council when considering budget and policy issues because pension costs were comprising an increasing portion of the City’s budget. He indicated that virtually no defined benefit plans remained in the private sector and the public sector had been trending away from them for some time. Noting that the dynamic of pension plans was currently under review nationwide, he maintained that the issue was not brought forward from a negative standpoint but merely to address the realities and determine how best to move forward.

Councilman Stern agreed that it was important for Council to examine this item because of the percentage of the City’s budget involved. He indicated that when he joined Council the City was not required to make an employer contributions to CalPERS and the entire cost of the City’s pension program was in the range of $133,000; whereas now, projections indicated that it would rise to nearly $600,000.

Councilman Stern moved, seconded by Councilman Gardiner, to delay any decision on revising the current City employees’ pension plan pending decisions on the proposed legislation by Governor Schwarzenegger, Assemblyman Richman, and the Jarvis Taxpayer Association regarding changes to the State public employee pension plan law.

Mayor Clark, noting the presence of virtually the entire City staff, asked if anyone would like to address Council.

Kathryn Downs, Accounting Manager, thanked Council for providing employees the opportunity to speak. She voiced opposition to terminating the CalPERS contract or replacing it with a defined contribution plan. She remarked that she viewed her salary and benefits as a total compensation package, saying that if one part decreased another needed to increase so that the total stayed the same and remained competitive in the current job market. She expressed concern about moving to a two-tiered system, noting employees hired with a less competitive compensation package were unlikely to be the same kind of talented hard-working individuals currently on staff. Additionally, she opined that having two groups of employees – those with a defined benefit plan and those with a defined contribution plan – would create low morale and personnel problems and would increase the difficulty the City was already experiencing in recruiting for professional positions.

Ms. Downs maintained that the small amount of money the City would save over the balance of her career would have a very large fiscal impact on her. She stated that, even if the CalPERS contract was replaced with a defined contribution plan with a generous 6% City match, over the life of her career the City would save approximately $45,000 but the impact to her would be over $3.1 million making a defined contribution plan an inadequate replacement for what was currently in place. She agreed that society in general was moving toward defined contributions but asserted that the traditional pension model provided a much greater benefit to the employees. She commented that average wages in the public sector were generally lower with superior benefits than in the private sector, saying it was crucial to maintain those benefits as part of the compensation package in order to keep the public sector competitive with the private sector.

Nancy Vitez, Staff Assistant II, advised Council that the City Manager’s Weekly Administrative Report of February 23rd reflected that RPV was one of the most cost efficient cities in the South Bay. She noted that she and most of her coworkers performed a variety of jobs, saying she was the City operator, averaging approximately 180 calls per day, in addition to being the chief receptionist, cashier, and business license coordinator. She stated that merit increases were a very important aspect of an employee’s compensation and should be separate from the annual CPI increase. She indicated that her wage increase the previous year was 2.6% but the actual CPI was 2.2%, saying that equates to a merit increase of only 0.4%. She declared that the City’s staff was very dedicated and requested Council to keep that in mind when reviewing any changes to employee compensation.

Alberta Gray, Executive Staff Assistant, echoed the sentiments of her coworkers. She asserted that a defined contribution plan would severely impact workers in the lower salary ranges, saying that if 6% was taken from their salaries without providing a 6% percent increase it was unlikely they would be unable to pay into a pension plan on their own. She remarked that employees needed these pension plans and, if they were going to be eliminated, some other form of compensation was necessary to ensure their ability to adequately pay into any alternative retirement plan.

Mayor Clark described the contribution plan for Federal workers, saying that a healthy percentage of around 10% was provided by the government and the employee was allowed to contribute up to an additional 7 percent, which equates to between 17 and 20 percent being invested annually into an employee managed retirement program. He advised that some of the people who had maximized their investments in that plan had substantial seven-figure pensions awaiting them, saying that moving from a defined benefit to a defined contribution plan was not necessarily a negative concept.

Ms. Gray declared that a 6% contribution out of a $30,000 a year salary does not leave much to live on. She expressed concern that implemented a two-tier system was likely to have a negative impact on employee morale, saying that people do make comparisons with each other. She requested that Council keep in mind how these proposed changes might affect staff morale and the way the City operated.

Councilman Long supported the idea of continuing the item, saying that, without prejudging where things were headed, he was inclined to believe Council’s decision would be heavily influenced by what happened at the State level. He remarked that the performance of defined contribution plans was a function of how well one’s investments do and defined benefit plans carry the risk of under funding, saying that he would be mindful of these hazards when the matter was reconsidered.

Les Evans, City Manager, advised that approximately one-third of the City’s staff earned $41,000 a year or less, saying that he believed there needed to be some mechanism to provide lower income employees with a defined benefit plan much the way social security was designed. He stated that the League of California Cities would likely put forth a recommendation for modified pension plans and, while he firmly believed that pension plans did need to change, consideration must be given to providing a safety net for lower income workers.

Dennis McLean, Director of Finance, stated that he would work with Council to formulate the City’s retirement plan, noting that he could offer perspectives from both sides -- as the City’s Finance Director as well as that of the City’s employees. He advised Council to proceed with caution, saying that the transition from a defined benefit to a defined contribution plan had already been implemented in a number of states with very unsatisfactory results.

Gina Park, Assistant to the City Manager, commented that she had been a member of CalPERS for over 10 years, that she greatly appreciates the benefit, and that was what kept her working in the public sector. She indicated that as a reasonable and relatively young person with good potential for income growth she would be looking at other cities with good benefits packages, realizing that, if the Governor’s plan to go to a two-tier system was implemented, she needs to be in the right place before 2007. She disagreed with staff’s recommendation, saying that she would prefer to see Council act as advocates for the City’s employees by joining together with other cities, standing up, and fighting against these types of pressures from the State. She recognized Council’s responsibility to the City’s residents, noting this issue could easily impact their quality of life and their retirement as well. Ms. Park also voiced concern that the baby boom generation was slowly retiring, leaving a large talent gap. She advised Council that the City was already confronting the problem of recruiting young people into government service. She declared that its staff was the City’s largest asset and urged Council to support them by pushing the Governor into taking a larger view of the situation.

Lauren Ramezani, Senior Administrative Analyst, concurred that the City had been experiencing recruitment problems. She contended that a good retirement benefit was like extra salary, saying that taking something like that away from incoming workers, especially when there was so much uncertainty about the future of social security, would prevent vacancies from being filled and would increase pressure on the current staff. Ms. Ramezani requested that Council also reexamine the merit pool, saying that each year the increase in the cost of living eats up the bulk of employee merit raises so that people end up working hard all year for what amounts to a very paltry increase. She suggested that Council consider placing some of the bonus pool into merit increases, so workers can get a decent raise.

Councilman Stern inquired how a two-tier system would affect those employees who moved to a different City.

City Manager Evans answered that was still unclear but the thinking was that anyone currently in the CalPERS system would be considered a new hire and would lose their benefit standing if they moved to a new city. He indicated that, if a two-tier system does go into effect in July 2007, employees would want to make certain they were working at an agency where they wanted to finish out their careers.

Mayor Pro Tem Wolowicz indicated that he was very familiar with the idea of employee compensation, which he viewed as a total package – salaries, bonuses, pensions, health insurance, and merit increases. He indicated that he came from the private sector, saying that his company made the transition from defined benefits to defined contribution plans as a matter of cost shifting. He expressed an understanding of trying to achieve a balance between wages and what workers can afford to pay for retirement, saying he was sensitive to the fact there was nothing more personal than one’s paycheck. He declared that he was motivated first by a fiduciary responsibility to the City’s residents to balance the budget and then to the City’s employees to balance their needs. He indicated that he wanted to examine all the details to determine where to achieve that balance with what needed to be taken from the City’s resources to deal with the infrastructure, storm drains and sliding hillsides.

Mayor Pro Tem Wolowicz voiced support for the motion to defer the matter until reaction at the State level was known, indicating he was not going to hide behind the State nor the Federal government and, whether or not they took a position he agreed with, he would still come back and address this issue. He recognized the City’s staff for being well managed and well respected in the community and beyond, saying that he hoped to continue to retain the finest people possible to work for the City.

Councilman Gardiner commented on his experience as a small business owner, when revenue increased and there were more discretionary funds available, he believed in being generous; when the opposite was true, difficult decisions had to be made and implemented. He declared that change was in the air and something was going to happen, but he strongly believed that changing the rules for people already in the system was unfair. He supported the motion to defer, saying that when the times came to make changes he would look forward to staff’s continued input on how best to implement that change with the proviso that he did not support changing the rules for those already in the system.

Councilman Long concurred with delaying the matter, saying that, while what Council did may be governed by the decision at the State level, he did not believe that it would necessarily be the controlling factor. He recognized that the primary value and asset of the City was its employees and providing excellent service to the residents, saying that he would be mindful of two things when this issue returned: Being less focused on discussing change for the sake of change and being more focused on issues like providing a safety net for employees at lower levels of income. He commented that he never had a defined benefit plan, noting at higher levels of income it was of less a concern, but that he was aware of the fact that public sector employees generally have lower salaries and part of the tradeoff for that had traditionally been a better pension plan. He indicated that Council would have to examine the relative risks, burdens, and benefits of both plans, saying that he did not view them as mutually exclusive and did not believe the solution was necessarily an entirely defined benefit or entirely defined contribution plan but perhaps a mix along the lines of what was being proposed for social security reform.

The motion carried on the following roll call vote:

AYES: Gardiner, Wolowicz, Long, Stern, Clark

NOES: None

Recess and Reconvene:

Mayor Clark recessed the meeting at 11:34 a.m. and reconvened the meeting at 11:49 a.m.

City Employee Health Plan

City Manager Evans presented a summary staff report and requested that Council provide direction on how much they would like health insurance costs cut, saying that he would like to go back to the employees and work with them to determine if they would rather pay more rather than have a cap imposed.

Councilman Gardiner declared he was not interested in saving a penny for the City if the employees were required to pay that penny, saying he would prefer to pay the $70,000 in potential savings rather than shift it to the employees and, as such, favored retaining the system in its current configuration.

Councilman Long remarked that he understood Councilman Gardiner’s sentiment of wanting to provide a good health plan for employees, adding that he did not favor capping the City’s contribution as a cost saving mechanism because that did not recognize the City’s responsibility to its employees and merely dealt with increased costs by avoiding the problem. He mentioned that most of the City’s employees were enrolled in the zero deductible PPO Plus plan, which in the long run did not encourage employees to appreciate that the actual purpose of insurance was not to deal with regular day-to-day expenses but to be available with a broad spectrum of coverage for catastrophic events and serious illness. He reiterated that he did not like health plans with dollar limits that restrict one’s ability to obtain certain types of treatment; on the other hand, he noted that everyone needed to recognize that costs can escalate if the people using the system were not required to share in the cost to any degree. He suggested exploring the possibility of asking the employees enrolled in low deductible plans to pay the additional premium of those plans or to consider higher deductibles and co-payments.

Mayor Pro Tem Wolowicz remarked that this issue ultimately boiled down to either cost capping or cost shifting; the types of plans, HMO versus PPO; and, the limits, co-payments and total deductibles within a particular year. He indicated that he viewed this issue in concert with the pension plan, merit increases, bonuses, and tuition reimbursement saying that while he appreciated Councilman Gardiner’s position, he was trying to determine where to look for savings and it was not clear whether it was in medical benefits, direct salaries or somewhere else. He indicated that he would like staff to reexamine the issue and return with their recommendations of where those savings might be found.

Councilman Stern questioned the different attributes between the PPO and PPO Plus plans.

City Manager Evans answered that the basic difference was the deductible, with the PPO plan having either a $250 or $500 annual deductible and the PPO Plus having a zero deductible.

Mayor Clark, noting the survey included in the staff report indicated that the other South Bay cities paid 100% of their employees’ health insurance premiums, remarked that Federal employees pay part of their health plan regardless of their salary level and declared that the City’s plan was a tremendous benefit. He stated that he was unsure how best to proceed.

Mayor Clark mentioned that Federal employees can retain their health coverage upon retirement and inquired what happens to this benefit once a municipal employee retired.

City Manager Evans advised Council that retirees could maintain the City’s health insurance but they were required to pay the full premium plus two percent for the City to administer their participation in the plan. He noted that retirees benefited from remaining in a group plan where the costs were lower.

Councilman Gardiner indicated that he could think of nothing more devastating than illness, saying it can strike without warning, cause huge financial hardships, and threaten the lives of individuals and their loved ones. He declared that the $70,000 being discussed was trivial in the scheme of things and he would prefer to remove this item from further consideration.

Councilman Long asserted that a plan that grew exponentially at this pace must be dealt with in the long run. He stated that the City’s plan, notwithstanding the proposed cost increase, was still fairly reasonably priced but that there was no incentive for anyone to consider the issue of cost when they used the services, which was essentially what created the high level of cost escalation seen in recent years. He stated that he did not favor forcing people into HMO’s nor capping costs but, if the cost increase was going to be controlled, it must be a collaborative partnership. He noted that City staff was a relatively young group, saying that, if steps to contain costs were not taken by making moderate changes now, in five or ten years Council’s successors would have to make more drastic changes to balance the situation. He suggested that Council consider the possibility of increasing co-payments, deductibles, or perhaps the contribution for dependents rather than implementing the other alternatives.

Councilman Stern indicated that he tended to agree with Councilman Gardiner, saying that, while he understood the argument of having higher co-payments or deductibles, the reality was that neither provides a savings of any magnitude. He contended that taking those steps would to a large degree merely shift costs to the employees and save an inconsequential amount for the City, noting he that did not view the numbers as really creating a problem. He opined that it essentially became a matter of how Council valued things and concurred that health care was a huge issue because medical problems can be totally unexpected and devastating.

Councilman Gardiner maintained that the cost growth being considered was very low in terms of the overall budget, saying it was not currently a problem and if it was tracked over time a determination could be made when it started to become one.

Councilman Long stated that the City was paying $600 per year for each of the employees on the PPO Plus plan so they can take advantage of not having to pay a $250 deductible. He opined that giving those employees $250 plus another $50 to cover the tax obligation and burning the other $300 in a bonfire would provide the City with just as good a deal. He indicated that the same analysis applied on up the line, noting that the City could save nearly $17,000 in premiums, give a portion of that in the form of additional compensation to employees and everyone would be better off with the exception of the insurance companies.

Councilman Stern inquired if it would be possible to implement a policy that the City would reimburse employees for their deductibles.

City Manager Evans answered that he assumed it might be possible, but that it would have to be researched.

Mayor Pro Tem Wolowicz noted that even if the PPO Plus option were removed and the City recouped that $15,000 or $17,000, it wouldn’t equate to anything of significance in a budget this size. He explained that he was concerned by the direction this cost was heading, saying that if it increased $70,000 this year and again the next and next, suddenly it would be out of control. He inquired as to why no cafeteria plan had been introduced.

City Manager Evans advised that the option of a cafeteria plan had been explored but staff had been unable to locate an insurance carrier willing to provide one for the City’s small group of employees that would save any money.

Mayor Pro Tem Wolowicz indicated that he would like to total all employee expenses -- FICA, health, merit, et cetera -- and, allowing for changes in employees over the course of a year, determine a percentage those numbers would increase, and then figure out how to maintain medical coverage within that envelope. He expressed concern over the assertion that $70,000 was not a big deal, warning that if the increases continued at that rate a cruel upward spiral would be created and ultimately costs would have to be shifted somewhere. He said that he would like to find some way to keep medical costs in line with the other employee expenses and inquired if staff had some mechanism to analyze that relationship, noting that he would be more agreeable to consider this item in that fashion.

Mayor Clark stated that he was struck by the fact that out of the 14 South Bay cities reflected in the staff report, only 4 did not cap their monthly health benefit costs. He noted that Torrance and El Segundo were among those that do, saying that El Segundo had roughly one-third the population compared to RPV and a very healthy economy. He questioned why El Segundo would cap those costs.

City Manager Evans replied that he did not know the answer but surmised that since El Segundo’s pay scales were much higher than RPV’s, that city might be doing something akin to what Councilman Wolowicz had suggested.

Councilman Long moved, seconded by Councilman Stern, to make no changes to the existing health care plan at this time; directed staff to explore the possibility of discontinuing the PPO Plus medical plan and move current enrollees to the PPO plan with the City reimbursing the difference in the deductible in pre-tax dollars, with City Council members being ineligible to receive reimbursement.

Councilman Gardiner inquired if the motion was intended to exempt Council members.

Councilman Long advised his intent was that Council would be eligible for the PPO Plan with the deductible but should not be reimbursed since they were not employees.

Mayor Pro Tem Wolowicz requested that staff coordinate this item in concert with the FY 05-06 draft budget for future review.

The motion carried on the following roll call vote:

AYES: Wolowicz, Long, Gardiner, Stern, Clark

NOES: None

Employee Compensation

Councilman Gardiner moved, seconded by Councilman Stern, to 1) Include an adjustment to the City’s salary ranges in the FY 05-06 draft budget equivalent to the March 2005 Consumer Price Index; 2) Include a merit pool in the FY 05-06 draft budget equivalent to 7% of payroll; and, 3) Include funding in the FY 05-06 draft budget for the employee bonus and tuition reimbursement programs that was equivalent to 1.5% of annual payroll.

The motion carried on the following roll call vote:

AYES: Stern, Long, Wolowicz, Gardiner, Clark

NOES: None

Recess and Reconvene:

Mayor Clark recessed the meeting at 12:49 p.m. and reconvened the meeting at 1:34 p.m.

Analysis of the City Attorney’s Position

City Manager Evans presented the staff report.

Councilman Long declared that there was a very important non-monetary component of the current arrangement that influenced the monetary, which was the ability of City Attorney Lynch to utilize the resources of her firm to bring in specialist assistance when necessary. He noted that Richards, Watson & Gershon (RWG) was able to provide the City with a City Attorney shared by a number of other cities and enhanced by a host of specialists with the necessary experience to handle a variety of situations. He noted that he did not believe an in-house City Attorney could replicate that nor that things would operate as smoothly. He indicated that he would not support heading in the direction of an in-house City Attorney unless there was a compelling reason to do so and a minor or even moderate savings would not be adequate justification in his opinion.

Mayor Pro Tem Wolowicz indicated that he in no way wanted to truncate or eliminate the current City Attorney arrangement, saying his motivation in reviewing this item was not to replace outside counsel but to supplement it by providing someone to address the more mundane, everyday matters. He explained that the City’s legal fees were escalating, noting that the "Other Litigation" category under "Cost of Services" was not discretionary and he was curious to know if hiring someone to handle the day-to-day services might help offset the overall cost. He agreed with Councilman Long that there was a good deal of merit to retaining the current arrangement.

Mayor Clark inquired if the City Attorney was not already receiving support from her associates for some of those day-to-day activities.

City Attorney Lynch stated that the costs under "General Services" were for those services typically provided by a generalist such as covering City Council and Planning Commission meetings and advising employees and Council on routine matters and, although those costs had fluctuated somewhat, they had basically remained consistent since 1991. She indicated that she attempted to keep many things that could be construed as specialty work in the "General Services" budget, saying that an in-house City Attorney would charge full rate for those services. She explained that she also had the ability to bring in assistance when necessary, noting one full-time person could not handle all the general services work required. She asserted that the number causing all the consternation was actually the cost for litigation, noting that those services would have to be contracted out in any event.

Councilman Gardiner indicated that he had approached this matter by not considering it as for or against City Attorney Lynch and RWG. He remarked that no financial argument could be made for shifting to an in-house City Attorney upon examining the numbers, saying it would be a "wash" at best. He asserted that there were myriad reasons that lend themselves to maintaining outside services, one being, if an in-house City Attorney were to become ill, the City would have a problem; but City Attorney Lynch and her firm afford the City the flexibility to obtain an equivalent to cover when the need arose. He stated that he was also unaware of cities competing with law firms to hire the top ten at law school, saying the level of talent provided, combined with the very reasonable rate, was well worth maintaining.

Councilman Stern agreed that it was wise to separate City Attorney Lynch and her firm from this discussion; on the other hand, he said he did not want to totally isolate them from it either because, if Council were dissatisfied with the services rendered, their view of deciding to go in a different direction would certainly be colored by that fact. He concurred that economics did not dictate in this matter and noted that for all the reasons articulated it made sense to continue to out source the position. He declared that he would not be totally comfortable having only one City Attorney providing all the legal advice to the Council, saying that the depth of expertise brought by City Attorney Lynch and her firm was of tremendous value and could not be achieved with an in-house City Attorney. He concurred that the billing rates were exceedingly low for the level of ability involved and that the contract provided a very fair arrangement for the City.

Councilman Stern moved, seconded by Councilman Gardiner, to make no change to the current contract with Richards, Watson & Gershon.

Mayor Clark commented that there were times when it appeared there might be a differential benefit to having an in-house City Attorney but, after examining all the facts, it was easy to determine that the City did benefit from obtaining high-quality legal counsel from an outside source, especially with the very favorable hourly rate charged for the quality guidance and timeliness of service provided. He acknowledged another advantage to having City Attorney Lynch and RWG on board over the last couple years had been the tremendous amount of very good work they performed on the Abrams case. He commented that City Attorney Lynch recommended an extremely talented advocate in Washington to strategize the approach and argue the case before the Court, opining the City would not have gotten the matter before the Supreme Court without their level of expertise. He also mentioned that the insurance recovery on San Ramon Canyon landslide repair and drainage project was an enormous achievement and complimented City Attorney Lynch and RWG for all they had been able to accomplish. He avowed that the City’s current legal counsel provided the talent, dedication and diversity necessary to meet the City’s needs and should be maintained.

Councilman Stern suggested an amendment to his motion to include the appointment of David Snow as Assistant City Attorney.

Councilman Long echoed the sentiments expressed by his colleagues and spoke in favor of the amended motion, saying that he believed David Snow was an excellent choice. He indicated that this was a useful exercise to go through periodically and, although it was difficult to say that a legal budget of a million dollars a year was small, once everything was examined, the price of an in-house City Attorney was not justified at this time.

Mayor Clark reminded his colleagues that the major component of the City’s legal costs had been litigation, saying that part of that litigation and the associate costs had been totally outside Council’s control. He noted that there had been policy decisions made to pursue certain things, but the assertions made in the press that Council was not watching the City’s legal costs were decidedly erroneous if one stepped back and placed everything in context. He asserted that this Council, City Attorney, and staff scrutinized how the City’s dollars were spent in this arena in a very conscious and thoughtful manner.

Councilman Stern moved, seconded by Councilman Gardiner, to make no change to the current contract with Richards, Watson & Gershon, except to appoint David Snow as Assistant City Attorney.

The motion carried on the following roll call vote:

AYES: Long, Wolowicz, Gardiner, Stern, Clark

NOES: None

PUBLIC COMMENTS:

Barbara Dye, Palos Verdes Peninsula Land Conservancy, advised Council that she received word that there were some underlying problems with the land acquisition plan for the 1,500 acre preserve at the State level, saying that she had developed something in response that would not only give the State more incentive to approve the acquisition but would also protect the City. She explained that there were only three days in which to obtain Council’s approval of these changes in order to meet the deadline for the Wildlife Conservation Board’s meeting in May, noting that there would be a change in the way the process worked but that it was a significant improvement in her opinion. She requested that the matter be agendized for Council’s consideration at the upcoming Council meeting on March 1st.

Councilman Gardiner moved, seconded by Councilman Long, to place the item on the March 1st City Council Agenda. Without objection, the motion passed.

Channel 33 Policy Issues/Franchise Issues

Councilman Long commented that since there were no future agenda items that involved any disputes with Cox Cable he could participate in the discussion and no longer needed to recuse himself.

City Manager Evans provided an overview of the staff report.

Councilman Gardiner presented a summary of the late correspondence and suggested his colleagues keep in mind that the new cable television station would likely begin broadcasting in the next three weeks and requested that the Council consider establishing a six-month initial review period to get things started. He indicated that the three-year plan outlined in the staff report appeared to be too ambitious at this point, adding that he was also not sure of the budget associated with some of the items. He requested that Councilman Stern to speak to his proposed policy regarding non-politicization of the channel.

Councilman Stern thanked Councilman Gardiner for all his time and hard work on this item. He indicated that he may be overly sensitive but he believed it was crucial that Channel 33 never be viewed as a mechanism by which the City Council or any individual Councilperson can obtain free publicity during an election, saying that he would like to keep the election process as open as possible.

Mayor Clark noted that past elections had some limited televised coverage and he believed it would be appropriate to expand that coverage with this new capability.

Councilman Stern agreed that the cable television station could and should be used constructively, but cautioned that care needed to be taken to prevent its misuse.

Councilman Long noted that he shared some of Councilman Stern’s concerns but was unsure if the length of time suggested that a Council member running for reelection could not appear on Channel 33 was appropriate, saying that six month was a very long time. He confessed that, as a former challenger running against incumbents, he was less concerned about the amount of coverage they were getting than he was by the fact he was receiving none, saying the primary issue basically comes down to one of equal access.

Mayor Clark asserted that he believed the Cable Subcommittee was trying to ensure that Channel 33 did not become a political forum for incumbents while at the same time recognizing that it provided an expanded opportunity for public forums that provided all candidates with equal time.

Councilman Stern maintained that his primary focus was to make absolutely certain that the City’s station was fairly administered and that no advantage was provided to incumbents.

Councilman Long mentioned that City Council candidates had a window of opportunity to formally designate their candidacy, saying once that declaration was made it would be an appropriate cutoff point for incumbents.

Councilman Stern indicated that the filing deadline for candidate nominations would be reasonable.

The Council as a whole agreed to use the filing deadline for candidate nominations as the cutoff.

Referring to the organizational chart, Councilman Stern queried why there was a direct line from the Mayor and City Council to the Station Manager, saying that, generally speaking, only the City Manager and City Attorney answer directly to Council. He recognized that it made sense in the startup phase because so much of what occurs involved policy decisions but once the channel was up and running, it was probably not appropriate for every issue to be addressed at that level.

City Manager Evans agreed, saying that at the point the position became a full-time rather than a volunteer position, it should be under the City Manager.

Councilman Long indicated that he did not yet have a clear preference whether the Station Manager should report to the City Manager or the City Council as a whole. He declared that this Council, unlike some other elected bodies on the Peninsula, did not have a designated spokesperson or subcommittees that make important policy decisions privately in derogation of State law.

Councilman Gardiner responded that the members of the Cable Subcommittee was very aware that their role was essentially filtering, filing, and forwarding information to the City Council and clearly understood that policy decisions must be made at the Council level. He advised his colleagues that during the start up phase of the new channel there was a great deal of busy work involved that he did not believe Council needed or wanted to be involved in, which could be handled by the subcommittee.

Councilman Long explained that he did not intend for his comment to suggest in any way that this Subcommittee had done anything wrong.

Mayor Pro Tem Wolowicz indicated that the City Manager should be charged with this responsibility in order to preclude any bifurcation of City management responsibilities.

Mayor Clark turned the discussion to programming and requested Ms. Holt to provide an overview.

Gabriella Holt, Manager of RPV Channel 33 Cable Television Production, advised Council that the initial programming for the station would depend on the type of equipment selected and how Council chose to ramp up production. She outlined some of the options as follows: a reader board with limited production time; a broadcast scheduler, which would allow more scheduling to be done in-house; acceptance of satellite transmissions, which would enable programming to be beamed in from outside sources; and, pre-produced programming.

Ms. Holt explained that very basic programming equipment would include a playback CD or DVD player which rotated through selections for a limited period of time and then goes dark the remainder of the time. She indicated that the produced material could be in-house productions such as RPV City Talk, franchise productions, and PSA’s, which were produced through the City’s contract with PV on the Net and Cox Communications, noting that there the local schools were also producing original programming that could be considered for broadcast on the new channel. She noted that Palos Verdes High School had a full-fledged studio, saying that the student’s abilities were incredible and they were anxious for an opportunity to prepare material for the City. She advised that there was also a tremendous amount of free pre-produced educational programming available, saying that Channel 33 could be programmed with quality material from other channels at virtually no cost other than the equipment. She indicated that in-house production was the most expensive and time consuming but it was also the most reflective of what the community would want to see, saying that it was a matter of the Council determining the desires of the Community and then obtaining the resources.

Mayor Clark said he that would like to see all of the City’s committee and commission meetings televised.

City Manager Evans advised that there would be a cost to do that because personnel would be needed to tape the broadcasts. He also reminded Council that Cox Communications would not allow anyone under age 18 to operate the audio/video equipment at Hesse Park.

Councilman Gardiner suggested that the City could use college interns, saying that interest had been expressed by Harbor College and El Camino College. In this situation, the age threshold should not generally present a problem. He advised his colleagues that there was also a possibility that Cox might be willing to provide training.

Ms. Holt indicated that the students at Palos Verdes High had expressed interest in taping the City committee and commission meetings, adding that they already had cameras and equipment and regularly worked in the field. She advised Council that there might also be other individuals available to tape the meetings, but she did not want to begin establishing these contacts until she understood exactly what the Council’s priorities were, how quickly its wanted to act, what kind of programming it was interested in, what would be broadcast between programs, and the type of equipment it was willing to provide for the channel.

Mayor Clark commented that he anticipated that some of RPV’s sister cities might be interested in participating since the programming could be seen on the entire Peninsula, saying that it might be a possible source of remuneration of some of the associate costs.

Ms. Holt advised Council that there were ways for the City to recover its costs, saying that one mechanism was through underwriting, which acknowledged funding sources by providing a scroll at the bottom of the screen indicating that a donation was provided by a particular business or organization.

Mayor Pro Tem Wolowicz stated that he wanted to focus on the budget issues and inquired if the numbers reflected in the staff report were included in the proposed FY 05-06 budget and the City’s five-year financial model.

City Manager Evans replied that the five-year financial model includes $10,000 for professional services and a small amount for equipment replacement for Channel 33.

Mayor Pro Tem Wolowicz queried if Council needed to take at this meeting in order to include the proposed $70,000 expenditure in the 05-06 budget.

City Manager Evans indicated that the $70,000 included as a budget policy issue represented a request by Ted Vegvari to add a trailer behind the cable television studio, saying that he was not sure if that would actually be Council’s first priority. He suggested that a reader board to get the channel up and running might be Council’s first consideration, followed by a decision on the level of sophistication of the programming and equipment, saying that ideally that might include a program scheduler, a reader board, and the capacity to air live broadcasts.

Mayor Pro Tem Wolowicz remarked that, whether the City spent money on Channel 33 or pension plans or storm drains, it boiled down to the same basic concept, saying that he would like to determine exactly what was going to be included in the budget. He indicated the possibility of additional revenue sources should always be fully explored, saying that, if scrolling advertisements were being considered, he would like to see that incorporated into the budget. He asserted that he would be more supportive of Channel 33 if it were cost neutral, adding that, while it seems like a great benefit, there really was no funding source available to support it other than the General fund.

Councilman Stern asked if the City was allowed to advertise on its local cable channel.

City Attorney Lynch responded she was not aware of any prohibition, but that there was always the issue of the First Amendment. She explained that regardless of what type of business wanted to advertise on the City’s channel, the City would be obliged to broadcast of them all, regardless of whether the City felt they were inappropriate or unsavory, in order to avoid creating a freedom of speech issue.

Councilman Gardiner advised that there might be the possibility of some very generous donors in the community that would be willing to support the cable channel.

Ms. Holt explained that the reader board was a fairly inexpensive piece of equipment, noting that with possible sources of underwriting, operating could also be very cost effective. She indicated that her experience with reader board systems was that they involved an initial $10,000 capital expenditure.

Mayor Clark queried if the trailer being requested by Mr. Vegvari would be a recurring cost or a capital cost to acquire the trailer.

City Manager Evans answered that would be a one-time cost, adding he felt the trailer could be purchased for less than $70,000.

Holly Starr, Recreation Services Manager, said she was struck by the timing of this particular project, saying that, having just sat through three hours of discussion regarding employee payroll and benefits, she was concerned about the commitment of funds and the ambitious schedule about to be undertaken. She noted many of her co-workers had already left the meeting but assured Council that they would also be very concerned by this item. She advised that the two trailers she has at PVIC cost $640 per month, saying a one-time expense of $70,000 seemed excessive.

Karen Peterson, Administrative Analyst, suggested that funding for this item should be considered in the context of the entire City budget. She declared that, while she was a big fan of public television, quality programming, and believed that Channel 33 would increase communication between Council and the City’s residents, the juxtaposition of this discussion with employee pensions, health care, and compensation was deeply troubling to her. She voiced concern that funding for a new program was being considered while there was still the looming possibility that City employees’ benefits might be cut or severely impacted. She reminded Council that social security can no longer be relied on as a source of economic security during retirement; that a very unstable stock market had caused justifiable concern, particularly when looking at defined contribution plans; and, that the overall cost of living continues to climb, especially housing costs.

Ms. Peterson summarized her benefit priorities, saying that first and foremost was pension and retirement. She indicated her preference would be that the City continue to pay 100 percent of the contribution to CalPERS or into some other pension program if that one was changed, saying that she would be willing to forgo raises in order to maintain investments in her retirement. She expressed appreciation for Council’s preliminary support of the COLA adjustment in addition to a merit increase, saying that last year she was compensated for her hard work and dedication with a salary increase that was equal to the cost of living adjustment. She noted that, while she was in very good health and rarely uses her health insurance coverage, it was extremely important to her that her co-workers and their dependents continue to receive 100 percent coverage. She noted that raises were wonderful, saying that she would be delighted to see more money in her paycheck but she would rather be assured that her pension was protected. She concluded by saying she was committed to working in the public sector and took great pride in being an RPV employee. She strongly urged that Council take into consideration other more pressing priorities rather than committing funding for Channel 33.

Councilman Gardiner admitted he was quite surprised by the figures reflected in the staff report regarding the projected cost of operating the new channel, saying that he could not support expenditures of $70,000 and $150,000. He noted his understanding was that some equipment would be purchased and that interns would begin producing some broadcasts in conjunction with free programming, saying that all of this should equate to very low-level expenses.

City Manager Evans explained that the figures in the staff report were not meant to represent a budget but were more of a "wish list". He indicated staff was thinking in terms of a continuing operating budget to pay for things like electricity, custodial, and equipment maintenance, along with purchasing a reader board, which Ms. Holt indicated would cost approximately $10,000, saying that he believed that would be the minimum to get started and would actually be closer to $20,000.

Councilman Gardiner remarked that the $20,000 figure seems far more reasonable and in line with what the Subcommittee had in mind to get things underway with reasonable quality.

Councilman Long commented that many of the expenses being discussed were one-time costs that could be adequately absorbed by City’s reserves, saying that City employees might be justifiably concerned about their benefits being threatened if this amount of money was going to be spent year after year to operate Channel 33. He noted that employee expenses were very different from program expenses like Channel 33, and he did not view one as impinging upon the other.

Mayor Pro Tem Wolowicz remarked that the City was well represented by the leadership and quality of its staff, saying that he was grateful to know that people are so passionate about their professions. He requested that staff to refine the numbers presented and provide some thought about what might be done to generate some revenue to help sustain the cable television station.

City Manager Evans indicated his understanding was that Council would like to see Channel 33 begin with a modest start including a reader board.

Mayor Clark agreed that would be preferable and directed staff and the Subcommittee to actively pursue ways to generate revenue with the objective being that at some future point the station would be able to cover its own costs.

City Manager Evans advised that staff can begin investigating that, noting however that it was unlikely those numbers would be included in the Finance Director’s budget projections for some time.

Councilman Gardiner moved, seconded by Councilman Wolowicz, to 1) Approve the Channel 33 organizational chart on an interim basis; 2) Approve the job description for the Manager, RPV Public Television Productions, subject to Council review in 6 months; 3) Approve the monthly programming template to be used as a guideline during the initial start up of Channel 33; 4) Approve the use of student interns, free educational programming from outside sources, and the acquisition of a reader board service for Channel 33; 5) Direct that Technical Interns shall report to the City’s contractor, Palos Verdes on the Net, and Production Interns shall report to the Manager, RPV Public Television Productions and City Manager; 6) Approve a policy prohibiting City Council candidates from appearing on Channel 33, except in the execution of their normal duties, during the period of time between the election filing deadline to the date of the election; 7) Authorize the Manager, RPV Public Television Productions, to proceed with the specified items; 8) Authorize the City Council Cable Television Subcommittee to solicit advertisements and sponsorships from local businesses and community organizations to generate a revenue source for Channel 33; and, 9) Direct the Manager, RPV Public Television Productions and staff to draft a policy regarding how new programs and other materials are added to the monthly programming template prior to the Council Subcommittee’s approaching local businesses and organizations.

Mayor Clark suggested an amendment to the original motion to include No. 8, authorizing the Subcommittee to contact, as appropriate, potential Chamber of Commerce businesses regarding the prospect of sponsoring Channel 33 and providing remuneration once the channel had been launched.

Ms. Holt indicated that it was crucial for the City to decide on a process for determining what was broadcast on the channel and how information for the reader board would be accepted, noting that the City had the ability to exercise control over the channel because it was a public access/educational/governmental channel but once things get going it would be difficult to direct if nothing was in place beforehand for reference.

Mayor Pro Tem Wolowicz requested amending the original motion to include No. 9, directing that a policy be drafted regarding how new programs and other materials would be added to the monthly programming template.

Councilman Long offered a friendly amendment to the motion, seconded by Councilman Wolowicz, that No. 9, the final item, be formulated and brought back to Council before any solicitation for funding occurs.

There being no objection to the amended motion, Mayor Clark so ordered.

Mayor Clark directed the discussion to Council’s consideration of the franchise shoots and PSA’s.

Mayor Pro Tem Wolowicz indicated he would like to maintain the flexibility to televise special meetings, saying there might be particular topics that would be appropriate and requested that two of the City’s franchise shoots be set aside for this purpose.

Mayor Clark, noting that the launch of Channel 33 would be a very significant City event, suggested that televising it might help increase community awareness of the City achieving this milestone.

Ms. Holt advised Council that the cable operator required a 28-day advanced notice in order to staff and produce the six franchise shoots.

Councilman Long moved, seconded by Councilman Gardiner, to direct staff to commit four of the six franchise shoots to include the Ocean Trails Park Dedication, the Launch of Channel 33, Whale of a Day, and the 4th of July Celebration, with the other two slots to remain open for recommendations in sufficient time to provide the necessary 28-day notice period to the cable operator.

ADJOURNMENT:

Mayor Clark adjourned the meeting at 3:34 p.m.

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Attest: Mayor

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City Clerk