MARCH 26, 2003

The meeting was called to order at 7:00 P.M. by Chairman Wolowicz at the City Hall Community Room, 30940 Hawthorne Boulevard, for the purpose of conducting the business pursuant to the Agenda. Roll call was answered as follows:

PRESENT: Butler, Curtis, McLeod, Smith, and Wolowicz

ABSENT: Clark, Wallace (both excused)

Also present were Finance Director McLean; Accounting Manager Downs; Senior Administrative Analyst Gary Gyves; City Manager Evans; Recording Secretary Bothe.

Chairman Wolowicz advised that Member Clark may be arriving late to this evening’s meeting.

Approval of Agenda

Director McLean requested that Agenda Item No. 8, 2003 Financial Model, be discussed following the approval of the agenda.

Without objection, Chairman Wolowicz so ordered the approval of the agenda as amended.

2003 Financial Model (Considered out of order)

Director McLean provided an overview of the 2003 Financial Model and the impact that the State budget crisis and possible loss of VLF revenues has upon the City’s budget; and he explained that the financial statements through June 30, 2002, have been successfully audited – noting that those fund balances reflect the starting point for the 2003 Financial Model. He stated that what has been added to this model is staff’s expectations with respect to revenues and expenditures for all of the City’s funds, but especially those of the General Fund, for the projected year ending June 30, 2003; and he mentioned that this same projected revenue and expenditure data was presented to the City Council in a mid-year report given in February 2003. Director McLean stated that since that presentation to City Council, staff has added a working draft of the proposed budget for FY2003-2004 and FY2004-2005 – pointing out that this working draft will go through numerous changes from what is reflected in the current model and from what will ultimately be adopted by the City Council, but that he does not expect the changes to be significant.

Director McLean thanked and commended Kathryn Downs and Gary Gyves for compiling the ever-changing information that needed to be obtained from each department for inclusion into the financial model. He added that the first two years of the five-year model are a working draft of the proposed budget and the last three years are based upon rates of change indexes that staff has utilized every year based upon assumptions. Highlighting Member Curtis’ recommendation to present a clear schedule of transfers between funds, Director McLean explained that due to time constraints, only the first two years of the transfers for 03-04 and 04-05 have been presented in this fashion; and that staff will have a clear schedule of the transfer between funds for all years of the model the next time this model is presented.

Director McLean stated that it is the City Manager’s and Finance staff’s belief that the backfill of the VLF revenues, approximately $1.6 million, is going to be lost as a part of the budget process that the State is working through; and credited City Manager Evans for recognizing the seriousness of this potential loss in revenue and adjusting this City’s budget based upon the assumption that the backfill of the VLF revenues is gone. He added that staff does not expect to know the conclusion to the State’s predicament with regard to the backfill of the VLF revenues until the City has already started its next fiscal year; and mentioned that staff anticipates the final answer to the loss of these revenues will not be known until sometime in September or thereafter.

Director McLean stated that recognizing the potential loss of VLF revenues, the City Manager had presented to the City Council on February 18, 2003, a short-term budget contingency plan; advised that the City Council adopted the recommendations that the City Manager had presented, such as shelving, for the time being, the FY2002-2003 residential overlay project costing $623,000 and the residential slurry seal project costing $500,000; and noted that these FY2002-2003 funds amounting to $1.123 million have been added to the General Fund reserves. He stated that with the addition of these monies, the General Fund reserves projected for the end of this fiscal year reflects approximately $8.1 million instead of $6.9 million.

Director McLean stated that since the February 18, 2003 meeting, Public Works staff has reported to City Council that the San Ramon project will cost more than expected and is therefore requesting a $491,000 budget adjustment – pointing out that City Council has adopted this requested adjustment; and added that the City Council has decided to pursue the establishment of a cable educational access channel, which is expected to be a minor cost. Director McLean highlighted Page Nos. 6 through 8 of staff’s report, which reflects 15 budget policy issues that are going to be provided to the City Council for consideration of the FY2003-2004 budget.

City Manager Evans explained that staff is preparing a baseline budget, presenting amounts that staff believes the City needs to continue functioning in at minimum service levels and to identify programs that are absolutely necessary. He stated that the City Council is opposed to cutting back on public safety services; but explained that there are some special programs that are included in the public safety budget that staff is proposing to eliminate, such as decreasing the number of CORE deputies that work at the schools and decreasing the number of Student and the Law classes, both expected to save approximately $78,000. He added the proposal to cut back 1/3rd of staffing for the view preservation/restoration program; and explained that the City Council will be presented this baseline budget, a menu of all items and related costs, and that City Council will be asked to consider adding back approximately $700,000 worth of menu items to the budget.

In response to concern for infrastructure maintenance expressed by Vice-Chair McLeod, City Manager Evans explained that the menu presented to the City Council would include a narrative that cites the advantages and disadvantages of eliminating each program, project or proposed expenditure from the budget.

After some discussion, the FAC suggested that the City Council be advised of associated disadvantages to eliminating certain programs in the menu, highlighting the example of the very successful pavement management program. Discussion ensued with regard to postponing some programs versus the elimination of certain programs.

Chairman Wolowicz suggested that this menu of items also be combined with a list that reflects the prioritization of items that should be reinstated should any additional funds become available in the future.

City Manager Evans stated that staff would probably include a list encompassing stages of priority (low, medium, and high). Addressing the healthy General Fund reserves that are in excess of City Council policy, City Manager Evans noted his expectation that the City Council may want to use some of those reserve funds to perform some of the more important expenditures, such as the pavement management program.

Chairman Wolowicz commented on the importance of the financing alternatives project and the need for studies to be conducted of the sewer and storm systems; and recommended that this issue be placed at the top of the prioritization list in the presentation to City Council at its workshop.

Director McLean advised that the funds dedicated for FY2002-2003 are going to be utilized to conduct the rate analysis for the possibility of a storm drain user fee; and stated that there is still enough money left over to work with a financial consultant to move forward in anticipation of the next City Council/FAC workshop regarding infrastructure needs and financing alternatives. With respect to the proposed budget for FY2003-2004, Director McLean noted that there are no monies in the baseline budget for continuing work by financial advisors, etc., in regard to this matter.

Chairman Wolowicz expressed his belief that the timing for potential user fees and engineering studies needs to move concurrently and that the studies should be on-going until a determination has been made with regard to the condition of the sewer and storm drain systems.

City Manager Evans advised that the sewer and storm drain master plan studies are funded in this year’s budget and that the studies will proceed; and stated that if these studies are not completed in this budget period, staff will request that City Council carry these studies over until completion.

Vice-Chair McLeod requested that City Council should be apprised of the FAC’s concern that when making budget adjustments, the City should be taking into account the long-term consequences of short-term fixes.

Director McLean stated that City Council will be advised of FAC’s concern with the need to continue on-going sewer cleaning, video filming and assessment when reviewing the menu of budget policy issues and the need for this issue to be a high priority issue.

With regard to the 15 budget policy issues addressed in staff report, Chairman Wolowicz suggested that staff investigate other ways to provide the Employee Incentive awards (other than the bonus program); expressed his desire that the Pointe Vicente Interpretive Center be a self-sustaining entity; suggested that the report and budget for the Building Replacement Fund include a long-range plan to set aside funds for on-going maintenance/upkeep; and with regard to Item Nos. 10 and 11, the two technology and information components, that staff include in its report to City Council the fact that most cities have these programs in place; that monies for implementation of these two programs had been set aside in the budget for FY2002-2003, but that no monies were expended; and that staff has stopped moving forward with both these items because the recurring costs of maintaining the two systems are additional costs to be put into the budget.

Member Butler commended staff for the thorough and informative report.

Chairman Wolowicz encouraged staff to provide the members of the FAC any draft updates to this report as soon as they become available.

City Manager Evans stated that the final revised report will be presented to City Council at its May 10th workshop; and he invited FAC to attend the workshop.

Financing Alternatives Update

Director McLean commented on staff’s presentation of the Financing Alternatives report to City Council and noted the following directions of City Council: that staff continue to go forward with the master plan update of the storm drain system; and continue to go forward with the project for sewer cleaning and video filming a segment of the sewer system and to report back to the City Council the condition of the system. He advised that City Council also approved an appropriation to proceed with a rate analysis in regard to the anticipation of a possible storm drain user fee; and that Finance staff arrange for and lead a joint workshop between the FAC and the City Council to provide additional information which will enable the City Council to more fully understand the details about the financing alternatives and why the FAC came to its conclusion that the user fee was the best approach for storm drains. Director McLean stated that this workshop will be scheduled for early summer; and stated that prior to that workshop, members of staff and City consultants will work through some of the details of what needs to be presented to City Council and noted that the services of a financial advisor may be sought to help provide information regarding a better description of the financing techniques that can be used.

Director McLean thanked those members of FAC for being present at the City Council meeting wherein this report was given, stating that the members’ input helped to provide weight to the seriousness of this issue.

Update – Global Needs Survey Team of the Open Space, Planning & Parks and Recreation Task Force

Director McLean distributed to the FAC this evening a memo that had been forwarded to the Recreation and Parks Department on Monday, which addresses some of the Global Needs Survey questions designed to educate the residents on the City’s infrastructure needs. Discussion ensued with regard to the importance of the residents knowing the importance of the necessity to work on infrastructure improvements prior to the residents taking part in the survey.

With regard to the budget crisis, Member Curtis questioned the timeliness of an Open Space, Planning & Parks and Recreation Task Force’s survey.

Addressing the plans for the Global Needs Survey, Director McLean advised that he and the consultant would participate in a conference call on March 31st, along with Member Clark and Vice-Chair McLeod.

State Budget Update

Senior Administrative Analyst Gyves briefly stated that at this point in time, nothing new has happened at the State level that directly affects the City; and mentioned that the mid-year reductions and fund shifts at the State level have mostly affected education.

Invitation to Participate in LOCAL

Director McLean explained that the League of California Cities and the League of California Counties have banded together to form an organization called Leave Our Community Assets Local (LOCAL); and stated that City Manager Evans has enabled the League of California Cities and one of its representatives, Ann Marie Wallace, to educate staff on this issue and to help push the initiative in utilizing LOCAL to make the City’s voice heard in Sacramento regarding VLF revenues. He added that LOCAL provides a unified effort of informing the legislators in Sacramento of how their budget decisions will impact cities and counties. He invited the members of the FAC to join LOCAL, elected officials, community leaders, city and county employees in Sacramento on May 14th and 15th to rally in two legislation action days, communicating to the legislators the seriousness of taking VLF revenues away from cities and counties. Director McLean added that Ann Marie Wallace will also provide input on this topic at the Community Leaders Breakfast on Saturday, May 10th; and he noted that a letter-writing campaign would be helpful.

Chairman Wolowicz encouraged each member of the FAC to send their own letters to legislators in Sacramento and that staff also draft one letter that would represent the FAC’s position on this issue.

Member Smith moved, seconded by Member Butler, that staff draft a letter, signed by the FAC, which represents FAC’s position on this issue. Without objection, Chairman Wolowicz so ordered.

2003-2004 FAC Calendar

Director McLean stated that the City Council would be given a copy of this calendar along with a short staff report.

Reports by Liaisons

Director McLean advised that the City Attorney had a conversation with the County Deputy Treasurer in regard to the percentage of property tax revenue that is allocated to the City out of the one percent property tax assessed and collected by the County -- and that the County Deputy Treasurer had never received such an inquiry, and that re-negotiation of the City’s share would not be possible at this time.

Member Butler stated that he would continue in his efforts.

Public Comments



At 9:40 P.M., the meeting was adjourned to April 23rd.


Chair, Financial Advisory Committee



Denise Bothe, Recording Secretary