MARCH 24, 2004 MINUTES FINANCE ADVISORY COMMITTEE

MINUTES

CITY OF RANCHO PALOS VERDES

FINANCE ADVISORY COMMITTEE

MARCH 24, 2004

Chair Clark called the meeting to order at 7:08 PM at the City Hall Community Room, 30940 Hawthorne Boulevard, for the purpose of conducting the business pursuant to the Agenda.

ROLL CALL

Roll call was answered as follows:

PRESENT: Bouey, Clark, Grimme, McLeod, Smith, Wallace, and Zorn

ABSENT: None

Also present were Director of Finance and Information Technology McLean; Accounting Manager Downs; and Senior Financial Analyst Gyves.

APPROVAL OF AGENDA

Member Smith motioned for approval of the agenda, and Vice-Chair McLeod seconded. Hearing no objection, Chair Clark ordered approval of the agenda.

APPROVAL OF DRAFT MINUTES FOR THE MEETING CONDUCTED FEBRUARY 25, 2004

Chair Clark distributed amended copies of the minutes from February 25, 2004 FAC meeting. Vice-Chair McLeod motioned for approval of the draft minutes as amended by Chair Clark, and Member Bouey seconded. Hearing no objection, Chair Clark ordered approval of the draft minutes as amended.

2004 FIVE-YEAR FINANCIAL MODEL

Director McLean provided the following information to the FAC regarding the 2004 Five-Year Model (2004 Model):

  • The model is prepared annually and General fund revenues are conservatively estimated.
  • General fund revenues, especially sales tax, are generally stable due to the fact that RPV does not endure the normal economic fluctuations as other cities do.
  • The County provides annual property tax estimates to the City.
  • As of June 30, 2003 the City experienced a positive revenue variance of approximately $700,000 and a positive expenditure variance of approximately $700,000. As of June 30, 2003, the City had an $8.5 to $9 million General fund reserve and due to the positive variances and the $1.7 million insurance settlement for the San Ramon project, the General fund reserve as of June 30, 2004 is estimated to be approximately $11 million.
  • The FY04-05 proposed budget and 2004 Model does not include the backfill portion of the Vehicle License Fee (VLF) revenue because these revenues are still at risk due to the State budget crisis
  • Current fiscal year VLF revenues are low because when the VLF tax rate was increased people stopped buying cars.
  • There are no substantial costs for capital improvement projects related to parks, storm drains and sewers in the 2004 Model. However, the City Manager will ask the City Council to amend the FY04-05 Budget to include $1.1 million for residential overlay/slurry projects that have been deferred from the last two years due to the anticipated loss of VLF revenues and $0.5 million for storm drain lining that will alleviate 10% of the City’s identified storm drain lining needs.
  • Staff will take the 2004 Model with changes discussed at this meeting to the City Council on April 20, 2004. When the FY04-05 Budget is adopted, Staff will provide an update of the 2004 Model to the FAC with an explanation of any changes that have occurred as a result of the City Council budget workshops.

QUESTIONS RELATED TO CONTENT OF THE 2004 MODEL

Member Grimme opined that the public should be given infrastructure improvement options, the related costs for each option and how long each option will extend the life of the related infrastructure. Member Grimme thinks that presenting various options will give the public the financial reasoning for choosing a particular option.

Member Wallace asked for an update on the Long Point Resort project. Director McLean informed the FAC that Rob Lowe of Lowe Enterprises will be giving an update to the City Council on April 20, 2004 related to the status of project financing.

Chair Clark inquired about the Cost-Based Fee Study (Fee Study). Analyst Gyves informed Chair Clark the Fee Study is a report that calculates fees for City services by taking into account the direct and indirect cost of providing the service. Analyst Gyves also informed the FAC that the City is hoping to have the Fee Study complete with the fees in place sometime during FY04-05. Accounting Manager Downs informed the FAC that the Fee Study is also being done to make sure the City is not over-charging for services, which is against State Law.

Member Grimme pointed out to the FAC that certain commercial real estate spaces located on Western Avenue are vacant and asked if the City has any type of economic development plan in place to remedy the vacancies and increase tax revenue. Director McLean stated that the City Manager currently has an informal economic development plan and a more formal plan will be taken to City Council within the next two months.

REVENUE DERIVED FROM FRANCHISING RIGHTS OF CITY OWNDED FACILITIES AND OTHER ASSETS

Chair Clark introduced the franchising rights topic with the caveat that it did not pertain to infrastructure needs or problems. Vice-Chair McLeod stated that the topic of channel 33 came up at the Mayor’s breakfast she attended in February. At the Mayor’s breakfast, Vice-Chair McLeod suggested that the City try to obtain corporate sponsorship for channel 33. After further discussion at the Mayor’s breakfast, the idea came up to try and obtain sponsorship for other City facilities (i.e. softball fields) currently being studied by the Open Space, Planning and Parks and Recreation Task Force.

Vice-Chair McLeod stated that the City would have to prepare business plans to entice corporate sponsorship. Vice-Chair McLeod questioned whether or not the City currently has enough tourism to entice corporate sponsorship, but stated it could be more feasible when Ocean Trails and Long Point Resort are up and running.

Director McLean stated that the City is currently in negotiations with Cox Cable to provide funding to help purchase equipment to make Channel 33 operational. Director McLean also stated that approximately four to five years ago a consultant for the Recreation Department put together a program to solicit corporate sponsorship, private foundation monies and private donations to sponsor exhibits at PVIC. Director McLean suggested that staff prepare a staff report for the April 20, 2004 City Council Meeting explaining what is being contemplated by the FAC and staff regarding franchising rights of City owned property. Chair Clark suggested that a sub-committee be formed to address the topic of franchising rights of City owned property. Director McLean suggested that the sub-committee be formed after the City Council reviews the staff report, due to the possibility of the City Council narrowing the FAC’s focus on the topic. Director McLean stated that the topic would be put on the agenda for the April 28, 2004 FAC meeting.

Member Grimme pointed out that he has a friend that works for Adelphia Cable that films local basketball and football games and sells advertising to local business during these games. Member Grimme stated that he would talk to his friend and enquire about the program and any related proposals.

UPDATE - INFRASTRUCTURE RENEWAL AND MAINTENANCE PROJECT

Director McLean reported that on March 2, 2004 the City Council approved the retention of the public information-consulting firm of Moore Iacofano Goltsman Inc. ("MIG") to assist the Infrastructure Renewal and Maintenance Team comprised of City Staff and consultants (the "Team") with the Infrastructure Renewal and Maintenance Project.

Director McLean reported that MIG and the Team conducted a kick-off meeting on March 18, 2004 to discuss the process for conducting stakeholder interviews, followed by a phone survey leading to a preliminary recommendation whether or not to proceed with conducting a public information process to inform residents about Infrastructure Renewal and Maintenance. A public information process would be necessary to educate the City’s residents about Infrastructure Renewal and Maintenance and the need to raise dedicated revenue to finance such improvements.

Director McLean also reported that during the MIG kickoff meeting the following issues surfaced:

  • Both MIG and the Team believe that infrastructure revenue initiatives should be reduced to one infrastructure item (storm drains), if possible, rather than sewers, a new civic center and recreational fields. An initiative to finance more than one will dramatically reduce the likelihood of acceptance by property owners.
  • The City Manager is presenting an update regarding the recommendations of the Open Space, Planning and Parks and Recreation Task Force at the April 6, 2004 City Council meeting. Discussion about the competing interests of storm drains, sewers, etc. may be discussed during the same meeting.
  • MIG recommended not conducting stakeholder interviews or phone surveys until the estimated range of the annual storm drain fee is known. Otherwise, the findings and conclusion about the interviewee’s acceptance to the storm drain fee could be flawed.
  • The Public Works Director stated that the results of the Citywide Storm Drain Master Plan Update were nearly completed. The estimated cost of storm drain renewal could be known within two to three weeks.
  • MIG and the Team agreed that it was necessary to perform an engineer’s rate analysis for the City’s storm drain system immediately to determine the allocation of the cost to each respective parcel. It was determined that using other ways of estimating the storm drain fee would likely be flawed. The rate analysis could consider the size of the lot and the ratio of hardscape versus landscape for each respective lot.
  • The rate study was authorized by the City Council on March 3, 2003. Prior to the kickoff meeting, the Team expected that it would be performed later in the process, perhaps when the City Council acted to consider a storm drain user fee.
  • Harris & Associates, led by Joan Cox, would conduct the rate study for about $25,000. The budgeted funds are available in the FY03-04 budget. Staff expects authorization for Harris & Associates to proceed with the rate analysis in early April of 2004.
  • The Public Works Director, Finance Staff and the City’s Financial Advisor began preliminary discussion regarding the preparation of a storm drain financial model. The model will consider what if scenarios based upon variable assumptions including, pay-as-you-go versus the use of bond financing, how many renewal projects could be performed at once, increased staff demands to manage the renewal projects, and inclusion of current "on-going" storm drain maintenance costs. It was decided that all parties would further consider the alternatives and meet again to discuss when the Citywide Storm Drain Master Plan Update is completed.
  • MIG and the Team determined that all parties would meet after the completion of the rate analysis to plan the stakeholder interviews and the phone survey. The Team expects to complete the rate analysis and the storm drain model during the summer.

QUESTIONS RELATED TO THE UPDATE - INFRASTRUCTURE RENEWAL AND MAINTENANCE PROJECT

Member Zorn asked why would the rate analysis take into consideration factors such as lot size and the property’s permeable surface instead of just looking at the number of homes in the City. Vice-Chair McLeod pointed out that it is State law to calculate property related fees based on the proportional benefit received by each property.

Member Grimme asked if the cost of complying with NPDES will be included in the storm drain user fee. Director McLean stated that incorporating the costs of complying with NPDES in the storm drain user fee is currently under debate by the Team. Director McLean also stated that one reason for not incorporating the costs of NPDES into the storm drain user fee is that residents might see it as a way the City is offsetting general fund costs with the user fee, which could reduce support for the fee.

LIASON REPORTS

Open Space Acquisition Monitoring

Member Wallace informed the FAC that he had nothing to report, but had a conference call the following day and would have something to report at the next FAC meeting.

Mayor’s Breakfast

Vice-Chair McLeod informed the FAC that she attended the Mayor’s Breakfast in February. Based on Mayor Gardiner’s comments at the breakfast, Vice-Chair McLeod explained that the City Council has four main initiatives that they plan on looking at over the next two years, including the acquisition of the approximately 700 acres of open space in the Portuguese Bend area, analyzing the different mechanisms to finance the City’s infrastructure needs, developing a master plan of parks and open space, and controlling the excessive speeding of automobiles in the City.

General Plan Steering Committee

Vice-Chair McLeod gave a brief overview of the General Plan Steering Committee’s efforts, and explained that the General Plan Steering Committee approved changes to the general plan made by the infrastructure and safety sub-committees. Vice-Chair McLeod distributed the fiscal element to the FAC detailing potential changes being discussed by the General Plan Steering Committee.

STATE BUDGET UPDATE

Analyst Gyves informed the FAC that the Governor released the first draft of the FY04-05 State Budget, which includes a $1.3 billion property tax shift to fund schools (ERAF). Analyst Gyves informed the FAC that If the States budget is adopted "as is", the Impact to RPV would be:

  • The City’s General fund property tax share of the $1.3 billion shift is estimated to be $109,000.
  • The City’s Redevelopment Agency property tax share of the $1.3 billion shift is estimated to be $8,200.
  • The FY04-05 State Budget Provides full funding of VLF.

Analyst Gyves also informed the FAC that Proposition 57, the one time Economic Recovery Bond of $15 billion, was approved by voters on March 2, 2004. Analyst Gyves provided the following information regarding the $15 billion Recovery Bond:

  • The $15 billion will be used to pay off the State’s accumulated General fund deficit as of June 30, 2004.
  • The "Triple Flip", used to secure the $15 billion bond issue, re-directs 0.25% of the sales and use tax going to cities and counties throughout the State. The State will then replace the lost revenues on a dollar-for-dollar basis with funds set aside from property tax revenues (primarily ERAF).
  • At this time, the City does not expect to realize any loss of revenues from the Triple Flip.
  • The Triple Flip is set to go into effect on July 1, 2004.
  • A lawsuit has been filed by a group of local agencies challenging the reduction in sales tax.

PUBLIC COMMENTS

Tom Redfield, 31273 Ganado Drive, asked about NCCP funding. Director McLean informed Mr. Redfield that the exact breakout of the funding is detailed in assumption number eight of the 2004 Five-Year Model and he will make sure Mr. Redfield gets a copy. Assumption number eight of the 2004 Five-Year Model reads as follows:

"$1 Million is budgeted in FY05-06 for the City’s participation towards the proposed purchase of about 722 acres of coastal hillside along Palos Verdes Drive South ("PVDS") in cooperation with the Palos Verdes Peninsula Land Conservancy ("PVPLC"). The PVPLC has committed to raising about $6 Million. The City and the PVPLC are striving to raise the remainder of the funds from State and federal grants totaling approximately $23 Million. Based on a staff report prepared by the Public Works Department, dated March 4, 2003, the $1 Million budgeted by the City will be funded in the amounts of $538,878, $332,500 and $128,622 from Proposition 12, Proposition 40 and Measure A funds, respectively."

ADJOURNMENT

Vice-Chair McLeod moved and Member Bouey seconded a motion to adjourn the meeting at 9:50 PM. Hearing no objection, Chair Clark ordered the meeting adjourned.

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Chair, Financial Advisory Committee

ATTEST:

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Gary Gyves, Recording Secretary