MINUTES

Chair Clark called the meeting to order at 7:05 PM at the City Hall Community Room, 30940 Hawthorne Boulevard, for the purpose of conducting business pursuant to the Agenda.

Roll call was answered as follows:

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

ABSENT: Wallace

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

Vice-Chair McLeod motioned to add the Proposed Vehicle License Fee Gap Loan Receivable Sale item to the agenda, and Member Grimme seconded. Hearing no objection, Chair Clark ordered that the item be added to the agenda.

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

Member Grimme motioned for approval of the minutes from the August 25, 2004 and November 18, 2004 FAC meetings, and Vice-Chair McLeod seconded. Hearing no objection, Chair Clark ordered approval of the draft minutes.

Director McLean informed the FAC of the following regarding the Proposed Vehicle License Fee Gap Loan Receivable Sale:

• The State Controller’s Office has determined that the City’s Vehicle License Fee Backfill Gap Loan (VLF Gap Loan) is $725,942. In accordance with the State’s FY04-05 Budget document, the VLF Gap Loan is scheduled to be repaid on August 15, 2006. However, the City’s receipt of this payment could be delayed further by future State budget legislation.

• Authorized under SB 1096, the Vehicle License Fee Backfill Gap Loan Program (VLF Program) was instituted by the California Statewide Communities Development Authority (CSCDA) to enable cities and counties to sell their respective VLF Gap Loan receivables to CSCDA for a fixed purchase price.

• CSCDA is planning to issue notes and use the note proceeds to purchase the VLF Gap Loan receivables (VLF Receivables). The actual purchase price of the VLF Receivables will depend on the total amount of VLF Receivables that cities and counties sell to CSCDA and on bond market conditions at the time the notes are priced. Therefore, the exact amount of net proceeds the City will receive from selling its VLF Receivable is unknown at this time.

• Staff is recommending that the City Council establish a maximum discount rate of 10.53%, and therefore, a minimum sales price of 89.47%. This will ensure that the City will receive at least $649,500 of its estimated VLF Receivable of $725,942. If this minimum sales price cannot be met, the City will not be obligated to participate in the VLF Program.

QUESTIONS REGARDING THE PROPOSED VEHICLE LICENSE FEE GAP LOAN RECEIVABLE SALE

Vice-Chair McLeod asked how many agencies are planning on participating in the VLF Program. Analyst Gyves informed the FAC that Based on information provided by CSCDA, 140 cities and counties have submitted applications to participate in the VLF Program with VLF Gap Loans totaling over $362 million.

Member Bouey asked how long would the proceeds from the sale need to be invested to offset the discount rate. Director McLean informed the FAC that it would take two or three years, based on the Staff’s expectations of interest rates, to offset the discount. Director McLean also informed the FAC that due to Proposition 1A, the State cannot borrow funds from local governments twice within a three-year period. Therefore, the State has no incentive to pay back the loan until it needs additional funding from local governments.

Member Bouey asked if there are any costs to the City that are not contained in the discount rate. Director McLean informed the FAC that the only additional costs to participate in the VLF Program are related to City Attorney and Staff time associated with document preparation.

Member Bouey asked for more information on CSCDA. Chair Clark informed the FAC that CSCDA is a joint powers authority created to provide local governments with low-cost financing for infrastructure projects and other projects that assist California communities.

FAC RECOMMENDATION REGARDING THE PROPOSED VEHICLE LICENSE FEE GAP LOAN RECEIVABLE SALE

Vice-Chair McLeod motioned for approval of the FAC’s recommendation to the City Council to adopt the Proposed Vehicle License Fee Gap Loan Receivable Sale Staff Report and the recommendations contained within it, and Member Smith seconded. Hearing no objection, Chair Clark ordered approval of the FAC recommendation.

Director McLean informed the FAC that Lori Zorn has resigned from the FAC. Director McLean requested that FAC members refer any friends and neighbors that they feel would be qualified and interested in joining the FAC.

Director McLean informed the FAC that the Chair of the FAC is appointed annually by the City Council. Director McLean also informed the FAC that the City Council will be interviewing FAC members for the Chair position at the February 1, 2005 City Council meeting. Director McLean requested that all FAC members interested in becoming Chair submit their application to the City Clerk.

Director McLean informed the FAC the following regarding the 2004 Five-Year Financial Model – Revision 2 (2004 Model):

• The 2004 Model was presented to the City Council on January 24, 2005.

• The 2004 Model includes all budget adjustments to date, including an increase in General fund revenues in the amount of $2,214,677, based upon an increase of $1,539,157 for Property Tax In-Lieu of VLF, a decrease of General fund revenues in the amount of $165,000 for Golf tax revenue and an increase in General fund revenues in the amount of $840,520 resulting from the sale of the Tyler property.

• The 2004 Model includes capital expenditures of $2.6 million for sewers as a worst-case scenario.

• The 2004 Model does not include expenditures for additional traffic enforcement, revenues from the proposed Long Point Resort or for an initial capital expenditure for the Water Quality and Flood Protection Program.

Director McLean informed the FAC that the City Council was given an update on the Proposed Water Quality and Flood Protection Program (Program) at the January 4, 2005 City Council Meeting. Director McLean also informed the FAC that at the January 4, 2005 meeting, the City Council took the following actions:

• Authorized Staff to continue to develop a Program, including the development of a user fee system and the preparation for a mail ballot measure that could be conducted during the summer of 2005 in accordance with Proposition 218 requirements.

• Authorized Staff to proceed with the Community Education and Outreach Strategy regarding the Program to be designed by Moore Iacofano Goltsman, Inc., the City’s Public Information Consultant.

• Approved an appropriation of $220,000 for consulting services to continue development of the proposed Program.

• Authorized Staff to move forward with the Preliminary Rate Model - Version 2 to:

• Include annual maintenance and staffing costs;
• Include a $2,000,000 General fund equity transfer to the proposed Enterprise fund;
• Spread Priority 1 and 2 projects over a 20-year time line;
• Calculate a flat user fee; and
• Use a pay-as-you-go methodology.

Director McLean also informed the FAC the following regarding the Proposed Water Quality and Flood Protection Program:

• Staff will be recommending to the City Council on April 19, 2005 to:

• Accept and approve a Final Rate Analysis performed by Harris & Associates; and

• Adopt a resolution stating the City’s intent to establish a storm drain user fee.

• Pursuant to the request made during the November 30, 2004 Joint Workshop, the Team prepared What-If Scenarios, Alternatives A-C. The What-If Scenarios are based upon the assumption that the proposed Long Point Resort Project is built and commences operations in accordance with the Developer’s projections. The purpose of the What-If Scenarios is to examine a mix of alternatives, including not establishing a user fee or supplementing a user fee with all, or nearly all of the proposed Transient Occupancy Tax (TOT) that would be derived by the City’s General Fund from the operation of the Long Point Resort. What-If Scenarios, Alternatives A-C, also demonstrate that a future City Council could reduce or eliminate the user fee in the future if the Program is financed with the proposed TOT derived from the Long Point Resort.

QUESTION REGARDING THE INFRASTRUCTURE FINANCING – PROPOSED WATER QUALITY AND FLOOD PROTECTION PROGRAM – ADDITIONAL INFORMATION

Member Bouey asked if the City has modeled the expenditures for storm drains if the mail ballot measure fails. Vice-Chair McLeod informed the FAC that this could easily be analyzed because General fund reserves would be used to pay for such expenditures.

Member Bouey asked if the user fee could be structured to automatically decrease when revenues from Long Point reach a certain threshold. Director McLean informed the FAC that the City Attorney is currently working on a response to that question. Director McLean also informed the FAC that if a trigger were included as part of the user fee structure, the City would lose the ability to bond against the user fee revenues.

No public comments were made.

Vice-Chair McLeod moved and Member Smith seconded a motion to adjourn the meeting at 8:25 PM. Hearing no objection, Chair Clark ordered the meeting adjourned.

_____________________________

Chair, Financial Advisory Committee

Gary Gyves, Recording Secretary