APRIL 19, 2006CITY OF RANCHO PALOS VERDES FINANCE ADVISORY COMMITTEE MINUTES APRIL 19, 2006 CITY OF RANCHO PALOS VERDES FINANCE ADVISORY COMMITTEE MINUTES APRIL 19, 2006 CITY OF RANCHO PALOS VERDES FINANCE ADVISORY COMMITTEE MINUTES

MINUTES

CITY OF RANCHO PALOS VERDES

FINANCE ADVISORY COMMITTEE

APRIL 19, 2006

Chair Clark called the meeting to order at 7:06 PM at the City Hall Community Room, 30940 Hawthorne Boulevard, for the purpose of conducting business pursuant to the Agenda.

ROLL CALL

Roll call was answered as follows:

PRESENT: Clark, Emenhiser, Grimme, James, McLeod, and Nelson
ABSENT: Smith

Also present were Director of Finance and Information Technology Dennis McLean; Deputy Director of Finance and Information Technology Kathryn Downs; Senior Administrative Analyst Gary Gyves; Interim Director of Public Works Ray Holland and Senior Engineer Ron Dragoo.

APPROVAL OF AGENDA

Chair Clark requested a motion to approve the agenda. Member McLeod motioned for approval of the agenda and Vice-Chair Nelson seconded. Hearing no objection, Chair Clark ordered approval of the agenda.

APPROVAL OF DRAFT MINUTES FOR THE MEETING CONDUCTED DECEMBER 14, 2005

Chair Clark requested a motion to approve the minutes for the meeting conducted December 14, 2005. Vice-Chair Nelson motioned for approval of the minutes and Member Grimme seconded. Hearing no objection, Chair Clark ordered approval of the draft minutes.

APPROVAL OF DRAFT MINUTES FOR THE MEETING CONDUCTED MARCH 22, 2006

Chair Clark requested a motion to approve the minutes for the meeting conducted March 22, 2006. Vice-Chair Nelson motioned for approval of the minutes as amended by Chair Clark and Member Grimme seconded. Hearing no objection, Chair Clark ordered approval of the draft minutes.

WATER QUALITY AND FLOOD PROTECTION PROGRAM

Director McLean introduced the Interim Director of Public Works Ray Holland and Senior Engineer Ron Dragoo. Director McLean, Director Holland and Engineer Dragoo gave a Power Point presentation updating the FAC on the status of storm drain repairs and the additional costs related to storm drain projects not identified in the Water Quality and Flood Protection Program that were expected to be presented to the City Council at the Budget Policy Workshop on April 29, 2006.

2006 FIVE-YEAR FINANCIAL MODEL

Deputy Director Downs informed the FAC that the Draft 2006 Model details General fund reserves declining at a faster rate when compared to the 2005 Model, which is primarily due to a 40% increase in residential pavement management costs. Deputy Director Downs and Analyst Gyves provided the FAC with an overview of the following significant changes that have been incorporated into the Draft 2006 Model since the 2005 Model was last presented to the City Council in May of 2005.

- The expenditures associated with the residential pavement management program included in the Draft 2006 Model total approximately $12.3 million for FY06-07 through FY10-11, or approximately $5.4 million more than detailed in the 2005 Model.
- The City Council authorized the addition of a dedicated traffic deputy and directed staff to include an additional deputy to the Regional Law Enforcement Contract in the Proposed FY06-07 Budget. The cost of these additional deputies will add approximately $235,000 to the FY06-07 Budget and approximately $1.7 million over the five years of the 2006 Model. The Sheriff’s Deputies union recently negotiated an 18.5% salary increase that is expected to be instituted over the next two and a half years. Based on information from the Sheriff’s department, this will likely result in a 4.9% increase to our Sheriff’s contract for FY06-07. The 2005 Model assumed an annual 3% increase in Sheriff’s services. This additional rate increase will add approximately $60,000 to the City’s FY06-07 Budget and approximately $0.8 million over the five years of the 2006 Model. The total estimated additional cost increase of about $2.5 million through FY10-11 will be offset by the expected increase of ticket revenue, which is estimated to be about $350,000 over the five years of the Model.
- Trump National reopened on January 20, 2006. The proposed Golf Tax revenue budget for FY06-07 is $300,000, which is based upon a full year of operation. The 2005 Model estimated Golf Tax at $85,000.
- The City contributed $350,000 in property tax revenue to the State budget crisis in both FY04-05 and FY05-06. The 2006 Model restores the City’s share of approximately $350,000 in property tax revenues annually beginning in FY06-07.

 

Deputy Director Downs informed the FAC that the City will start accounting for all storm drain projects in the Water Quality and Flood Protection (WQFP) fund beginning in FY06-07 and reminded the Committee that the issue was discussed with the FAC during its meetings on March 22, 2006. Deputy Director Downs mentioned that: (1) the storm drain construction projects included in the Rate Model will be identified and accounted for separately within the WQFP fund to maintain accountability to Fee payers and (2) based upon previous discussions between Staff and the City Council, it became clear that combining all storm drain costs in the WQFP fund would improve the financial reporting of total annual storm drain costs and the annual General Fund subsidy for storm drain expenditures.

Director McLean informed the FAC that he anticipates the favorable variance for General fund revenues will be less than in years past and that the Draft 2006 Model is based on the assumption that the user fee will not be repealed.

Director Holland informed the FAC that the update to the City’s pavement management plan is expected to be complete in June of 2006 and the report will give him a better understanding of the condition of the City’s streets. Director Holland also informed the FAC that the increased cost for street maintenance is a result of the increased cost of oil and the fact that China and India are bidding up the cost of all raw materials used in building infrastructure.

QUESTIONS AND COMMENTS REGARDING THE 2006 FIVE-YEAR FINANCIAL MODEL

Member Emenhiser asked Staff what would happen if a capital improvement project were postponed. Director McLean stated that the funds budgeted for capital improvement projects are reserved and would be carried over to the next year.

Member McLeod asked Staff how the FY06-07 Golf tax of $300,000 was calculated. Director McLean stated that the conservative estimate of Golf tax was based on three months of actual receipts received from the golf course that were compared to estimates provided by Trump National.

Member McLeod asked Staff if the Draft 2006 Model took into account the difference in salary between the current City Manager and his anticipated replacement. Director McLean informed the FAC that there was not enough information to calculate the difference between the two salaries.

Member McLeod asked Staff about the purpose of Quimby requirements. Deputy Director Downs informed the FAC that developers could either donate parkland to the City or pay an in-lieu fee that is called a Quimby fee.

Member McLeod asked Staff about the difference between the Street Maintenance fund and pavement management. Deputy Director Downs informed the FAC that the Street Maintenance fund accounts for costs related to street sweeping, garbage pickup, tree trimming, potholes and guard rails, while the pavement management plan is an engineering analysis that determines what the City needs to do to keep the streets in a certain condition.

Member McLeod asked Staff about the increase in revenues related to animal control. Deputy Director Downs stated that animal control does periodic canvassing for animal licenses that results in additional revenue to the City through fines.

Vice-Chair Nelson asked Staff about the decline in funds in both the Affordable Housing In-Lieu fund and the RDA Housing Set-Aside fund. Deputy Director Downs stated that the anticipated expenditures are related to the planned senior housing project located on Crestridge.

Vice-Chair Nelson asked about parking lot fees. Deputy Director Downs stated that the parking lot fees detailed in the Draft 2006 Model are parking fees for Abalone Cove Shoreline Park.

Vice-Chair Nelson asked about the significant drop in donations from FY05-06 to FY06-07. Director McLean stated that the City received significant donations in FY05-06 related to the exhibits located at the Point Vicente Interpretive Center (PVIC).

Vice-Chair Nelson asked about the additional costs of open space maintenance detailed in the Draft 2006 Model. Director McLean informed the FAC that the agreement between the City and the Palos Verdes Peninsula Land Conservancy (PVPLC) calls for an annual payment from the City to the PVPLC of $100,000 for maintaining the open space and the additional costs for open space are known costs that the City will directly pay such as brush clearing and land assessments (ACLAD).

Vice-Chair Nelson asked about the expenditure of $300,000 related to PVIC. Deputy Director Downs stated that $100,000 was for the purchase of inventory for the gift shop and the remaining expenditures were related to staffing and maintenance.

Chair Clark recommended to staff to include an estimate of the General fund reserve policy level in the chart located on page 4 and 10 of the Draft 2006 Model Staff Report.

Chair Clark asked if Staff has negotiated the sale of Proposition A funds planned for FY06-07. Deputy Director Downs stated that Staff has not negotiated the terms for the sale of Proposition A funds and the estimate detailed in the Draft 2006 Model was based on a previous sale completed in 1999.

Member James asked Staff if the City receives Golf tax from the Los Verdes Golf Course. Analyst Gyves stated that the City does not receive Golf tax from the Los Verdes Golf Course because it is owned by the County of Los Angeles.

Member James asked what the basis was for increasing the investment earnings interest rate assumption in the Draft 2006 Model. Deputy Director Downs informed the FAC that we are in a period of increasing interest rates and the City is diversifying its portfolio and expects to see additional returns as a result.

Member Grimme asked Staff how the Golf tax is calculated. Director McLean informed the FAC that the Golf tax is calculated as a percentage of green fees.

Member Grimme asked if the View Preservation function of the City was performed under a contract. Analyst Gyves informed the FAC that the View Preservation function is performed by City Staff.

Member Grimme asked Staff what comprises the costs related to Internet Technology. Director McLean informed the FAC that Information Technology costs include all costs related to the maintenance and replacement of the entire technology system at City Hall, including the voice system.

FAC RECOMMENDATION REGARDING THE 2006 FIVE-YEAR FINANCIAL MODEL

Chair Clark asked the members of the FAC if they wanted to make a recommendation to the City Council in conjunction with Staff’s presentation of the Draft 2006 Model and opened the topic up for discussion. Vice-Chair Nelson motioned for approval of the FAC recommendation regarding the 2006 Model. Member Emenhiser seconded the motion. Hearing no objection, Chair Clark ordered approval of the following FAC recommendation:

The FAC accepts the 2006 Model for forwarding to the City Council and supports the assumptions contained within. The FAC is concerned that General fund reserves are anticipated to fall below the policy reserve level in FY07-08. The FAC recommends the following to the City Council:

- Fund the additional $2.3 million of storm drain projects recommended for FY06-07 using General Fund reserves;
- Maintain pavement at the current level of condition and fund the recommended Residential Overlay budget for FY06-07; and
- To mitigate the effects of funding recommended infrastructure projects, consider alternative sources of revenue and funding and closely examine existing expenditures.

PUBLIC COMMENTS

Don Reeves gave his support for the City’s Public Works Department and stated that except for police, infrastructure is the most important thing to the City. Mr. Reeves stated that Staff should make the infrastructure costs detailed in the Draft 2006 Model clearer as to whether or not they are included in the WQFP program. Mr. Reeves also stated that the City should be realistic when considering how many projects can be done during the fiscal year.

ADJOURNMENT

Member Grimme moved and Vice-Chair Nelson seconded a motion to adjourn the meeting at 11:07 PM. Hearing no objection, Chair Clark ordered the meeting adjourned.

 

_____________________________
Chair, Financial Advisory Committee

 

ATTEST:

_____________________________
Gary Gyves, Recording Person