HomeMy WebLinkAboutApproved Minutes - April 13, 2017Finance Committee Meeting Minutes April 13, 2017
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CITY OF NEWPORT BEACH FINANCE COMMITTEE APRIL 13, 2017 MEETING MINUTES I. CALL MEETING TO ORDER
The meeting was called to order at 3:01 p.m. in the Crystal Cove Conference Room, Bay 2D, 100 Civic Center Drive, Newport Beach, California 92660.
II. ROLL CALL
PRESENT: Council Member Diane Dixon (Chair) (via teleconference), Mayor Kevin
Muldoon, Council Member Will O’Neill, Committee Member William Collopy, Committee Member Patti Gorczyca (arrived at 3:27 p.m.),
Committee Member Joe Stapleton, and Committee Member Larry Tucker
STAFF PRESENT: City Manager Dave Kiff, Assistant City Manager Carol Jacobs, Deputy City Manager Rob Houston, Finance Director/Treasurer Dan Matusiewicz,
Deputy Finance Director Steve Montano, Budget Manager Susan Giangrande, Purchasing Agent Anthony Nguyen, Public Works/Finance
Administrative Manager Jaime Copeland, Interim Fire Chief Chip Duncan, Accounting Manager Rukshana Virany, Budget Analyst, Shannon
Espinoza, Fire Administrative Manager Angela Velazquez, and Administrative Specialist to the Finance Director Marlene Burns
OUTSIDE ENTITITES: Honorable John Moorlach, Member of the California State Senate
Representing the 37th District and John Bartel, Bartel Associates LLC (via teleconference)
MEMBERS OF THE
PUBLIC: Jim Mosher and Michael Toerge III. PUBLIC COMMENTS
None. IV. CONSENT CALENDAR A. MINUTES OF MARCH 30, 2017 Recommended Action:
Approve and file.
Committee Member Tucker submitted corrections.
MOTION Committee Member Tucker moved and Committee Member Collopy seconded a motion to
approve the corrected minutes of March 30, 2017. The motion carried unanimously. V. CURRENT BUSINESS B. REVIEW OF FISCAL YEAR 2017-2018 PROPOSED BUDGET Summary:
Staff will provide an overview of the Proposed Fiscal Year 2017-2018 Operating Budget and/or CIP. Recommended Action:
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Review and comment.
City Manager Kiff presented the City Manager’s proposed budget indicating a balanced budget;
flat expenditures with the exception for program enhancements; adherence to Council guidance regarding use of Fiscal Year 2015-2016 budget surplus; new Harbor and Beaches
Capital Plan budget; efforts to pay down the pension liability; and staffing changes.
Council Member O’Neill asked about the proposed aggressive steps to pay down the pension obligations. Finance Director/Treasurer Matusiewicz explained the potential $12 million
savings of future interest expense over 30 years equating the savings to approximately $5 million in today’s dollars
In response to Council Member Dixon, City Manager Kiff explained that staff was suggesting
paying an additional $9 million discretionary payment. Finance Director/Treasurer Matusiewicz clarified that the recommended payment would be more than the default payment schedule in
the first five years, but would be less over the remaining 15 years. Council Member Dixon asked if the Finance Committee would review the discretionary amount annually. City Manager
Kiff stated that staff would analyze the payment each year.
In response to Committee Member Tucker, Finance Director/Treasurer Matusiewicz explained, as an example, that the City would receive a monthly UAL bill for $2 million and if the additional
$9 million is allocated, he would add $750,000 to the bill each month explaining that it would be like making extra principal payments on a mortgage each month.
Committee Member Stapleton asked if a one-time payment would be more beneficial. Finance
Director/Treasurer Matusiewicz stated that was an option and PERS would give half a year’s interest discount but the concern was about making a large lump sum payment into the equities
market on a given day versus dollar cost averaging the payment over the year.
In response to Committee Member Tucker, Finance Director/Treasurer Matusiewicz stated the additional payments could be stopped at any time if there were unforeseen budget issues.
City Manager Kiff continued the PowerPoint presentation outlining the projected revenues.
Committee Member Collopy asked where the reserves were shown. Finance
Director/Treasurer Matusiewicz stated the reserves were depicted as “set asides”.
In response to Council Member Dixon, City Manager Kiff stated salary savings were based on historical averages.
City Manager Kiff discussed cost differences between in house and contract staff and his
proposal to replace one contract position in Community Development and one contract position in Public Works.
In response to Committee Member Stapleton, City Manager Kiff stated the City was at risk of
paying a penalty for contact employees.
In response to Mayor Muldoon, City Manager Kiff stated the additional position was offset in Municipal Operations.
City Manager Kiff reviewed staffing changes.
Council Member Dixon asked if Animal Control officers were considered Safety employees.
City Manager Kiff stated they were not sworn officers.
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In response to Council Member O'Neill, Assistant City Manager Jacobs explained there is a
ten-year waiting period in order to join Orange County Animal Shelter after the initial buy-in period is over.
Council Member O'Neill asked if outsourcing for scanning was off the table with the addition of
staff in the City Clerk’s Department. Assistant City Manager Jacobs stated in-house part-time staff would be less expensive than a scanning contract. She stated that the increased staff
was associated with a specific project to clean up City records.
In response to Council Member Dixon, City Manager Kiff stated his staffing proposal was currently up one position over the prior year but anticipated an offsetting reduction would be
identified prior to the budget adoption.
In response to Committee Member Tucker, City Manager Kiff explained that the 5.58 full-time equivalent employees, composed of multiple part-time positions. Committee Member Tucker
stated he understood the efficiency but questioned the additional hours.
City Manager Kiff discussed other major supplemental budget enhancements, highlighting increased new recreational special events.
Council Member Dixon suggested sponsorships for Movies in the Park.
City Manager Kiff stated the budget did not include funding for the final harbor mooring
administration plan.
Committee Member Gorczyca arrived at this juncture, 3:27 p.m.
City Manager Kiff reviewed General Fund Transfers for Facilities Financial Plan, Harbor & Beaches Capital Plan, Facilities Maintenance Plan, 800 MHz Radio and Allocations for MOU
negotiations.
Council Member O'Neill stated the COP debt was paid out of the Facilities Financing Plan (FFP) with $2.5 million of Federal funding. He discussed the past tradition of adding additional surplus
money to the FFP but the current priority was to put any discretionary money into paying down the unfunded pension liability and saving for future harbor improvements. He asked the amount
of developer fees anticipated from the Uptown Newport project. City Manager Kiff anticipated $19 million with a portion dedicated to parks.
Council Member Dixon asked how the income would affect the FFP budget. City Manager Kiff
stated it was previously estimated to be received in Fiscal Year 2019-2020, but would likely be received in the 2016-2017 fiscal year bringing the reserve higher earlier.
Committee Member Collopy questioned the interest rate on the Civic Center bonds. Finance
Director/Treasurer Matusiewicz stated the rate was 4.4 percent.
Committee Member Tucker asked if there was still $5 million for FFP and Harbor. City Manager Kiff explained Council direction to slow down FFP expenditure and focus on the Harbor.
Committee Member Tucker stated the proposed budget was suggesting $9 million toward unfunded pension liabilities rather than FFP. City Manager Kiff stated that Council Policy
provides direction to allocate the surplus between long term obligations and neighborhood enhancements.
Committee Member Gorczyca asked about the annual debt service on City Hall. City Manager
Kiff stated it was not significantly impacted by the reduction in Federal Subsidy. Committee Member Gorczyca stated there had been two declines to the Build America Bonds Federal
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subsidy. Finance Director/Treasurer Matusiewicz stated that the net interest rate was not
significantly affected.
Council Member O'Neill stated the Federal sequestration would cost the City a total of approximately $4 million.
City Manager Kiff reviewed allocations to internal services. Finance Director/Treasurer
Matusiewicz provided additional detail about the allocations.
Council Member Dixon asked about the City’s unfunded OPEB amount. Finance Director/Treasurer Matusiewicz stated OPEB was at $40 million but should be fully funded
within approximately 12 years. John Bartel agreed with the Finance Director’s statement.
In response to Committee Member Gorczyca, Finance Director/Treasurer Matusiewicz stated $4 million was allocated to OPEB annually on top of prior OPEB trust savings.
In response to Committee Member Collopy, Finance Director/Treasurer Matusiewicz stated a
discussion on insurance would come back to the Finance Committee.
City Manager Kiff reviewed pension funding, long range fiscal model, and next steps.
Finance Director/Treasurer Matusiewicz discussed the future meetings of the Finance Committee and City Council.
Committee Member Tucker stated the Finance Committee was charged with making a
recommendation to the Council on the budget. City Manager Kiff suggested the Committee meet prior to June 13 to prepare its recommendation.
Council Member Dixon asked what the Committee would be considering on April 27 and May
11.
Committee Member Tucker requested a comparison between the current proposed and prior year’s budget.
Council Member O'Neill requested a comparison of the enterprise funds and high level
overview of internal services funds.
Council Member Dixon questioned whether the May 25 Finance Committee meeting was necessary. City Manager Kiff suggested saving the date in the case it is needed.
Committee Member Collopy asked if the Council universally agreed on the additional $8.6
million proposed payment towards pensions. Council Member O'Neill anticipated there would be a division amongst Council members; therefore, the Finance Committee’s recommendation
would be meaningful. He explained the Committees’ consideration of the wastewater enterprise fund and unfunded pension liability in last year’s budget.
Committee Member Collopy requested a detailed discussion on reserves. City Manager Kiff
stated the budget detail would include the trends and a discussion on reserves. He explained the General Fund contingency reserve was typically 25 percent of all operation costs but this
year he proposed excluding the additional pension contribution from the reserve computation
Committee Member Gorczyca requested a three-year comparison of pensions, CIP and Harbor contributions.
In response to Committee Member Collopy, City Manager Kiff stated the comparisons would
be presented in conjunction with the long-range plan.
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Council Member Dixon left the meeting at this juncture, 3:54 p.m.
Committee Member Collopy suggested consideration of the budget in the context of the long-range plan at the May 11 meeting.
There were no public comments on the item.
Committee Member Tucker asked what composed the $7.6 million transfer in. City Manager
Kiff explained the Tideland Funds transfers.
In response to Committee Member Gorczyca, City Manager Kiff explained the City’s ability to seek reimbursements from Tidelands Funds. Committee Member Gorczyca requested
additional information on the Tideland Funds at a future meeting. A. PENSION DISCUSSION Summary:
The Honorable John Moorlach, Member of the California State Senate Representing the 37th District, will make a presentation to the Finance Committee. Recommended Action: Receive and file.
City Manager Kiff introduced Senator Moorlach and stated the City was interested in
Sacramento’s perspective.
Honorable John Moorlach, Member of the California State Senate Representing the 37th District, discussed SB32, which picked up where Governor Brown left off on his PEPRA bill.
He explained SB681 regarding exiting from CalPERS. He reviewed SCA-8 giving employers the ability to adjust retirement benefits and SCA-10, similar to County Measure J, requiring
approval of the voters to increase retiree benefits that would create debt. He commented about SB454 requiring fully funding healthcare. He discussed his committee involvement including
Governance and Finance, Judiciary, Budget and Fiscal Review and Subcommittee 1, overseeing all education throughout the State, and Public Employment and Retirement.
In response to City Manager Kiff, Senator Moorlach stated he had not heard any recognition
from his Democratic colleagues that there was a real pension problem.
Committee Member Tucker stated the City’s unfunded liability on June 30, 2007, was $2 million and increased to $370 at June 30, 2016. He asked what would happen when other agencies
could not pay the unfunded liability. Senator Moorlach discussed the “Trump Bump” in the stock market and Democrats’ belief that it was a long-term deal. He stated it was necessary
to communicate through the League of California Cities.
Committee Member Tucker asked what happened if the investment returns continued to fall short. He asked about the reaction in the legislature to the shortfall. He discussed the
constrained ability to negotiate with bargaining units due to State laws. He questioned whether the City should continue to be as aggressive with its payments. Senator Moorlach stated he
was not optimistic of legislative solutions without further support from the other side of the aisle.
Mr. Bartel stated each agency was on its own to figure out the unfunded liability.
Committee Member Tucker stated he assumed there would not be answers. He asked what would happen when agencies could no longer make the payments. Senator Moorlach stated
Sacramento was a union town; therefore, there would be blow back. He stated human nature was to wait until the very end to take action. He stated the next governor would have to deal
with it.
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Council Member O'Neill discussed the City’s efforts to pay its unfunded liability. Senator Moorlach stated the best way to take care of a debt was to pay it off early.
In response to Committee Member Collopy, Senator Moorlach anticipated the chance of
success on SB32 to be minimal. He discussed the opposition to SB681.
Committee Member Gorczyca asked if there was greater freedom for movement than the OCERS plan. Mr. Bartel discussed the two options available for exiting. Committee Member
Gorczyca suggested patterning OCERS for SB681. Senator Moorlach discussed cities with their own retirement plans.
Committee Member Stapleton asked what it would cost to buy out of CalPERS. Finance
Director/Treasurer Matusiewicz stated it was approximately $1 billion to terminate the plan.
There were no public comments.
The Committee thanked Senator Moorlach for attending the meeting. C. LONG-TERM FINANCIAL FORECAST Summary:
Review of City’s long-term forecast plan model. Recommended Action:
Receive and comment.
The opportunity for public comment was offered, of which there were none. The item was moved to a subsequent meeting.
D. BUDGET AMENDMENTS Summary: Receive and file a staff report on the budget amendments for the prior quarter. Recommended Action: Receive and file.
There were no questions on the item.
There were no public comments.
E. REVIEW OF FINANCE COMMITTEE WORKPLAN
Summary: Staff will review with the Committee the agenda topics scheduled for the remainder of the
calendar year. Recommended Action:
Receive and comment.
Council Member O'Neill stated the April 27, 2017, meeting would be a review of budget.
Committee Member Collopy stated he might need to teleconference on April 27, 2017. Council Member O'Neill stated he would be absent on April 27, 2017.
Committee Member Stapleton stated he would be absent on May 11, 2017.
The Committee agreed to a joint meeting with the City Council on May 23, 2017, at 4:00 p.m.
Jim Mosher reminded staff that teleconferencing was required to be noticed.