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HomeMy WebLinkAboutFinance Committee - January 17, 2019CITY OF NEWPORT BEACH FINANCE COMMITTEE AGENDA - Final 100 Civic Center Drive - Crystal Cove Conference Room, Bay 2D Thursday, January 17, 2019 - 3:00 PM Finance Committee Members: Will O'Neill, Chair / Mayor Pro Tem Diane Dixon, Mayor Joy Brenner, Council Member William Collopy, Committee Member Joe Stapleton, Committee Member Larry Tucker, Committee Member VACANT, Committee Member Staff Members: Grace K. Leung, City Manager Dan Matusiewicz, Finance Director / Treasurer Steve Montano, Deputy Director, Finance Marlene Burns, Administrative Specialist to the Finance Director The Finance Committee meeting is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that the Finance Committee agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that the public be allowed to comment on agenda items before the Committee and items not on the agenda but are within the subject matter jurisdiction of the Finance Committee. The Chair may limit public comments to a reasonable amount of time, generally three (3) minutes per person. The City of Newport Beach’s goal is to comply with the Americans with Disabilities Act (ADA) in all respects. If, as an attendee or a participant at this meeting, you will need special assistance beyond what is normally provided, we will attempt to accommodate you in every reasonable manner. Please contact Dan Matusiewicz, Finance Director, at least forty-eight (48) hours prior to the meeting to inform us of your particular needs and to determine if accommodation is feasible at (949) 644-3123 or dmatusiewicz@newportbeachca.gov. NOTICE REGARDING PRESENTATIONS REQUIRING USE OF CITY EQUIPMENT Any presentation requiring the use of the City of Newport Beach’s equipment must be submitted to the Finance Department 24 hours prior to the scheduled meeting. I.CALL MEETING TO ORDER II.ROLL CALL III.PUBLIC COMMENTS Public comments are invited on agenda and non-agenda items generally considered to be within the subject matter jurisdiction of the Finance Committee. Speakers must limit comments to three (3) minutes. Before speaking, we invite, but do not require, you to state your name for the record. The Finance Committee has the discretion to extend or shorten the speakers’ time limit on agenda or non-agenda items, provided the time limit adjustment is applied equally to all speakers. As a courtesy, please turn cell phones off or set them in the silent mode. IV.CONSENT CALENDAR MINUTES OF DECEMBER 13, 2018A. Recommended Action: Approve and file. DRAFT MINUTES 121318 January 17, 2019 Page 2 Finance Committee Meeting V.CURRENT BUSINESS COUNCIL POLICY F-7, INCOME PROPERTY, REVIEWA. Summary: A subcommittee of the Finance Committee was appointed to review and recommend changes if deemed necessary to select financial policies. In continuation from the December 13, 2018, meeting, the subcommittee working with staff has made additional edits to Council Policy F-7, Income Property, in order to align policy with current practice. Recommended Action: Review the draft changes to Council Policy F-7, Income Property, and recommend further changes as needed for submission to the City Council for final approval. STAFF REPORT ATTACHMENT A PENSION ACCRUED LIABILITY BASICSB. Summary: The City’s CalPERS actuary, Kerry Worgan, will present the major components, assumptions and plan experience considered during the development of the pension accrued liability. Recommended Action: Receive and file. SECTION 115 DISCUSSIONC. Summary: An investment advisor and major provider of Section 115 pension prefunding trusts, PFM, will discuss the pros and cons; risks and benefits; and other considerations when considering the establishment of a Section 115 pension benefit trust. Recommended Action: Recommend a subcommittee further investigate the merits of a Section 115 prefunding trust and or receive and file. BUDGET AMENDMENTS (QUARTER ENDED DECEMBER 31, 2018)D. Summary: Receive and file a staff report on the budget amendments for the prior quarter. Recommended Action: Receive and file. STAFF REPORT ATTACHMENT A January 17, 2019 Page 3 Finance Committee Meeting WORK PLAN REVIEWE. Summary: Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Recommended Action: Receive and file. ATTACHMENT A VI.FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) VII.ADJOURNMENT Finance Committee Meeting Minutes December 13, 2018 Page 1 of 10 CITY OF NEWPORT BEACH FINANCE COMMITTEE DECEMBER 13, 2018 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: Mayor Pro Tem/Chair Will O’Neill, Council Member Diane Dixon, Committee Member William Collopy, Committee Member Joe Stapleton, Committee Member Larry Tucker ABSENT: Council Member (VACANT POSITION) Committee Member (VACANT POSITION) STAFF PRESENT: City Manager Grace K. Leung, City Attorney Aaron Harp, Finance Director/Treasurer Dan Matusiewicz, Deputy Director/Finance Steve Montano, Administrative Specialist to the Finance Director Marlene Burns, Budget Manager Susan Giangrande, Accounting Manager Rukshana Virany, Public Works Finance/Administrative Manager Jamie Copeland, Purchasing Agent Anthony Nguyen, Budget Analyst Matt Chong, Administrative Analyst Raymund Reyes, Recreation and Senior Services Director Laura Detweiler, Human Resources Director Barbara Salvini, Public Works Director Dave Webb, Real Property Administrator Lauren Wooding Whitlinger, and Revenue Manager Evelyn Tseng MEMBERS OF THE PUBLIC: Jim Mosher III. PUBLIC COMMENTS Chair O’Neill opened public comments. Jim Mosher inquired regarding the Harbor fees, which were discussed at the previous Finance Committee meeting. He stated the City has an obligation to charge fair-market value for various uses of the Harbor and requested clarification regarding how the fair market value is established. He further requested the City’s appraisal be reviewed by the Finance Committee, as they are the appropriate party to analyze this type of data. Noting there were no other members of the public who elected to speak on this item, Chair O’Neill closed public comments. IV. CONSENT CALENDAR A. MINUTES OF NOVEMBER 29, 2018 Recommended Action: Approve and file. Committee Member Tucker submitted proposed modifications to the minutes for the record. Chair O’Neill requested the word “comprehensive” be struck and replaced with “further,” as he is not proposing an in-depth review of the Section 115 Trust matter (Page 10 of 11). Finance Committee Meeting Minutes December 13, 2018 Page 2 of 10 Committee Member Stapleton proposed a revision to his comments to read, “$10 million lump sum payment could be a high risk” (Page 8 of 11). Committee Member Collopy requested his last paragraph be struck from the record as he does not recall making this comment (Page 8 of 11). MOTION: Chair O’Neill moved, and Committee Member Tucker seconded, to approve the minutes, with proposed amendments. The motion carried 5 – 0, with 2 Committee Member positions vacant. V. CURRENT BUSINESS A. REVISIONS TO CITY COUNCIL POLICY F-14 – AUTHORITY TO CONTRACT Summary: The purpose of Council Policy F-14 is to establish authority for City contracts, such as service contracts and purchase orders, which collectively encompass the majority of the City’s procurement activities. It also provides clarity in areas where the state and federal statutes may be silent or ambiguous. The Finance Department recently conducted a review of F-14 with the overall objective to determine its relevance to current and best practices, trends, and current law. After soliciting input from Department Directors and consulting with the City Attorney, staff is proposing numerous changes to the policy. Recommended Action: Staff welcomes input and recommendations on the proposed revisions to Council Policy F-14. Finance staff will bring Committee recommendation, if any, to the City Council for consideration. Purchasing Agent Anthony Nguyen provided a staff report. A PowerPoint Presentation was displayed with slides entitled Proposed Changes to Council Policy F-14, Review of F-14 Policy, Proposed Changes, Council Policy F-14 (Redline Changes), Objectives of Proposed Changes, Questions, Exhibit A Contract Volume by Authorization Tier, and Exhibit B, Misc. Contract & Purchase Order Statistics. Purchasing Agent Nguyen provided a background of the policy, noting the last major revision was conducted in 2011. He also stated certain provisions of the policy were open to interpretation and there was a desire to clarify language. A discovery process was undertaken including interviews with City staff, the Charter and Municipal Code, practices implemented by other agencies and review of the City Manager’s signature authorization limit of $120,000. Committee Member Collopy inquired regarding the comparison among the various cities’ practices, as many of them have a different structure for their City management. Purchasing Agent Nguyen noted there is difficulty in making comparisons due to the differences in structure, and also stated some cities, such as the City of Redondo Beach, take all contracts to the City Council for approval. Purchasing Agent Nguyen mentioned the major clean-up provisions which are proposed, as there were circumstances where small scale vendors could not meet the existing purchasing policy provisions pertaining to insurance coverage and other provisions, or the lack thereof, that make contract management less efficient. Proposed changes include language to authorize the City Manager to make exceptions to City’s standard contract terms, addition of the City Attorney and City Clerk under authorization limits granted to Department Directors, clarification for the Human Resources Director to enter into contracts to revolve claims, litigation, and other legal disputes up to the Department Director limit of $75,000, clarification of City Manager authorization to amend a contract to increase by 125% or $120,000 (whichever is less), maximum 5 year term for on-call service contracts and fee-based recreation instructor contracts, changes to reflect the merger of Policy F-5 with Policy F-14 and separate on-call Finance Committee Meeting Minutes December 13, 2018 Page 3 of 10 service contracts from emergency contracts, and purchase orders for procurement of services to increase operational efficiency which will be subject to strict amount and usage limits. Purchasing Agent Nguyen explained the current contract provisions impede operational efficiency. An example was given regarding procuring services from smaller vendors/contractors who provide services, such as the track starter for recreation programs, experience difficulty meeting the City’s current procurement requirements, which in turn, delays the City from obtaining the needed service. A purchase order for services is proposed at $7500 per transaction, not to exceed $15,000 per vendor, per year. Committee Member Tucker confirmed the purchase order forms still contain the terms and conditions of the City. This was affirmed by Purchasing Agent Nguyen. Chair O’Neill stated he requested this review, which triggered a Department-wide review of the purchasing process. This policy will delegate authority normally reserved for the City Council and he concluded he is comfortable with the purchasing threshold numbers. He noted that where negotiations result in an outside party requesting specific terms other than those required by the City, the proposed policy would allow the City Manager, after consulting with the City Attorney, to move forward with a desired agreement. Administrative policies are developed by the City Manager and are followed by City staff, and cannot contradict City Council policies. He emphasized the importance of having clear and defined processes and procedures anytime the City Council elects to delegate authority away from itself. In such case, the City Charter prevails, followed by the Municipal Code (Ordinances), City Council Policies, and Administrative Policies, which should all be in concurrence. Council Member Dixon inquired whether there is a process by which purchases/contracts under $120,000 can be reviewed in an aggregate manner by the City Council. City Manager Leung stated the City Clerk posts approved contracts on the City’s webpage, and confirmed she will coordinate with the City Clerk as to the potential to transmit these items to the City Council. Chair O’Neill stated the proposed policy is not related to the budget amendment process. City Manager Leung affirmed there is a policy that states the City Manager annually review a summary of contracts with the City Council. Committee Member Tucker stated he was a member of one of the previous Charter Review Committees, where considerable time was given to reviewing purchasing limits. He supports the proposal which allows for flexibility to veer away from standard contracts when necessary. Chair O’Neill stated the City Manager is the only one who can do so under the proposed policy changes. Committee Member Tucker inquired how the consultation between the City Manager, City Attorney, and Department Directors occur, as proposed by the policy, and whether the method should be specified (Page 1, Paragraph 3). He also stated there was a potential need to strike language, which would imply the City Manager also approves the budget (Page 2, Section A.2.). City Manager Leung noted “City Manager” would be stricken from this section. Committee Member Tucker noted the Human Resources Director would likely not be receiving funds; however, would rather be expending funds related to settling personnel matters (Page 3, Section A.4.). City Attorney Aaron Harp responded the Human Resources Department has a larger and broader scope, which may include more than personnel matters, including the settlement of tort claims. Currently, the Human Resources Director is also serving as the Acting Risk Manager. Chair O’Neill stated that if there is any modification to the City’s Human Resources structure would necessitate an adjustment of the policy. Finance Committee Meeting Minutes December 13, 2018 Page 4 of 10 Committee Member Tucker inquired whether there would be an opportunity for the City Council to terminate or not move forward with a contract where the City Manager has exercised an amendment (Page 4, Section B.3.). City Attorney Harp stated the proposed change allows the City Manager to have the amendment approval and requires the City Manager to inform the City Council within 24 hours. He also noted the City Council, through the Mayor, can always call a special meeting to address the matter procedurally. Committee Member Tucker inquired regarding the difference in language relative to pricing and minimum qualifications for Requests for Bids (RFB) versus Requests for Proposals (RFP) (Page 6, Section B.). Purchasing Agent Nguyen explained the different requirements for each process, noting the Invitation for Bids (IFB) process is governed by state mandates for bidding (lowest responsible and responsive bidder), whereas a RFP process has different types of requirements and considerations. Committee Member Tucker would prefer the language “best interest”, instead of “greater benefit” be included (Page 6, Section B, Paragraph 2). City Attorney Harp further suggested changing the language throughout the document for continuity purposes. Committee Member Tucker suggested the phrase “and must” be changed to “but must include” (Page 7, Section F). He also suggested inserting the same termination clause utilized in Section F into Section G of the policy. Council Member Dixon inquired whether delays in procuring services due to insurance have been addressed, and inquired as to the specifics as to why insurance was the cause for delay. Purchasing Agent Nguyen noted the City’s consultant provided in-house training to improve insurance processing by Departments, and those procedures will be memorialized in the Administrative Procedures. Chair O’Neill opened public comments. Jim Mosher stated that in a Council-Manager form of government, the City Council has the authority to review contracts, however he emphasized the public assumes the City Council has the responsibility to review contracts, with the exception of contracts approved as part of the annual budget. The proposed policy appears to be an implementation of Section 421 of the City Charter regarding contracting. In 2012, the Charter language was modified, and he expressed concerns with delegation of the City Council’s responsibility for contract approval. He continues to request clarification regarding items which are approved or not within the City’s budget. He further noted there are contracts that are committing the City to certain actions for which they will receive revenue, and requested clarification of the proposed policy, which would allow City staff to enter into these types of agreements without City Council approval. He expressed concern regarding a lack of internal controls for cumulative contracts with the same vendor. In closing, he commented the City Clerk posts new contracts signed within the last 30 days to the City’s website. However, there is a commitment in the City Charter to keep all contracts in a digital repository in perpetuity; however, this repository is not available to the public. Noting there were no other members of the public who elected to speak on this item, Chair O’Neill closed public comments. MOTION: Chair O’Neill moved, and Committee Member Collopy seconded, to approve the modifications to City Council Policy F-14 as proposed by Committee Member Tucker, and as modified through the discussion. The motion carried 5 – 0, with 2 Committee Member positions vacant. There was no further action taken on this item. Finance Committee Meeting Minutes December 13, 2018 Page 5 of 10 B. REVIEW OF SELECT FINANCIAL POLICIES Summary: The Finance Committee is charged with a variety of tasks including, but not limited to, reviewing and monitoring events and issues that may affect the financial status of the City and making recommendations to the City Council regarding amendments to financial and budgetary policies. A subcommittee of the Finance Committee was appointed to review and recommend changes if deemed necessary to nine select financial policies. Recommended Action: Review the draft changes to the select financial policies and recommend further changes as needed for submission to the City Council for final approval. Chair O’Neill introduced the item and noted it was a sub-committee work project. He thanked members of the subcommittee for their work and opened the floor to Committee Member Tucker to lead the remainder of the report. Committee Member Tucker introduced consideration of Policy F-3. Committee Member Collopy expressed concern with usage of the word “checklist,” and preferred the phrase “itemized budget revisions” be utilized. City Manager Leung stated “itemized budget revisions” are not to be considered budget amendments. Committee Member Tucker preferred to use the phrase “supplemental budget items.” The previous language (“checklist”) was confusing. There was consensus among the Finance Committee to allow staff to develop language that would reduce confusion. Committee Member Tucker introduced consideration of Policy F-4. Committee Member Collopy expressed concerns with Policy F-4, Items F through K, as there was no wording compelling the City Council to take specific action. Finance Director Matusiewicz stated the respective items represent staff’s attempts to memorialize certain sustainability priorities suggested by previous Finance Committee members. Chair O’Neill noted removing these items would create the appearance the City Council is not proactively working toward these goals. Council Member Dixon confirmed that approval of fee increases is under the jurisdiction of the City Council, however, the Finance Committee should be aware of any proposed fee increases or potential for recovering costs for City services. Chair O’Neill recommends the Finance Committee continue to receive fee-related reports as receive and file items. Deputy Director/Finance Montano noted it was staff’s understanding proposed fee increases are taken to the City Council for their consideration and can also be brought before the Finance Committee for informational purposes under review and file. Chair O’Neill would prefer the items come before the Finance Committee for review and file, with no specific action requirements. Committee Member Collopy encouraged the continuation of the joint meeting process with the City Council and Finance Committee (Policy F-3, Item C). Chair O’Neill stated he is comfortable with the language as proposed, with the joint meeting to be conducted by the second meeting in May of each year. Committee Member Collopy requested the joint meeting be conducted as an informal round table. Chair O’Neill confirmed that all study sessions conducted by the City Council are held in the City Council Chamber. Discussion ensued regarding the format for the joint meeting. Finance Committee Meeting Minutes December 13, 2018 Page 6 of 10 As related to City Council Policy F-3, Council Member Dixon inquired as how to codify the long- term financial planning process. Deputy Director/Finance Montano noted that Policy F-3 would be the appropriate policy to include the language memorializing the long-term financial planning process. Discussion ensued regarding the inclusion of some portion of the previous performance plan process, as Council Member Dixon found it to be informative, especially for new Committee Members and the public. Staff confirmed the performance plan process constituted a significant amount of time for City staff and the Socrata software performs a similar function. Chair O’Neill stated the budget message included at the front of the annual budget book provides clarification to the public as to how the budget is developed each year. Council Member Dixon requested the approved City budget be posted online by a specific deadline each year. It was suggested this item be placed under Policy F-3, Section C. Council Member Dixon inquired as to Policy F-3, Section D, Item 3 – Assessment District Appropriation. Discussion ensued regarding clarification of wording related to the maximum amount estimated, as it would not be known how many property owners would opt to pay the assessment in full. At the conclusion of the discussion, there were no suggested changes in wording to this section. Council Member Dixon requested clarification related to the phrase “carry-over” versus “re- budget.” Discussion ensued as to the definition of each of the two phrases. Chair O’Neill provided an example, noting the Corona Del Mar Library and Fire Station was included in the City’s approved Capital Improvement Plan, however, the City Council did not take action to encumber specific monies towards those projects in that budget year. If the monies where approved and dedicated in the following fiscal year budget, that would be considered a re- budget. Once the funds are approved and encumbered, they could be carried forward into a subsequent fiscal year. At the conclusion of the discussion, there were no suggested changes to the proposed wording. Chair O’Neill moved forward to consideration of Policy F-7. Committee Member Tucker described the history of land-use for Old City Hall, noting it had been determined the land was most valuable for housing than any other use. The public preferred a hotel in the location and the City Council responded to their desire by instituting a ground lease deal to retain the property. He noted there are many elements to a ground lease and preferred a deep look into the value of a ground lease prior to disposing of a City-owned property. He emphasized the property owner, in this case the City, has more control. Owning property in a desirable location, such as Newport Beach, should be considered not only from a rental fee perspective, but also from all perspectives, prior to consideration of its sale. Committee Member Tucker suggested the addition of a paragraph to Policy F-7, Section E, in order to ensure good governance and a best-practice operational structure, which will keep the City out of any future disputes. He proposed language that would require a non-profit lessee, which is seeking to lease tideland property, or other such public-use property, to include in their by-laws a procedure that requires their membership to include members of the public and a best-practice governance and operational structure, to be approved by the City Council. Committee Member Tucker emphasized that certain properties, such as tidelands, are particularly public property, as they are not just utilized by City residents, but considered a statewide resource. Discussion ensued on the topic related to audit requirements, resolution of disputes, and the City’s jurisdiction to become involved in any disputes within the lessee organization. Chair O’Neill recommended adding a 7th subsection to Section E, noting whenever the City Council enters into a new lease or a lease renewal, they must make the findings as listing in Section E, Items 1 through 7, with the 7th Item stating the City Council may waive a particular finding if it discovers the action would be impossible for a potential lessee. Committee Member Tucker Finance Committee Meeting Minutes December 13, 2018 Page 7 of 10 emphasized that when a property is being leased for less than fair-market value, certain findings must be made, as that organization is already being granted favorable conditions through the reduction in rents. Deputy Director/Finance Montano introduced the City’s Real Property Administrator, Lauren Wooding Whitlinger. Administrator Wooding Whitlinger suggested the revision of language to Section E., Item 3. She suggested substituting the phrase “costs or expenses” for the word “allowances.” Committee Member Tucker agreed with this change, although he noted in the private sector the term “allowances” is commonly utilized. Administrator Wooding Whitlinger suggested the revision of language to Section J. She suggested a bullet point be added prior to Section J, Item 1, which states: Whether the City is prevented from selling the property by tidelands, grants, Coastal Commission guidelines, other State or Federal regulation, or otherwise restricted by deed or agreement Chair O’Neill stated this would essentially affirm whether the subject land could be even be sold legally. Committee Member Tucker requested additional time to review this particular section, as he believed it was covered within another section of the document. Chair O’Neill stated these constitute different findings from Section E, Item 1, and there should be a clarification process as to whether a property can legally be sold. Administrator Wooding Whitlinger suggested modification of the Section E, Item 1 to state: The maximum open market value of the City’s interest in the property in its as-is condition and its highest and best use. Committee Member Tucker did not necessarily want to include the concept of highest and best use, as on occasion, the City Council may prefer a particular property to have an alternative use. He requested additional time to review the wording of Policy F-7 overall to ensure clarity of the document before forwarding it to the City Council for their review. Chair O’Neill continued the review of Policy F-7 to the next Finance Committee meeting to allow Committee Member Tucker to work with Administrator Wooding-Whitlinger to revise the language of the policy. Discussion ensued among the Finance Committee members regarding whether a list of City properties exists and whether the properties should be itemized within the policy. Committee Member Tucker emphasized that requiring a potential lessee to have a good governance and operational structure prior to granting the lease will reduce the City’s involvement in future disputes. Chair O’Neill stated he would prefer the policy not to include references to specific properties, as it would potentially require unnecessary modification to add or delete such references if a change were to occur. Chair O’Neill moved forward to consideration of Policy F-8. Committee Member Collopy inquired if there was a particular problem the City was trying to resolve in requiring the Finance Director to approve all official travel prior to the time of travel (Section C). Discussion ensued on the topic, with staff noting up to 20 to 25 requests are reviewed and approved per week, mostly related to Police Department requests. Committee Member Collopy inquired if this approval can be delegated to the Department Directors. Chair O’Neill did not see any need to change the City’s current practice. Finance Committee Meeting Minutes December 13, 2018 Page 8 of 10 Committee Member Collopy inquired if the City had a continuity of City government policy. City Manager Leung confirmed she would research the matter and return to the Finance Committee with any related information. Chair O’Neill moved forward to consideration of Policy F-11. Committee Member Collopy inquired whether the City has a City-owned property control system or authorization process that addresses procedures related to usage constraints, location, transfers, and disposal of assets. Deputy Director/Finance Montano confirmed the City has an asset inventory system, which is updated periodically. Committee Member Collopy requested to meet with Deputy Director/Finance Montano to review the City’s system. Chair O’Neill moved forward to consideration of Policy F-13. There were no comments made on this item. Chair O’Neill moved forward to consideration of Policy F-15. Committee Member Collopy inquired as to how the areas of audit emphasis are selected each year. Director Matusiewicz stated the auditors independently select the area of risk to be evaluated, and the City could request additional areas of focus as an agreed-upon process. Committee Member Collopy would prefer the Finance Director, City Manager, and City Attorney as a group make the determination of the areas of highest risk. Deputy Director/Finance Montano noted the City had developed an internal control audit roadmap that had been shared with the Finance Committee at a previous meeting. Director Matusiewicz also affirmed an external auditor is utilized due to their independent nature and they should maintain control of the audit process, as is currently the preferred and established auditing standard. Chair O’Neill moved forward to consideration of Policy F-25. Committee Member Collopy stated in reference to Section A, he would prefer the Program Administrator and the Finance Department both be ultimately responsible for correct grant accounting. He emphasized grant accounting is very specialized, and that skill may not be available at the Department level. Director Matusiewicz affirmed that many of the grants are specialized and require Department-level staff to serve as Program Administrators due to their discipline-specific knowledge. Finance staff may not have the specialized knowledge required to administer a particular grant program. Committee Member Collopy emphasized grant accounting is specialized, and would like Section D to reflect that financial and grant reporting require two signatures, one from the Program Administrator, and one from the Finance Department, for final approval. Discussion ensued among the Committee and staff as to the appropriate process by which the City can be assured the financial reporting for grants will be completed correctly and any requirements that would be necessary during an audit of the grant. At the conclusion of the discussion, it was determined the current process, as put in place by the City, involved internal controls to assure the City Manager and City Council correct accounting for grants is taking place and no changes were made to the proposed wording of the policy. Committee Member Collopy inquired in regard to Section A as to why the Mayor would need to execute a grant contract. Discussion ensued on the matter with the final determination made that the Mayor executes documents, such as resolutions, which are approved by the City Council, which on occasion are grant contracts. Finance Committee Meeting Minutes December 13, 2018 Page 9 of 10 Chair O’Neill moved forward to consideration of Policy F-28. There were no comments made on this item. Chair O’Neill opened public comments. Jim Mosher suggested the checklist wording in Policy F-3 be amended to be budget corrections. Committee Member Collopy responded the checklist items are not correction, as that would imply there was an error. Mr. Mosher stated that the joint meeting of the City Council and Finance Committee could be held in the City Council Chamber, as the Coastal Commission currently meets there and the dais can accommodate 12 chairs. He further stated the performance plan did contain useful information, however, he does not know whether it warranted the commitment of staff time toward the process. Noting there were no other members of the public who elected to speak on this item, Chair O’Neill closed public comments. MOTION: Chair O’Neill moved, and Committee Member Stapleton seconded, to incorporate the changes to draft City Council Policies F-3, F-4, F-8, F-11, F-13, F-15, F-25, and F-28 as proposed in the staff report and as amended through the discussion with the Finance Committee, return them on a future agenda for further review, and continue the discussion of City Council Policy F-7 to the next Finance Committee meeting. The motion carried 5 – 0, with 2 Committee Member positions vacant. There was no further action taken on this item. C. WORK PLAN REVIEW Summary: Staff has prepared a list of key FY 2019/20 budget preparation milestones and alternate dates for Finance Committee meetings in calendar year 2019. Specific and detailed work plan elements can be determined in January after the new City Council session begins. Recommended Action: Select appropriate meeting dates for calendar year 2019 or select the date of January meeting and defer work plan development to January. Chair O’Neill determined the regular meeting schedule would be the second Thursday of each month, as a general rule. Discussion ensued on meeting topics pursuant to Chair O’Neill’s request for items. By consensus, the Finance Committee determined the following topics should be discussed by the Finance Committee in the upcoming meetings: Water (Dixon), Long Range Financial Plan (Collopy), Obligation side of the Unfunded Pension Liability (Collopy), and Public Works Department deep-dive. Discussion ensued on the meeting dates for 2019. The following dates were agreed upon, by consensus of the Finance Committee, for 2019: January 17, 2019 February 14, 2019 March 14, 2019 April 25, 2019 May 16, 2019 May 28, 2019 – Joint Meeting with the City Council May 30, 2019 June 27, 2019 Finance Committee Meeting Minutes December 13, 2018 Page 10 of 10 September 12, 2019 October 10, 2019 November 14, 2019 December 12, 2019 Chair O’Neill opened public comments. Jim Mosher reported the Zoning Administrator meetings are also held on Thursdays at 3:00 p.m., which would create a conflict for members of the public who would also attend the Finance Committee meeting. Noting there were no other members of the public who elected to speak on this item, Chair O’Neill closed public comments. The item was unanimously received and filed by the Committee. There was no further action taken on this item. VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON- DISCUSSION ITEM) VII. ADJOURNMENT The Finance Committee adjourned at 5:02 p.m. to the next regular meeting of the Finance Committee on January 17, 2019, at 3:00 p.m. Filed with these minutes are copies of all materials distributed at the meeting. The agenda for the Regular Meeting was posted on December 7, 2018, at 2:31 p.m., in the binder and on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic Center Drive. Attest: ___________________________________ _____________________ Will O’Neill, Chair Date Finance Committee Finance Committee Meeting Minutes December 13, 2018 Page 6 of 10 As related to City Council Policy F-3, Council Member Dixon inquired as how to codify the long- term financial planning process. Deputy Director/Finance Montano noted that Policy F-3 would be the appropriate policy to include the language memorializing the long-term financial planning process. Discussion ensued regarding the inclusion of some portion of the previous performance plan process, as Council Member Dixon found it to be informative, especially for new Committee Members and the public. Staff confirmed the performance plan process constituted a significant amount of time for City staff and the Socrata software performs a similar function. Chair O’Neill stated the budget message included at the front of the annual budget book provides clarification to the public as to how the budget is developed each year. Council Member Dixon requested the approved City budget be posted online by a specific deadline each year. It was suggested this item be placed under Policy F-3, Section C. Council Member Dixon inquired as to Policy F-3, Section D, Item 3 – Assessment District Appropriation. Discussion ensued regarding clarification of wording related to the maximum amount estimated, as it would not be known how many property owners would opt to pay the assessment in full. At the conclusion of the discussion, there were no suggested changes in wording to this section. Council Member Dixon requested clarification related to the phrase “carry-over” versus “re- budget.” Discussion ensued as to the definition of each of the two phrases. Chair O’Neill provided an example, noting the Corona Del Mar Library and Fire Station was included in the City’s approved Capital Improvement Plan, however, the City Council did not take action to encumber specific monies towards those projects in that budget year. If the monies where approved and dedicated in the following fiscal year budget, that would be considered a re- budget. Once the funds are approved and encumbered, they could be carried forward into a subsequent fiscal year. At the conclusion of the discussion, there were no suggested changes to the proposed wording. Chair O’Neill moved forward to consideration of Policy F-7. Committee Member Tucker first described the history of land-use hearings for the formerOld City Hall site, noting it had been determined the land was moremost valuable for housing than any other use. However, Tthe public preferred a hotel in the location and the City Council responded to their desire by entering intoinstituting a ground lease for the development of a hotel on deal to retain the property. He noted there are many beneficial aspects to being a ground landlordelements to a ground lease and preferred a deep that should be evaluatedlook into the value of a ground lease prior to disposing of a City-owned ground leased property. He emphasized the property owner, in this case the City, has more control as the tenant’s interest is a wasting asset. Owning property in a desirable location, such as Newport Beach, should be considered not only from a rental fee perspective, but also from all perspectives, prior to consideration of its sale. Committee Member Tucker next suggested the addition of a paragraph to Policy F-7, Section E, in order to ensure good governance and a best-practices operational structure in those circumstances where the City leases a public asset for little or no compensation, which will keep the City out of any future disputes. He proposed language that would require a non-profit lessee, which is seeking to lease tideland property, or other such public-use property, to include in their by-laws (i) a procedure that requires directors be chosen in an open processtheir membership to include members of the public and (ii) have a best-practices governance and operational structure, to be approved by the City Council. Committee Member Tucker emphasized that certain properties leased at below market, such as tidelands, are particularly public property, as they are not just utilized by City residents, but considered a statewide resource. Item No. 4A1 Draft Minutes of December 13, 2018 Correspondence Janaury 17, 2019 Finance Committee Meeting Minutes December 13, 2018 Page 7 of 10 Discussion ensued on the topic related to audit requirements, resolution of disputes, and the City’s jurisdiction to become involved in any disputes within the lessee organization. Chair O’Neill recommended adding a 7th subsection to Section E, noting whenever the City Council enters into a new lease or a lease renewal, they must make the findings as listing in Section E, Items 1 through 7, with the 7th Item stating the City Council may waive a particular finding if it discovers the action would be impossible for a potential lessee. Committee Member Tucker emphasized that when a property is being leased for less than fair-market value, certain findings must be made, as that organization is already being granted favorable conditions through the reduction in rents. Deputy Director/Finance Montano introduced the City’s Real Property Administrator, Lauren Wooding Whitlinger. Administrator Wooding Whitlinger suggested the revision of language to Section E., Item 3. She suggested substituting the phrase “costs or expenses” for the word “allowances.” Committee Member Tucker agreed with this change, although he noted in the private sector the term “allowances” is commonly utilized. Administrator Wooding Whitlinger suggested the revision of language to Section J. She suggested a bullet point be added prior to Section J, Item 1, which states: Whether the City is prevented from selling the property by tidelands, grants, Coastal Commission guidelines, other State or Federal regulation, or otherwise restricted by deed or agreement Chair O’Neill stated this would essentially affirm whether the subject land could be even be sold legally. Committee Member Tucker requested additional time to review this particular section, as he believed it was covered within another section of the document. Chair O’Neill stated these constitute different findings from Section E, Item 1, and there should be a clarification process as to whether a property can legally be sold. Administrator Wooding Whitlinger suggested modification of the Section E, Item 1 to state: The maximum open market value of the City’s interest in the property in its as-is condition and its highest and best use. Committee Member Tucker did not necessarily want to include the concept of highest and best use, as on occasion, the City Council may prefer a particular property to have an alternative use. He requested additional time to review the wording of Policy F-7 overall to ensure clarity of the document before forwarding it to the City Council for their review. Chair O’Neill continued the review of Policy F-7 to the next Finance Committee meeting to allow Committee Member Tucker to work with Administrator Wooding-Whitlinger to revise the language of the policy. Discussion ensued among the Finance Committee members regarding whether a list of City properties exists and whether the properties should be itemized within the policy. Committee Member Tucker emphasized that requiring a potential lessee to have a good governance and operational structure prior to granting the lease will reduce the City’s involvement in future disputes over governance issues. Chair O’Neill stated he would prefer the policy not to include references to specific properties, as it would potentially require unnecessary modification to add or delete such references if a change were to occur. Chair O’Neill moved forward to consideration of Policy F-8. CITY OF NEWPORT BEACH FINANCE COMMITTEE STAFF REPORT Agenda Item No. 5A January 17, 2019 TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE FROM: Lauren Wooding Whitlinger, Real Property Administrator 949-644-3236, lwooding@newportbeachca.gov SUBJECT: COUNCIL POLICY F-7, INCOME PROPERTY, REVIEW SUMMARY: The Finance Committee is charged with a variety of tasks including, but not limited to, reviewing and monitoring events and issues that may affect the financial status of the City and making recommendations to the City Council regarding amendments to financial and budgetary policies. A subcommittee of the Finance Committee was appointed to review and recommend changes if deemed necessary to certain financial policies, including Council Policy F-7, Income Property. Financial Planning Programs Subcommittee member Larry Tucker discussed the Policy with staff to help inform the nature and extent of the proposed changes. RECOMMENDED ACTION: Review the draft changes to Council Policy F-7, Income Property, and recommend further changes as needed for submission to the City Council for final approval. DISCUSSION: Most of the changes are minor in nature and seek to clarify the scope of the City’s mix of properties, and types of agreements that it may enter into. Other changes made by staff and members of the subcommittee are proposed to align policy with current and industry best practices. Council Policy F-7, Income Property Review January 17, 2019 Page 2 The following is an overview of the major changes to the policy proposed by the subcommittee: Section E, Item 7, adds parameters requiring entities contracting with the City, where less than open or appraised value is received, or an open bid process not conducted, to have self-governance and operational capacity written into its bylaws, consistent with that of a comparable professional organization or state or federally recognized nonprofit. Section K, Items 1- 6, adds language outlining the scope and nature of financial analysis that shall be prepared and provided to City Council, prior to offering any property in the City’s portfolio for sale, assuming the property is not restricted by state, federal, local or other factor limiting the City’s ability to divest the asset. The scope of analysis to be considered includes the (i) current fair market value of the property, (ii) whether the property is an important component of the City’s portfolio and strategic, long-term goals, (iii) whether changes to the lease term, rent structure, or utility of the property could positively impact cash flows associated with the property, (iv) whether proceeds from sale of the property would outweigh the income stream over the term of the lease, and (v) the financial benefit of the proposed use of such sale proceeds. The proposed financial policy revisions and proposals are prudent tools for the governance of the City’s financial resources. With the Committee’s comments and approval, Finance staff will bring Committee recommendations to the City Council for consideration and approval. Prepared and Submitted by: /s/ Lauren Wooding Whitlinger _____________________________ Lauren Wooding Whitlinger Real Property Administrator Attachment: A. Council Policy F-7, Income Property (Redline Version) ATTACHMENT A COUNCIL POLICY F-7, INCOME PROPERTY (REDLINE VERSION) F-7   1 INCOME AND OTHER PROPERTY The City owns and manages an extensive and valuable assortment of property including streets, parks, beaches, public buildings and service facilities. The City also owns or ground leases and/or operates a yacht basin, resort hotel and apartment propertya mobile home park, a luxury residential development and various other income producing properties. MuchMost of the income property is tidelands, filled tidelands or waterfront. Unencumbered fee value of income property is substantial.estimated at upwards of one four hundred million dollars, and income typically contributes ten percent of all City revenues. As owner/manager of property, the City is the steward of a public trust, and state law requires the City to maximize its returns on state-managed property or be subject to a charge of making a gift of public funds. Nevertheless, the City Council recognizes the importance of this property not only as a revenue generator, but also as a means to provide otherwise financially less unfeasible uses and facilities thatto benefit the community. In managing its property, the City will continually evaluate the potential of all City owned property to produce revenue. This may include leasing or licensing unused land, renting vacant space, and establishing concessions in recreation areas or other similar techniques. The City Council will evaluate the appropriateness of establishing new income generating opportunities on City controlled areasproperties using sound business principles and after receiving input from neighbors, and users and the public. The policy of the City Council is that income and other property be held and managed in accordance with the following: A. Whenever a lease, license, management contract, concession, sale or similar action regarding income property is considered by the City, an analysis shall be conducted to determine the maximum or open market value of the property. This analysis shall be conducted using appraisals or other techniques to determine the highest and best use of the property and the highest income generating usevalue of the property. B. All negotiations regarding the lease, license, management contract, concession, sale or similar action regarding income property shall include review of an appraisal or analysis of the use being considered for the property conducted by a reputable and independent professional appraiser, real estate consultant, or business consultant. C. The City shall seek, whenever practical and financially advantageous both in the short and long term, to operate or manage all property and facilities directly with F-7   2 City staff or contractors, provided staff has the expertise needed to competently do so, or to oversee the work of contractors. D. In mostall negotiations regarding the lease, license, management contract, concession, sale or similar action regarding an non-residential income or other property, the City shall seek revenue equivalent to the open market value of the highest and best use; and, whenever practicablepossible the City shall conduct an open bid or proposal process to ensureinsure the highest financial return. D.E. However, in some circumstances the City may determine that use of a property by the public for recreational, charitable or other nonprofit purpose is preferred and has considerable public support, in which case the City may determine that non-financial benefits justify not maximizing revenue from such property. In such circumstances, the City has a vested interest in ensuring that the lessee of such property operates the activities conducted on or from the property in the manner that has been represented to the City throughout the duration of any lease or contract with the City. E.F. Whenever less than the open market or appraised value is received or when an open bid process is not conducted, the City shall make specific findings setting forth the reasons thereof. Such findings may include but need not be limited to the following: 1. The City is prevented by tideland grants, Coastal Commission guidelines or other restrictions from selling the property or converting the propertyit to another use. 2. Redevelopment of the property would require excessive time, resources, expertise and costs, which would outweigh other financial benefits. 3. Converting the property to another use or changing the operator, manager, concessionaire, licensee, or lessee of the property would result in excessive vacancy, relocation or severance costs, real estate commissions, tenant improvement allowances, expenses or rent concessions which would outweigh other financial benefits. 4. Converting residential property to another use or opening residential leases to competitive bid would create recompensable liabilities and other inequities for long-term residents. 5. The property provides an essential or unique service to the community or a clearly preferred use that enjoys substantial support in the community that F-7   3 might not otherwise be provided were full market value of the property be required. 6. The property serves to promote other goals of the City such as affordable housing, preservation of open space, uses available to the public or marine related services. 6.7. If the lessee is not (a) a statewide or national nonprofit organization, or (b) a public entity or subdivision thereof, then the City finds that the By-Laws and charter documents of such lessee (i) establishes a procedure wherein the election of directors of such lessee is accomplished by an open, democratic and transparent process that allows members to vote, (ii) has a governance and operational structure that is consistent with best practices for non-profit public benefit corporations as determined by the City Council, and (iii) cannot be amended without the prior written consent of the City as lessor. F.G. Generally, lengths of licenses, leases, management contracts, concessions, or similar agreements will be limited to the minimum necessary to meet market standards or encourage high quality improvements and will contain appropriate reappraisal and inflation protection provisions. Also, all agreements shall contain provisions to assure complete audits periodically through their terms. G.H. All negotiations regarding the license, lease, management contract, concession, sale or similar action regarding income property shall be conducted by the City Manager or his/her designee under the direction of any appropriate City committees. H.I. To provide an accurate accounting of actual net revenues generated by the City’s income property, all costs and charges directly attributable or allocable to the management of a specific income property shall be chargeddebited against the gross revenues collected on that property in the fiscal year the costs are incurred. Costs soand chargeables include but are not limited to property repairs and maintenance, property appraisals, and consultant fees, as authorized by the City Council, City Manager, or by this Income Property Policy. [Question: What other charges would this include?] J. The City Manager or his/her designee is authorized to sign a license, lease, management contract, concession, or similar agreement or any amendment thereto, on behalf of the City. Notwithstanding the foregoing, the City Manager or his/her designee, or a City Council member, may refer any license, lease, management contract, concession or similar agreement or any amendment thereto, to the City Council for its consideration and/or action. F-7   4 K. The City’s portfolio of quality income producing properties adds an element of diversification to a portfolio otherwise invested primarily in financial assets. Certain of those income properties are restricted from sale by their terms of grant, state agency regulations or rules, other federal and state guidelines, private covenant or agreement or otherwise. For those properties not so restricted from sale, an analysis shall be prepared to determine the following prior to such income producing property being offered for sale: 1. The maximum open market value of the City’s interest in the property in its as is condition. 2. If the property is in an important location, a determination of the possible future consequences of the City no longer controlling that property. 3. If the current rent is contractually low and significant rent increases are likely within a finite period. 4. The likelihood of significant increases in the ability of the property to generate income after the expiration of any current lease of the property. 5. The likelihood of a lease extension being requested by the tenant and the ability to substantially increase rents or require significant improvements to enhance the utility and the value of the property as consideration for granting such an extension. I. 6. The value of the revenue stream from (i) lease income over the life of an existing lease and/or (ii) likely lease revenue if an existing lease were to be renewed or the property re-let to a different tenant; and/or (iii) lease income from the property if it were to be converted to its highest and best use, compared with the financial benefits of the use of the proceeds of a sale and if, considering the totality of the circumstances, such use of the proceeds of a sale is preferable to retaining the property in question. Adopted - July 27, 1992 Amended - January 24, 1994 Amended - February 27, 1995 Amended - February 24, 1997 Amended - May 26, 1998 Amended – August 11, 2009 Amended – May 14, 2013 Formerly F-24 1/17/2019 1 1 CalPERS Update City of Newport Beach January 17, 2019 Kerry Worgan FSA, FCIA Supervising Pension Actuary, CalPERS 2 CalPERS Update CalPERS Funding Liability •Accrued Liability calculated based on : - Present value of projected benefit payments based on: - salary growth assumptions - termination/death/disability assumptions - retirement age assumptions - mortality assumptions - inflation assumptions - Present value of projected ER + EE contributions •Discount Rate = Expected Future Investment Return -reflects short-term capital market assumptions ( 10 yrs) - reflects long-term capital market assumptions (11+ years) - based on strategic asset allocation which is set by Board through ALM process and monitored/adjusted if necessary 1/17/2019 2 3 CalPERS Update Accrued Liability - Example •New Entrant – Entry Age 30 – Earning $50K •Branches represent decrements: –Termination –Transfer –Death –Disability •Project Benefit payable at each branch •Present Value of each Benefit Entry Age }Retire Age 4 CalPERS Update Accrued Liability - Example •At Entry Age 30 •Present Value of Future Benefits –$60,000 •Present Value of Future Salary –$600,000 •Total Normal Cost –$60,000 / $600,000 = 10% •Employer Normal Cost –Total Normal Cost minus Employee Contribution 1/17/2019 3 5 CalPERS Update Accrued Liability - Example •At Attained Age 35 •Present Value of Future Benefits –PVFB = $85,000 •Present Value of Future Normal Cost –PVFNC = $55,000 •Accrued Liability = PVFB - PVFNC –$30,000 6 CalPERS Update Accrued Liability – Experience Gains/Losses •Actual experience will differ from expected experience •Differences will create demographic gains or losses in each future valuation •For example: –large salary increase will create higher accrued liability and experience losses –Higher terminations will create lower accrued liability and experience gains 1/17/2019 4 7 CalPERS Update Recent Changes •Discount Rate Changes - 7.50% to 7.375% at 6.30.16 (FY 2018-19) - 7.375% to 7.25% at 6.30.17 (FY 2019-20) - 7.25% to 7.00% at 6.30.18 (FY 2020-21) •Demographic Assumption Changes - 2017 Experience Study Completed (updating salary, mortality, retirement, and termination rates) - first reflected in 6.30.17 valuation, impact Rates for 2019-20 - 5 year projections of rates provided in valuation report •Amortization Schedule impact - $11.0M (Misc) and $15.2M (Safety) of additional AL at 6.30.18 at 7.0% 8 CalPERS Update Funded Status ($M) At June 30, 2017 Miscellaneous Safety TOTAL Accrued Liability $396.83 $542.67 $939.50 Assets $278.87 $340.96 $619.83 Unfunded Liability $117.96 $201.70 $319.67 Funded Ratio 70.3% 62.8% 66.0% 1/17/2019 5 9 CalPERS Update Required Contributions – FY 2019/20 •Normal Cost – Cost of service earned in the coming year •Unfunded Accrued Liability –Amortized payments for outstanding liability Plan Miscellaneous Safety Totals Normal Cost* $4,259,707 $6,554,081 $10,813,788 Unfunded Liability Payment** $9,808,449 $16,661,108 $26,469,557 Total Annual Contribution $14,068,156 $23,215,189 $37,283,345 2019/20 Normal Cost Employer Rate 9.354% 18.991% •*Based on projected payrolls, discount rate of 7.25% •**Unfunded Liability Payment may be pre-paid for year or CalPERS will send a monthly invoice 10 CalPERS Update DEMO Projection Prototype Tool 1/17/2019 6 11 CalPERS Update CalPERS Facts 12 CalPERS Update 1/17/2019 7 13 CalPERS Update 14 CalPERS Update 1/17/2019 8 15 CalPERS Update Questions? © PFM 0 City of Newport Beach Section 115 Trust Discussion 50 California Street Suite 2300 San Francisco, CA 94111 Ellen Clark, Senior Managing Consultant January 17, 2019 © PFM 1 Comparison Restricted to high-quality short term fixed income investments Designed for short-term funds to be accessed (spent) within 0-2 years Total return potential is limited Funds may be segregated an internal service fund but could be used for other purposes City controls investment strategy Broader investment universe including lower credit quality fixed income and stocks Appropriate for intermediate to long-term funds not to be used for 5 years + Total return potential is higher Funds contributed to a trust must be used for the stated purpose, i.e. OPEB, pension The City controls investment strategy Operating Funds Section 115 Trust Funds © PFM 2 Why Consider a Section 115 Trust Access to expanded investment universe with potential for higher returns over time Sets aside funds for a specific purpose Offers budgetary control tool to smooth the impact of rising contributions to CalPERS The City has control over investment strategy © PFM 3 Expand the Investment Universe Funds invested in a captive could be subject to the insurance regulations of the state in which the captive is domiciled, allowing for greater investment flexibility than what is typically permitted for public agency funds in California. Investment Authority “ C o n v e n t i o n a l ” F i x e d - I n c o m e U.S. Treasuries CA Gov’t Code Federal Agencies CA Gov’t Code Municipal Securities CA Gov’t Code Negotiable Certificates of Deposit CA Gov’t Code Prime Commercial Paper CA Gov’t Code Bankers’ Acceptances CA Gov’t Code Medium-Term Corporate Bonds (“A” or Better)CA Gov’t Code Asset-Backed Securities (ABS)CA Gov’t Code Supranationals (“AA” or better)CA Gov’t Code Repurchase Agreements CA Gov’t Code Money Market Funds CA Gov’t Code Local Government Investment Pools CA Gov’t Code B r o a d e r F i x e d - I n c o m e Foreign Sovereign/Agencies Multi-Asset Class Portfolio Non-Agency MBS Multi-Asset Class Portfolio BBB and High-Yield Multi-Asset Class Portfolio Private Placements Multi-Asset Class Portfolio Convertibles Multi-Asset Class Portfolio Emerging Markets Debt Multi-Asset Class Portfolio Non-U.S. Dollar Investment Grade Multi-Asset Class Portfolio Bank Loans Multi-Asset Class Portfolio E q u i t i e s Domestic Equities (Large Cap, Mid-Cap, Small Cap)Multi-Asset Class Portfolio International Equities (Large Cap, Mid-Cap, Small Cap)Multi-Asset Class Portfolio Emerging Markets Multi-Asset Class Portfolio Preferred Stock Multi-Asset Class Portfolio Equity Mutual Funds and ETFs Multi-Asset Class Portfolio A l t e r n a t i v e s Commodities Multi-Asset Class Portfolio Real Estate Multi-Asset Class Portfolio Hedge Funds Multi-Asset Class Portfolio Private Equity Multi-Asset Class Portfolio Source: California Government Code Section 53601 © PFM 4 Rationale for Multi-Asset Class Investing Index Returns As of December 31, 2018 1 Year 3 Years 5 Years 10 Years Domestic Equity (Russell 3000 Index)-5.24%8.97%7.91%13.18% International Equity (MSCI ACWI ex US)-14.20%4.48%0.68%6.57% Fixed-Income (Barclays Aggregate) 0.01%2.06%2.52%3.48% ICE BofA 1-5 Year Government/Credit AA and Better Index 1.52%1.09%1.09%1.33% Source: Investment Metrics as of 12/31/2018. The introduction of multi-asset class investments (including broader fixed-income and equities) may reduce volatility and enhance returns over time © PFM 5 Long-Term Equity & Bond Return Have Outpaced Inflation Source: Morningstar as of 12/31/2018. -20% -18% -16%-14%-12% -10% -8% -6% -4% -2% 0% 2% 4% 6%8%10% 12% 14% 16% 18% 20% 22% 24% 26% 28%30%32% 34% 36% 38% 40%Annualized 5 Year Rolling Equity & Bond Returns S&P 500 Consumer Price Index Barclays Aggregate Bond (1976-2013) and 50% Int. Corporate, 25% Int. Gov't and 25% US Long-term Gov't (1950-1976) U.S.Inflation Geometric Mean: 3.04% Domestic Equity Geometric Mean: 9.78% Aggregate Fixed Income Geometric Mean: 5.11% © PFM 6 Developed Int’l and Emerging Markets Cycles of Performance Source: Morningstar as of 12/31/2018. -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%Annualized 5 Year Rolling Developed Int’l and Emerging Market Returns MSCI EAFE MSCI Emerging Markets MSCI EAFE Geometric Mean: 9.01% MSCI EM Geometric Mean(Since 2004): 9.60% © PFM 7 Fixed Income: 30 Years of Declining Rates 10-Year U.S. Treasury Yield 1962 -Current Longest Bull Market in History Source: St. Louis Federal Reserve as of 12/31/2018 © PFM 8 The City Trustee BankPFM Investment Advisor Fiduciary Overseeing Investment Functions Primary Fiduciary Fiduciary Overseeing Holding of Assets Collaborate on Strategy, Provide Reporting and Communication Independent Safekeeping and Reporting of AssetsSection 115 Trust Oversight of the Trust –Your Fiduciary Partners © PFM 9 City Governance Structure and Oversight Section 115 Pension Trust INVESTMENT COMMITTEE Primary Fiduciary Bylaws of the Section 115 Trust Investment Committee: Defines the: 1.Membership 2.Administration 3.Meetings 4.Accountability 5.Conflicts of Interest Regulations Charter of the Section 115 Pension Trust Investment Committee: Defines the 1.Purpose 2.Composition 3.Duties and Responsibilities Investment Policy Statement IPS of the Section 115 Pension Trust: Guidelines on: 1.Investment Authority and Objectives 2.Investment Guidelines 3.Selection of Investment Managers 4.Guidelines for Portfolio Holdings 5.Control Procedures Investment Advisor Co-Fiduciary © PFM 10 Various Asset Allocation Options to Drive Incremental Returns Sample CA Portfolio PFM 20/80 Model PFM 30/70 Model PFM 40/60 Model Equity 0.0%20.0%30.0%40.0% Domestic Equity 0.0%13.0%20.0%26.0% International Developed Equity 0.0%5.0%7.0%10.0% Emerging Markets Equity 0.0%2.0%3.0%4.0% Fixed Income 100.0%80.0%70.0%60.0% Short-Term Fixed 100.0%0.0%0.0%0.0% Core Fixed Income 0.0%40.0%35.0%30.0% Investment Grade Corporate 0.0%20.0%17.5%15.0% Emerging Markets Debt 0.0%10.0%8.8%7.5% High Yield 0.0%10.0%8.8%7.5% Intermediate-Term Assump. (5 Years) Expected Return 3.1%4.2%4.6%4.9% Standard Deviation 3.0%6.0%7.0%8.0% Probability of 4.0% Return 25.0%53.2%57.2%59.8% Long-Term Assump. (30 Years) Expected Return 4.3%6.3%6.6%6.8% Standard Deviation 3.0%6.0%7.0%8.0% Probability of 4.0% Return 71.1%98.7%98.5%97.8% *Sample CA Portfolio represents a diversified, high-quality 1-3 year portfolio in compliance with the requirements of the California Government Code. © PFM 11 2019 Capital Market Assumptions Expected Return Expected Risk Expected Return Expected Risk US Equity 6.0%16%7.5%16% International Developed Equity 6.6%17%7.4%17% Emerging Markets Equity 6.1%20%7.5%20% Short-Term Fixed 3.1%3%4.3%3% Core Fixed Income 3.0%4%5.1%4% Intermediate Investment Grade 3.7%6%6.1%6% Emerging Markets Debt 4.0%10%6.7%7% High Yield 4.3%9%6.6%9% Bank Loans 4.4%6%5.4%10% REITs 5.7%12%6.5%6% Private Equity Real Estate 6.5%15%7.8%12% Commodities 4.9%16%5.5%15% Hedge Funds 5.5%15%7.2%16% Private Equity 7.1%25%9.5%15% Cash 3.2%1%3.5%25% Intermediate: Next 5 Years Long Term Projections For the intermediate term (up to 5 years), our capital market assumptions derive from our assessment of current economic conditions, including corporate profits, balance sheets, etc., and current valuations for various asset classes. Our long-term assumptions are derived using an economic building block approach that projects economic and corporate profit growth and takes into consideration the fundamental factors driving long-term real economic growth, our expectation for inflation, productivity and labor force growth. © PFM 12 40/60 Asset Allocation Return Expectations Based on PFM’s Capital Market Assumptions PFM 40/60 Model Expected Return Intermediate-Term Projections Long-Term Projections Standard Deviation 8.1%8.3% Return Variance 5 Year 10 Year 30 Year 95th Percentile 10.4%9.1%9.6% 75th Percentile 7.3%6.6%8.1% 50th Percentile 4.9%4.9%7.1% 25th Percentile 2.5%3.2%6.1% 5th Percentile -0.9%0.7%4.6% All returns are annualized The information provided reflects standard risk and return metrics for the portfolio depicted and are derived by running Monte Carlo simulations using PFM’s Capital Market Assumptions and the strategic target asset class allocations as of the presentation date. Please refer to PFM’s Capital Market Assumptions presentation for key assumptions and the methodology utilized. The return data is hypothetical in nature and should not be relied upon as independently verifiable information. There is no guarantee that the projected returns can or will be achieved. Results may vary with each use and over time. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon or used in substitution for the exercise of independent judgment. Past performance is not a guarantee of future results. Prior to investing, you should consult your accounting, tax, and legal advisors to understand the implications of such investment. US Equity 26.00% Int'l Developed Equity 10.00% EM Equity 4.00% Core Fixed 30.00% Inv. Grade Corp 15.00% EM Debt 7.50% High Yield 7.50% © PFM 13 PFM Fixed Income Performance September 30, 2018 Strategy/Benchmark Average Annual Total Returns Duration Standard Deviation of Returns No. of Accounts Assets (in $ Millions) (5 years) 1 Year 3 Years 5 Years 7 Years 10 Years PFM 1-3 Year Fixed Income Composite 0.46%0.77%0.82%0.81%1.51%1.64 0.61%157 11,287 ICE BofAML 1-3 Treasury Index 0.04%0.38%0.56%0.53%1.09%1.80 0.69% PFM 1-5 Year Fixed Income Composite -0.16%0.69%1.03%1.05%2.16%2.31 1.13%130 9,315 ICE BofAML 1-5 Treasury Index -0.58%0.29%0.73%0.70%1.58%2.57 1.29% ICE BofAML 1-5 Gov't/Corp, AA or better -0.48%0.39%0.81%0.81%1.79%2.53 1.25% The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate. Data shown is prior to the deduction of investment advisory fees. GIPS compliant composite presentations are available upon request. For important disclosure information please go to pfm.com/disclosures. Benchmark source: Bloomberg. All benchmarks represent total returns for the noted periods, with the exception of the ICE BofAML Constant 5-Year Maturity Treasury Index, which represents a book value return by utlizing the rolling 60-month moving average yield. As the stable value benchmark is an equally weighted rolling 60-month moving average of a 5-year Treasury security for each month, the 2.54 year duration noted above represents a weighted average maturity (WAM). © PFM 14 PFM Multi-Asset Class Performance September 30, 2018 Strategy/Benchmark No. of Accounts Assets (in $ millions) 1 Year 3 Years 5 Years 7 Years PFM Multi Asset Class 40:60 Composite 4.47%7.12%5.85%7.49%8 133.6 26% Russell 3000, 14% MSCI ACWI ex US, 60% Barclays Aggregate 3.93%6.56%5.42%6.62% PFM Multi Asset Class 40:60 Low Volatility Composite 4.51%5.80%2 89.2 26% Russell 3000, 14% MSCI ACWI ex US, 60% Barclays Aggregate 3.93%6.56% PFM Multi Asset Class 30:70 Composite 3.90%6.04%5.22%6.51%13 177.7 20% Russell 3000, 10% MSCI ACWI ex US, 70% Barclays Aggregate 2.70%5.27%4.66%5.52% PFM Multi Asset Class 20:80 Composite 3.29%5.11%4.49%5.67%3 5.2 13% Russell 3000, 7% MSCI ACWI ex US, 80% Barclays Aggregate 1.34%3.92%3.80%4.32% PFM Multi Asset Class Fixed Income Composite -0.67%2.23%2.67%3.45%7 22.7100% Barclays Aggregate -1.22%1.31%2.16%2.02% The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate. Data shown is prior to the deduction of investment advisory fees. GIPS compliant composite presentations are available upon request. © PFM 26 Appendix © PFM 15 More than 35 years’ experience managing money for public sector entities •$128.1 billion in total assets under management and advisement* Discretionary multi-asset class portfolios employ best in class managers Serve over 135 clients, representing $6.0 billion in discretionary multi-asset class asset for pension, OPEB and Section 115 trusts* •63 OPEB plans representing $4.0 billion in assets* Strong and established track record Independent investment advisory firm focused on helping our clients invest funds wisely Client Types •State and Local Governments •Healthcare and Higher Education •Not-for-Profit •Insurance Portfolio Types •Pension and OPEB Funds •Endowments and Foundations •Defined Contribution Plans About PFM *As of September 30, 2018 Multi-Asset Class Management © PFM 16 0% 4% 8% 12% 16% Cash Short Bonds Core Bonds High Yield Corporates U.S. Equity Developed ex U.S. Emerging Markets Pr o j e c t e d 5 -Ye a r A n n u a l i z e d R e t u r n Intermediate Term (5-Year) Capital Market Assumptions 2015 2016 2017 2018 2019 Source: PFM 2015-2019 Capital Market Assumptions; 5-Year annualized returns sourced from Bloomberg, as of December 31, 2018 The Evolution of PFM Capital Market Assumptions 5-Year Annualized Return (2014-2018)5-Year Annualized Return (2013-2017) © PFM 17 2019 | 6.0% 2018 | 6.5% U.S. Equity Intermediate Assumption Annual Income –steady at 2.2% Stock Buyback/Dividend Increase –steady at 0.60% Continued economic growth Lower valuations Reduced shares outstanding Benign rate environment Annual income/dividends More stock buybacks Modestly lower revenue and profit growth Heightened volatility Positive Neutral Negative U.S. Equity Return Assumption Modestly Lower Source: PFM 2019 Capital Market Assumptions. © PFM 18 2019 | 3.0% 2018 | 1.9% Core Bonds Intermediate Assumption Annual Income –steady at 2.2% Stock Buyback/Dividend Increase –steady at 0.60% Higher starting yield Wider credit spreads Moderated interest rate increases Low inflation Flat yield curve Modestly higher duration Downgrades > upgrades Positive Neutral Negative Bond Return Outlook Improving Source: PFM 2019 Capital Market Assumptions. © PFM 19 Ex-Officio Member Leo Karwejna Chief Compliance Officer Committee Members Economic & Capital Markets Research Research Team Multi-Asset Class Investment Committee Multi-Asset Asset Allocation Manager Research, Due Diligence and Monitoring Multi-Asset Portfolio Construction Biagio Manieri, Ph.D., CFA, Chair Chief Multi-Asset Class Strategist 33 Years Industry Experience John Spagnola Multi-Asset Class Practice Co-Leader 35 Years Industry Experience Marc Ammaturo Multi-Asset Class Practice Co-Leader 23 Years Industry Experience Marty Margolis Chief Investment Officer 41 Years Industry Experience Kenneth Schiebel, CFA Managing Director 38 Years Industry Experience Alex Gurvich Director of Investment Research 26 Years Industry Experience Mark Yasenchak, CFA Director 18 Years Industry Experience Surya Pisapati, CFA Senior Research Analyst 10 Years Industry Experience The Committee averages 28 years of Industry Experience © PFM 20 Diversification: There is No Substitute Source: JP Morgan Guide to the Markets 1Q19 as of 12/31/2018. © PFM 21 2018 Asset Class Returns -1.1% -3.9% -11.2% -2.1% -2.2% 0.0% 1.5% 1.8% -14.5% -13.3% -4.4% -20%-10%0%10%20%30%40% 2018 Returns 2017 Returns Prior 5-Year Returns Prior 5-Year Returns are based on time period from 2013-2017 and are annualized. Equities Domestic Fixed Income Alternatives U.S. Developed ex U.S. Emerging Markets Commodities Real Estate Hedge Funds Cash Short Bonds Core Bonds Investment Grade Credit High Yield Corporates © PFM 22 2,300 2,400 2,500 2,600 2,700 2,800 2,900 3,000 Jan '18 Feb '18 Mar '18 Apr '18 May '18 Jun '18 Jul '18 Aug '18 Sep '18 Oct '18 Nov '18 Dec '18 Jan '19 S&P Price Change S&P 500 Has Rallied Almost 10% Since 12/24 Source: Bloomberg, as of 1/14/2019. 2017 close Now: +9.8% since 12/24, price return © PFM 23 Yield Curve Continues Its Two Years of Flattening 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 3 M 1 Y 2 Y 3 Y 5 Y 10 Y 30 Y Yi e l d Maturity December 31, 2018 December 29, 2017 December 30, 2016 U.S. Treasury Yield Curve History © PFM 24 2019 Capital Market Assumptions, Correlations US Equity International Developed Equity Emerging Markets Equity Core Bonds Intermediate Investment Grade Corp Emerging Markets Debt High Yield Bank Loans REITs Private Equity Real Estate Commodities Hedge Funds Private Equity Cash US Equity 1 International Developed Equity 0.8 1 Emerging Markets Equity 0.7 0.7 1 Core Bonds 0.3 0.2 0.2 1 Intermediate Investment Grade 0.3 0.2 0.2 0.9 1 Emerging Markets Debt 0.5 0.5 0.5 0.4 0.4 1 High Yield 0.7 0.5 0.5 0.4 0.4 0.4 1 Bank Loans 0.4 0.3 0.3 0.3 0.3 0.7 0.7 1 REITs 0.5 0.4 0.4 0.3 0.3 0.3 0.4 0.4 1 Private Equity Real Estate 0.4 0.3 0.3 0.3 0.3 0.2 0.4 0.2 0.8 1 Commodities 0.1 0.1 0.2 0.2 0.2 0.3 0.2 0.2 0.1 0.1 1 Hedge Funds 0.6 0.5 0.5 0.4 0.4 0.3 0.4 0.4 0.4 0.3 0.2 1 Private Equity 0.7 0.6 0.6 0.3 0.3 0.3 0.5 0.2 0.4 0.4 0.1 0.5 1 Cash 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.1 1 Correlations Please refer to PFM’s 2019 Capital Market Assumptions for a complete description of the methodology used to develop these assumptions and important disclosures. © PFM 25 Disclaimers Any investment advice in this document is provided solely by PFM Asset Management LLC. PFM’s asset management business is an investment advisor registered under the Investment Advisers Act of 1940. This material is based on information obtained from sources generally believed to be reliable and available to the public; however, we cannot guarantee its accuracy, completeness, or suitability. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. All statements as to what will or may happen under certain circumstances are based on assumptions, some but not all of which are noted in the presentation. Assumptions may or may not be proven correct as actual events occur, and results may depend on events outside of your or our control. Changes in assumptions may have a material effect on results. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in this presentation is not an offer to purchase or sell any securities. © PFM 27 CITY OF NEWPORT BEACH FINANCE COMMITTEE STAFF REPORT Agenda Item No. 5D January 17, 2019 TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE FROM: Finance Department Dan Matusiewicz, Finance Director 949-644-3123 or danm@newportbeachca.gov SUBJECT: BUDGET AMENDMENTS (QUARTER ENDED DECEMBER 31, 2018) EXECUTIVE SUMMARY The purpose of this memorandum is to report on the budget amendments for the second quarter of Fiscal Year 2018/19. All budget amendments are in compliance with City Council Policy F-3, Budget Adoption and Administration. DISCUSSION City Council Policy F-3, Budget Adoption and Administration, identifies how appropriations can be transferred, increased or reduced. The Finance Committee reviews a quarterly report of City Council and City Manager budget amendments including their effect on fund balance. Please find the list of budget amendments for the quarter ending December 31, 2018, as Attachment A. Prepared by: Submitted by: /s/ Susan Giangrande /s/ Dan Matusiewicz Susan Giangrande Dan Matusiewicz Budget Manager Finance Director Attachment: A. Budget Amendments Fiscal Year 2018/19 Quarter Ending December 31, 2018 ATTACHMENT A BUDGET AMENDMENTS FISCAL YEAR 2018/19 QUARTER ENDING DECEMBER 31, 2018 Date Amount Amendment Type Fund Net Effect on Fund Balance Increase/(Decrease) Department Explanation 10/23/2018 $18,000.00 City Council General Fund - Library To increase expenditure appropriations and revenue estimates for funding received from the CA State Library for Literacy Services annual grant program. 10/23/2018 $144,000.00 City Council General Fund (144,000.00) Utilities To increase expenditure appropriations from unappropriated General Fund balance to the Beach Trashcan Collection account for four months of services in FY 2018-2019 10/23/2018 $596,300.00 City Council Tidelands Capital (596,300.00) Public Works To increase expenditure appropriations from the unappropriated Tidelands Capital fund balance to be used for the Grand Canal Dredging project. 11/13/2018 $353,142.00 City Council Environmental Cont.(96,858.00) Public Works To increase revenue estimates and expenditure appropriations to provide funding for completion of the Median Landscape Turf Replacement Project. Balboa Village Parking Management (181,000.00) Measure M (230,000.00) 11/13/2018 $12,271.00 City Council General Fund (12,271.00) Police To increase expenditure appropriations for the purchase of supplies and equipment for the City's Emergency Operations Center from the Emergency Management Performance Grant included in the FY 2018-19 Adopted Budget. 11/27/2018 $19,936.64 City Council General Fund - Recreation and Senior Services To increase revenue estimates and expenditure appropriations for the purchase and installation of cardio equipment for the OASIS Senior Center. 11/27/2018 $116,377.61 City Council General Fund - Library To increase revenue estimates and expenditure appropriations and accept funding from the Friends of the Newport Beach Library for library materials and office furniture. 11/27/2018 $300,000.00 City Council Wastewater Enterprise Fund - Public Works To increase revenue estimates in the Wastewater Fund from OCSD and increase expenditure appropriations to cover costs for inspection, maintenance, repair or rehabilitation of the subject sewer. 11/27/2018 $150,000.00 City Council General Fund CIP - Public Works To transfer expenditure appropriations from the Jasmine Creek Maintenance Road Reconstruction Project to the FY 2019 Concrete Replacement Program. 11/27/2018 $513,750.00 City Council Gas Tax - Public Works To transfer expenditures appropriations from the Concrete Street Pavement Rehabilitation project to Bayside Drive Rehabilitation project and recognize additional revenue from OCSD for the Bayside Drive Rehabilitation project. 11/27/2018 $677,000.00 City Council Tidelands Capital (377,000.00) Public Works To increase expenditure appropriations from the unappropriated Tidelands fund balance and to transfer funds from the cancelled Harbor Port Plan in Tidelands Capital fund to be used for the Harbor-wide Dredging/Planning project. 11/27/2018 $485,000.00 City Council Assessment Dist #113 (485,000.00) Public Works To authorize the formation and design associated with Assessment District #113. 11/27/2018 $20,000.00 City Council General Fund (20,000.00) Public Works To increase expenditure appropriations from unappropriated General Fund balance to the Public Works Department operating budget to be used for landscape maintenance of Civic Center grounds and park. 10/08/2018 $3,600.00 City Manager General Fund - Recreation and Senior Services To increase revenue estimates and expenditure appropriations related to the per player field maintenance agreement for the Adult Soccer League's Fall 2018 season. $1,416,764.00 General Fund - $1,924,620.00 Tidelands Fund - 11/07/2018 $500.00 City Manager General Fund - Library To increase revenue estimates and expenditures appropriations to accept donation to the Newport Beach Public Library. 10/26/2018 City Manager Public Works Harbor Dept Real Property To record the transfer of revenue estimates between Public Works, Community Development, Harbor, Finance and Utilities due to formation of the Harbor and Utilities Departments. City of Newport Beach Budget Amendments Fiscal Year 2018-19 Quarter Ending December 31, 2018 Public Works To increase expenditure appropriations from the unappropriated Balboa Village Parking Management fund balance and the unappropriated Measure M Fair Share fund balance for the Balboa Village Streetscapes Improvements project. 11/13/2018 $411,000.00 City Council ATTACHMENT A WORK PLAN  Scheduled Date Agenda Title Agenda Description Council Policy F-7, Income Property, Review A subcommittee of the Finance Committee was appointed to review and recommend changes if deemed necessary to select financial policies. In continuation from the December 13, 2018, meeting, the subcommittee working with staff has made additional edits to Council Policy F-7, Income Property, in order to align policy with current practice. Pension Accrued Liability Basics The City’s CalPERS actuary, Kerry Worgan, will present the major components, assumptions and plan experience considered during the development of the pension accrued liability. Section 115 Discussion An investment advisor and major provider of Section 115 pension prefunding trusts, PFM, will discuss the pros and cons; risks and benefits; and other considerations when considering the establishment of a Section 115 pension benefit trust. Budget Amendements (Quarter Ended December 31, 2018 Receive and file a staff report on the budget amendments for the prior quarter. Work Plan Review Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Discuss Items for Future Agendas Tuesday, January 22, 2019 CITY COUNCIL STUDY SESSION Beacon Economics will present its bi-annual economic and top revenue forecast for the City of Newport Beach. Saturday, February 02, 2019 CITY COUNCIL OFF-SITE PLANNING SESSION Staff will present status and funding of major programs planned for the calendar year. Harbor and Beaches Master Plan Review Harbor and Beaches Master Plan for financial solvency based on known Council Priorities Facilities Financial Plan Review Facilities Financial Plan for financial solvency based on known Council Priorities AMI Discussion Staff will discuss the planned financing and implementation of advanced metering infrastructure (AMI). AMI is an integrated system of smart meters, communications networks, and data management systems that enables two- way communication between utilities and customers. Long-Range Financial Forecast (LRFF) Staff will provide an update to the latest version of the LRFF. Review of Operating Budget (Public Works Department) The goal of this presentation will be to familiarize members of the Finance Committee with the elements of the FY 2018-2019 Public Works Department budget, provide opportunity for questions, and to gain clarity in the funding allocations for departmental programs. Review of Revenue Assumptions Staff will provide of an overview for revenue assumptions for the FY 2019-2020 budget. Thursday, January 17, 2019 Thursday, February 14, 2019 &LW\RI1HZSRUW%HDFK)LQDQFH&RPPLWWHH:RUN3ODQ January February March Thursday, March 14, 2019 I:\Users\FIN\Shared\Admin\Finance Committee\WORKPLAN\2019\2019 FC Workplan 1