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HomeMy WebLinkAbout05-11-1998 - Special Meeting0 CITY OF NEWPORT BEACH City Council Minutes Special Meeting May 11, 1998 - 4:30 p.m. ROLL CALL 11013 Present: Thomson, Debay, Hedges, Glover, Noyes, Mayor Edwards Absent: O'Neil 1. PRELIMINARY BUDGET FOR THE 1998 -99 FISCAL YEAR. City Manager Murphy distributed 1998 -99 budget overviews and reported that the past practice of having the Finance Committee review the budget in May and return to the Council with comments is going to change this year as Finance Committee Chairman Hedges indicated that the entire budget should be reviewed by the full Council. He indicated that the Capital Improvement will be discussed during the May 26 study session and that the department budgets will be discussed during the June 8 study session. Mr. Murphy stated that, once Council creates their checklist, Council will • review those items and take a straw vote during the June 22 meeting. Mr. Murphy stated that he and Administrative Services Director Danner spent 2.5 hours with the media providing them with a budget overview. Mr. Murphy reported that revenue for the 1998 -99 fiscal year is up $2.2 million. This reflects an adjustment for Pacific Bay Homes' one -time advancement of fees. He stated that the Secured Property Tax, City Sales and Use Tax, and Transient Occupancy Tax represents 63 percent of the General Fund revenues. Regarding the Secured Property Tax Revenue, he stated that the City may realize a 3 percent increase in the next fiscal year and that he believed that the City may receive more than $18.3 million at the close of this fiscal year. Regarding City Sales and Use Tax, Mr. Murphy indicated that the earlier peak of $12.4 million occurred before the 1992 -93 fiscal year, but that there has been a steady growth as the economy is recovering. $15.9 million is estimated for the 1997 -98 fiscal year (16.5 percent increase). Regarding the Transient Occupancy Tax, he stated that there was a 5.3 percent growth from last fiscal year and that a 3 percent growth is projected for next fiscal year. Mr. Murphy stated that a fee schedule will be coming back to Council for approval since some service fees will be increased. He reported that the KPMG study was based on 1996 -97 fiscal numbers and that an estimate 3 percent growth (if not higher) may occur. • Regarding expenditures, Mr. Murphy reported that expenditures are up $3.1 million (4.2 percent). He indicated that $1 million of the growth and expenditures are internal charges to City departments to increase their set Volume 52 - Page 14 City of Newport Beach City Council Minutes May 11, 1998 • aside amounts for workers' compensation, general liability, and compensated absences. He also reported that airport program expenditures have moved from capital projects into a division of the City Attorney's Office General Fund budget ($360,000), which actually accounts for a 2.4 percent increase. In response to Council questions regarding the Public Safety Expenditures to Property and Sales Tax Revenues graph, Mr. Murphy indicated that the City's two largest sources of revenue (property and sales taxes) are utilized mostly for Police and Fire & Marine expenditures. He believed that the City is more fortunate than other cities as it has a diversified revenue base. He also clarified that the one -time Police cost for the 800 MHz Radio System is included in the Capital Improvement Program and that the graph represents the base Police budget which increased due to positions and salaries. Regarding the General Fund Balance graph, Mr. Murphy indicated that the additional amounts in the fund balance include off - street parking fees, park fees (paid by developers), and any other incumbencies. He stated that the stabilization and contingency reserve is available to Council for emergency purposes. He pointed out that the drop between 1992 and 1993 resulted from liability losses and the impact of the economy; and that the "original" estimates from 1997 and 1998 were far less than the "actual" estimates. In response to Council Member Glover's question, Mr. Murphy indicated that • the current allocating costs; reserves for workers' compensation, liability, and compensated absences; vehicle costs; and insurance reserves are charged to each department. Further, as illustrated in the summary volume, money is transferred into reserves before money is allocated to the departments. Regarding the Insurance Reserve Fund/Cumulative Cash Balance, Mr. Murphy indicated that the projection would have been greater had reserve money not been transferred. He estimated that the cash deficit will be nearly gone by the end of this fiscal year. Further, that Council adopted a Reserve Policy which requires a set percentage to fund workers' compensation, general liability, and compensated absences. In response to Council Member Glover's question regarding the Insurance Reserve Fund graph, Mr. Murphy indicated that, since the Reserve Policy has been adopted, he will need to plan (in five years or less) how to make the long term liability and cash flow match. Regarding the General Liability graph, Mr. Murphy pointed out that the set aside funds increased substantially in 1997, 1998, and 1999 (projected). Mayor Edwards requested and received clarification from Mr. Murphy that "unfunded liability" occurs when there is no cash set aside for the liability. Mayor Edwards expressed concern about the amount of unfunded liability and the constants of it. Mr. Murphy stated that staff tries to anticipate set aside needs and build enough for the future. Council Member Hedges stated that it was his understanding that the unfunded liability will remain the • same, as long as the employee count remains constant, the benefits package remains the same, and the risk manager remains in control of the unfunded liability. Volume 52 - Page 15 11011 • City of Newport Beach City Council Minutes May 11, 1998 PROD)�• Referencing the Compensated Absences Liability, Mr. Murphy further pointed out that expenditures will continue to decrease even though funding is increasing. He emphasized that diligent efforts have been made regarding workers' compensation, especially since claims are down 35 percent. He indicated that, since claims and the amounts are down, long term liability will begin to decrease. Mr. Murphy confirmed that efforts and investments made in human resources have helped account for part of the payoff. Mr. Murphy explained that the City did a merger with Costa Mesa so that one case worker handles only their workers' compensation cases. Regarding the Workers' Compensation graph, Mr. Murphy pointed out that the City has substantially increased workers' compensation funding to build the reserve to the level that Council has mandated. Further, that $1 million a year is being added to the insurance reserve fund. He indicated that a third of the expenditures for next year's budget is toward this reserve. In response to Council questions, Mr. Murphy indicated that the City is now better protected in both general liability and workers' compensation than in the past. He expressed the opinion that the City may have been better covered in previous cases had the payment structure been paid over time. Mr. Murphy stated that the possibility of the City losing the Vehicle License Fee (VLF) is an issue that needs to be addressed. He reported that the VLF • represents 4 percent of the General Fund budget ($2.8 million). He expressed the opinion that the State is flush with money as it already took away some of the City's property tax money. Council Member Hedges stated that taxpayers should receive some taxes back directly from the State. He expressed the opinion that the City was able to make changes when they had their "backs to the wall" in 1993 and 1994. Further, that the City's increased spending is unacceptable and should be kept at a constant. Council Member Hedges stated that the City should budget as if it has lost VLF and will receive no backfill from the State. He suggested looking at the expenditure side of the budget as much as the revenue side. He also pointed out that there has not been any discussion about returning some of the revenue. Mayor Edwards expressed the opinion that there has been incredible improvements relative to the General Fund balance and noted that the City is short over 100 - employees. He noted that there are certain areas that need major infrastructure improvements and funding. Council Member Glover expressed the opinion that how the City has addressed the reserves is one of the most intelligent things done this year and that this method helps the City attend to its needs even if the City was not flush. She noted that the City does not receive the full amount of property tax moneys, only 15 percent. • Mayor Edwards concurred with the handling of the reserves, adding that a breakdown of property tax distribution should be included. Volume 52 - Page 16 • City of Newport Beach City Council Minutes May 11, 1998 Mr. Murphy added that the largest portion of expense increases is for reserves, then salaries. He reported that there is also increased funding for the airport, community newsletter, and infrastructure. He stated that $3.2 million is set aside from Gas Tax and General Fund money for road maintenance ($1 million of slurry sealing, $1.4 million in overlay, and $800,000 of reconstruction); the tree trimming account is increasing by $100,000; the $2 water rate will stand until the water bonds are paid off (then decreased after); $250,000 from the base capital improvement fund will be used for street light improvements; and almost all of the CDBG funds will be used toward Peninsula revitalization. Mr. Murphy stated that a net increase of 3 employees is proposed. He reviewed the 6 positions to be added (1 accountant position, 3 mechanic positions for the ABLE helicopter program, upgrading the Arts Coordinator to full-time, and adding 1 motor officer) and the 3 park maintenance positions to be eliminated. In response to Council Member Glover's questions, Mr. Murphy stated that the 3 mechanics will be budgeted by the City, not Costa Mesa, until their positions are included with PERS. This was done for the ease of the hiring cycle and transition to JPA status after 18 months. He added that Costa Mesa reimburses the City for their share. Mr. Murphy explained that a common supervisor was named for both cities when the program was created • even though the mechanics are employed in their employing jurisdiction. In response to Council Member Debay's question, Mr. Murphy stated that the Disaster Preparedness position is billed into the Fire & Marine 1997 -98 budget. He noted that many positions are included in this year's budget since they were approved this year. Council Member Debay suggested placing footnotes on the graphs that explain the significant changes in the budget. PUBLIC COMMENTS - No public comments were presented. ADJOURNMENT - 5:04 p.m. The agenda for the Special Meeting was posted on May 7, 1998, at 8:50 a.m. on the City Hall Bulletin Board located outside of the City of Newport Beach Administration Building. QimI City Clerk Volume 52 - Page 17 INDEX