HomeMy WebLinkAbout05/26/2009 - Study SessionCITY OF NEWPORT BEACH
City Council Minutes
City Council Study Session
May 26, 2009 â 3:00 p.m
I. ROLL CALL
Present: Council Member Henn, Mayor Pro Tem Curry, Mayor Selich, Council Member
Webb, Council Member Gardner, Council Member Daigle
Excused: Council Member Rosansky
Council Member Rosansky arrived at 3:25 p.m.
II. CURRENT_ BUSINESS
1. CLARIFICATION OF ITEMS ON THE CONSENT CALENDAR - None
2. BUDGET REVIEW.
City Manager Bludau reported that staff will utilize a PowerPoint presentation to
discuss pending budget issues and that questions regarding departmental budgets
will be addressed at the next study session.
Facilities. Financing Plan (FFP)
Deputy Administrative Services Director Kurth explained the purpose of the Facilities
Finance Plan (FFP) and the different aspects of the FFP, emphasized that the FFP
will mainly be used to replace existing facilities and is not part of the Capital
Improvement Program (CIP), and reported that there are short term and long term
focuses that go out 30 years. He noted that future generations will not need to put
more than 5% into the FFP to continue the plan. He explained how the proposed FFP
differs from last year's FFP, particularly as it relates to format and structure, scope
and cost of Bands A and B projects, the effects on the FFP due to the current economic
situation, the extended timeline from 15 years to 30 years, and the possibility of
needing an increased contribution from the General Fund each year. He indicated
that staff recommends that Council approve the current plan/schedule, re- evaluate
the plan every six months or whenever significant information changes, the City be
mindful of financial thresholds, and be wary of introducing new projects before
completing Bands C and D, even if lower costs or new revenue allows for faster
progress.
In response to Council questions, Deputy Administrative Services Director Kurth
confirmed that the amount of the General Fund contribution ramps up to a level
percentage of 4.93% by 2016. However, he clarified that the City's contributions this
year are not coming from the General Fund, but from appropriation surpluses. He
indicated that the FFP can be adjusted depending on whether The Irvine Company's
contributions are received early and emphasized that the biggest impacts on the FFP
are development revenues and the actual cost of projects. Assistant City Manager
Wood responded to questions regarding the Santa Barbara Condominium and Hyatt
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Regency development agreements. City Manager Bludau confirmed that the timing of
the City Hall and Park, Marina Park, and Sunset Ridge Park projects in the plan are
in line with the City's environmental documents and permitting that is needed from
other agencies.
Mayor Pro Tem Curry commended staff for creating a flexible FFP and reiterated that
it can be adjusted depending on revenues. He pointed out that the FFP can stay on
schedule with the next three projects, even with the adverse economic situation,
diminished revenues, and increased City Hall and Park project costs. He also
commended Mayor Selich and Council Member Rosansky for negotiating development
agreements that have added over $50 million in offsetting revenues so projects can
move forward.
Council Member Henn indicated that he is satisfied with the project priority order set
forth in the FFP, as some projects have already begun, and the City will have
opportunities throughout the process to increase or decrease projects when more
substantial financial information is known. He emphasized that the FFP is taking
place with the annual budget and that this year's budget is the toughest budget the
City has had to tackle in ten years. He added that the FFP will be moving forward
with a blaanced budget, even in light of current difficult economic times. He noted
that the City's bond rating is AA and that the plan is intended to preserve this rating.
Council Member Rosansky believed that the projects being proposed for the next five
years are appropriately prioritized in the FFP and that there will be a recovery from
the recession. He indicated that it is time to build the new City Ball since costs are
low and that Marina Park and Sunset Ridge Park fulfills a need for West Newport.
Potential State Borrowing of Property Tax Revenues
Administrative Services Director Danner reported that, if Proposition 1A is imposed, a
supermajority vote of the State Legislature is required to invoke the borrowing. The
estimated amount this would cost the City is $5.8 million.
Council Member Gardner suggested discussing this issue during the regular meeting
so residents can begin contacting their Representatives.
PERS Rates for FY 2011 -12
Administrative Services Director Danner highlighted the rates and amounts the City
will be paying. He indicated that the PERS Board is proposing to mitigate the
impacts of the increases based on many assumptions and described the corridor
methodology. He noted that the PERS Chief Actuary supports the proposal and that,
historically, 7.75% is a supportable rate. He added that PERS is running at a 31%
loss this fiscal year and will not know the final rate of return until September. He
reported that this is not a budget issue this year, but will need to be dealt with in the
near future.
In response to Council Member Henn's questions, Administrative Services Director
Danner reported that the rate of change depends on payroll volatility. He indicated
that, if the PERS Board does not adopt the proposal, the miscellaneous rate will
increase almost $1.4 million and the safety rate will increase almost $4.8 million in
2011 -2012; in 2012 -2013, the rates would increase $431,000; and $445,000 in 2013-
2014. However, if the proposal is adopted, the miscellaneous rate will increase
$182,000 and the safety rate will increase $628,000 in 2011 -2012; in 2012 -2013, there
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will be a $2.5 million increase; and a $3.5 million in 2013 -2014
Lower Say Dredgng
Assistant City Manager Kiff discussed the Lower Bay Dredging Project, compared
Upper Newport Bay and Lower Newport Bay, highlighted critical issues related to the
project and cost estimates, and discussed the proposed timeline for the project. He
indicated that stimulus money will be used for the Upper Newport Bay dredging and
the congressional appropriations money will be used for the Lower Newport Bay
dredging. He confirmed that the $17.8 million for the Upper Newport Bay dredging
project cannot be rescinded and that there is only a small chance that Congress would
rescind the $1.8 million proposed by the President for the Lower Newport Bay project.
He noted that the City established the Robinson - Skinner Annuity and the City pays
about $200,000 /year to sediment control facilities to handle ongoing maintenance of
the Upper Newport Bay. He stated that the Lower Newport Bay will need future
dredging; however, it can be maintained, as long as sediment is controlled upstream.
He stated that the City will continue to request a long term funding source from
Congress, but recommended also considering a local funding source.
Following the dredging projects, Assistant City Manager Kiff indicated that the City
will need to deal with eelgrass so people can dredge underneath their docks, continue
to maintain the Bay, and tackle Total Maximum Daily Loads (TMDL) issues. Harbor
Resources Manager Miller discussed areas that are County, City, or privately -owned
that need dredging and possibly include those in the larger projects. He noted that he
prepared a chart that projects what the Harbor needs, including maintenance-
In response to questions, Assistant City Manager Kiff indicated that staff will be
discussing funding and the project with the Army Corps of Engineers this week. He
discussed the need for either California Environmental Quality Act (CEQA) or
National Environmental Policy Act (NEPA) reports, depending on which entity takes
the lead in the project. City Attorney Hunt added that joint Environmental Impact
Reports (EIR) and Environmental Impact Statements (EIS) will also be prepared -
Assistant City Manager Kitt' reported that the size of the Confined Aquatic Disposal
(CAD) site may need to be increased to accommodate the Rhine Channel's material.
Harbor Resources Manager Miller discussed how big the CAD may be, but noted that
the size depends on how much sediment needs to be disposed.
Council Member Henn indicated that the current preferred site for the CAD is
between Lido Isle and Balboa Peninsula, and that the residents are interested in the
exact CAD dimensions, impacts to the area, and alternatives that were considered in
addition to the CAD. He requested that more outreach occur.
Need for Water Rate Increase
Utilities Director Murdoch reported that current revenues do not meet expenditures,
the water reserve policy is not being met, the cost of water is increasing $4 million to
$5 million, and water supplies are decreasing. He reviewed the history of the issue,
noting that the City conducted its last rate increase in 2005. He reported that Red
Oak Consulting conducted a rate study in February 2008 and highlighted the cost of
purchasing water, projected expenditures, what would happen if the City did not
increase the water rates, the proposed five -year financial plan, and recommended rate
increases. He demonstrated how the increase could impact a single - family residence,
using an interactive bill calculator, and indicated that a majority of customers will
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only see a slight increase. He provided a history of Proposition 218 and discussed
future actions that need to take place in order to enact a water rate increase and a
new water conservation ordinance. He reported that the Utilities Department has
already cutback on operating and maintenance costs and, if rates are not increased,
the City's reserves would be depleted, water would need to be cut back, and there
would probably need to be employee layoffs.
In response to Council questions, Utilities Director Murdoch reported on the status of
the Balboa Island infrastructure and noted that the plans for the project are complete;
although, due to the "no" vote on the Balboa Island utilities underground project
(Assessment District No. 87), the planned water line replacements should be
deferred. He indicated that the timing of the Balboa Island work can be delayed
without affecting quality or reliability of water, and that the money originally
intended for this work will be redistributed amongst other projects or not spent at this
time. He added that the City has been aggressive with its CIP cast iron
mairdinfrastructure replacement, groundwater, and reservoir cover projects. He
pointed out that newer cities did not use cast iron pipelines, so their maintenance
level is lower than Newport Beach's. He reported that the amount the City currently
invests in maintenance is about the same as other cities and entities. He emphasized
that the City's system is very reliable and reported that there were no breaks during
the recent earthquake.
III. PUBLIC COMMENTS - None
City Attorney Hunt reported that Closed Session Item C -1 (Conference with Real
Property Negotiator) will not be discussed during Closed Session.
IV. ADJOURNMENT - 5:07 p.m.
The agenda for the Regular Meeting was posted on May 20, 2009, at 4:19 p.m. on the
City Hall Bulletin Board located outside of the City of Newport Beach
Administration Building.
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