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HomeMy WebLinkAboutApproved Minutes - October 10, 2024 Finance Committee Regular Meeting Minutes October 10, 2024 Page 1 of 6 I. CALL MEETING TO ORDER The meeting was called to order at 3:00 p.m. by Mayor Pro Tem/Chair Stapleton. II. ROLL CALL PRESENT: Joe Stapleton, Mayor Pro Tem/Chair Allen Cashion, Committee Member Keith Curry, Committee Member Nancy Scarbrough, Committee Member William Collopy, Committee Member ABSENT: Will O’Neill, Mayor (excused) Noah Blom, Councilmember (excused) STAFF PRESENT: Grace K. Leung, City Manager Jason Al-Imam, Finance Director/Treasurer Shelby Burguan, Deputy Finance Director Marlene Burns, Buyer Dave Webb, Director of Public Works Theresa Schweitzer, Public Works Finance/Administrative Manager Michael Sledd, Deputy Public Works Director/Municipal Operations MEMBERS OF THE Charles Klobe PUBLIC: Jim Mosher III. PLEDGE OF ALLEGIANCE Committee Member Nancy Scarbrough led the Pledge of Allegiance. IV. PUBLIC COMMENTS A. ADDITIONAL MATERIALS RECEIVED Mayor Pro Tem/Chair Stapleton opened public comments. Jim Mosher, Newport Beach resident, complimented the Finance Department for completing and posting the adopted budget on the website and suggested an electronic table of contents would be a useful improvement. Additionally, Mr. Mosher commented on the City Council study session held in August on development impact fees, noting that he did not recall that ever came to the Finance Committee. He also advised the Committee that on Tuesday, October 8th an item was brought forward at the City Council meeting to establish the in-lieu park dedication fee value, which he thought might be of interest to the Committee. He also pointed out that the development impact fees would be brought back to the City Council at a future date, which he suggested should come back to the Committee for further discussion. Finance Director/Treasurer Jason Al-Imam noted that there is a table of contents on page five of the document. Mr. Mosher clarified his suggestion was for electronic bookmarks within the document. Seeing no others, Mayor Pro Tem/Chair Stapleton closed public comments. Finance Committee Regular Meeting Minutes October 10, 2024 Page 2 of 6 V. CONSENT CALENDAR A. MINUTES OF SEPTEMBER 12, 2024 Recommended Action: Approve and file. MOTION: Committee Member Keith Curry moved to approve the minutes of September 12, 2024, as amended, seconded by Committee Member Cashion. The motion carried as follows: AYES: Cashion, Curry, Scarbrough, Stapleton NOES: None ABSENT: Blom (excused), O’Neill (excused) ABSTAIN: Collopy VII. CURRENT BUSINESS A. OVERVIEW OF PUBLIC WORKS DEPARTMENT BUDGET Recommended Action: Receive and file. Dave Webb, Director of Public Works began the presentation by stating there are 97 full-time employees and 12.5 part-time employees, with several active contract resources. There are three main divisions: Engineering Services, Municipal Operations, and Administration. Public Works is responsible for infrastructure planning, design, construction, management, operation, and maintenance of City facilities. Director Webb indicated that the Public Works Department is responsible for developing and maintaining City infrastructure master plans. Committee Member Collopy inquired whether the master plans require City Council approval or whether the master plans are used for internal course guidance. Director Webb responded that both are correct. For example, the Water Master Plan is brought forward to the City Council for review and approval, which impacts water rates since the Water Master Plan includes capital items that need to be funded from water rates to pay for those capital improvements. Theresa Schweitzer, Public Works Finance/Administrative Manager, presented the financial overview of how the operating budget has grown since 2020 relative to the increase in staff. The budget has grown 30% since 2020, while staffing has grown 4% during the same period. Increased maintenance and operating costs make up the bulk of the increases, in part due to increased contract costs such as landscape maintenance, refuse collections, water and electricity costs and maintenance and repair costs. Committee Member Collopy asked whether the City saved money when refuse operations were outsourced roughly 15 years ago. Committee Member Curry indicated that the City saved $15 million when it sold its trucks to CR&R, which avoided the need to pay another $600 thousand to replace those vehicles. Committee Member Collopy inquired why contract costs for refuse has increased. City Manager Leung indicated that the primary reason for the increase in costs is due to State regulations related to recycling and the related mandates. Ms. Schweitzer continued with the presentation and indicated that Public Works makes up approximately 41% of the City’s budget. Contract Services and Maintenance and Repairs make up about 45% of Public Works budget, and Salaries and Benefits make up 33% of their operating budget. Ms. Schweitzer broke down the different categories within the Public Works budget and explained what expenses were included within each category. Committee Member Collopy asked whether the department has a chart showing the components of the Public Works Operating Budget over time. It was reiterated that the chart is Finance Committee Regular Meeting Minutes October 10, 2024 Page 3 of 6 a great snapshot of the department’s operating budget. However, it would be meaningful for the Committee to look at each component of the department’s operating budget over time. Ms. Schweitzer indicated that staff could put something together. Ms. Schweitzer continued with the presentation and indicated that contract services make up about 22% of the operating budget. The bulk of contract services consists of janitorial services, park maintenance, and tree maintenance. However, it was pointed out that costs associated with the refuse contract are not included in contract services but instead those costs are classified as maintenance and repair. Committee Member Curry asked why the refuse contract is not part of contract services. Director Webb acknowledged that it was not in the right bucket but that it is consistent with how it has been categorized over time. Ms. Schweitzer continued with the presentation and provided an overview of the components of the Engineering Services Division and Municipal Operations Division. Accomplishments include managing over 65 capital improvement projects each year, in which 31 projects were completed last year. 79% of those projects started within sixty days of when they were scheduled to begin. Operating statistics were also discussed, which includes the number of tons of debris and refuse removed from the beaches, number of trees trimmed, etc. Committee Member Collopy indicated that these are great work volume indicators. However, it would be helpful to have some comparison. For example, how much overtime did it take to accomplish these tasks. Discussion ensued on workload volume indicators and how to best show the Public Works Department is operating in an efficient and effective manner. A chart was discussed which shows the number of full-time employees responsible for maintenance of vehicles and equipment compared to the number of vehicles and equipment maintained over a fifteen-year period. It was noted that facility maintenance is another area where additional maintenance staff may be needed in the future upon the completion of the new Lecture Hall and the Newport Bay Trash Wheel. Primary costs of the Administration Division include salaries and benefits with the balance largely spent on maintenance and operations. Public Works brings in approximately $5 million dollars in revenue each year from recycling service fees, permit and inspection fees, and transfer station rental fees. Future budget related considerations include citywide facilities maintenance, fleet electrification mandates, transportation management, infrastructure and operating impacts from new housing development, refuse/sustainability mandates, homeless response, and corresponding growth in administrative functions. It was also noted that risk management, state and federal oversight/regulations, material cost and availability, and staff retention and recruitment are major factors in future budget needs. Mayor Pro Tem/Chair Stapleton commented it would be helpful to see a breakdown of each category over time and compare it to previous budgets so they could evaluate the increases of each in addition to the snapshot of the entire budget. That would also be the best way to examine the cost of personnel needed as it relates to services provided and how much overtime is being utilized. Director of Public Works Dave Webb responded more staff are needed on the beaches and the streets due to response times during and after storms. Parks would mostly entail tree services after storms as opposed to possible flooding. Committee Member Cashion inquired if there was a growing concern with respect to the scarcity of sand for beach replenishment. Director Webb acknowledged that there is a growing scarcity of sand for beach replenishment, which is a concern. However, the City works with County, State and Federal partners to ensure that local sources of sand are preserved for beach replenishment. Finance Committee Regular Meeting Minutes October 10, 2024 Page 4 of 6 Committee Member Nancy Scarbrough commented that she and the Chair attend the Water Quality Tidelands Committee where the beach sand is addressed and discussed on a monthly basis. Mayor Pro Tem/Chair Stapleton opened public comments. Mr. Jim Mosher, Newport Beach resident, spoke about plastic recycling and at a recent meeting it was stated that less than 5% of all plastic gets recycled. Additionally, the pie chart indicates that 7% are paying other departments for services supplied Public Works, which are part of the Internal Service Funds; Mr. Mosher inquired if Public Works delivers services to other departments that fall under Internal Service Funds and commented on the organizational chart and the lack of staff under Chris Miller; and asked if there is a formal procedure for evaluating and considering the advantages of in-sourcing. Director Webb explained that Chris Miller was added to the Public Works Department specifically to consider adding a new dock, and to work on the legislative side such as overseeing the dredging project that is underway. Chris is the liaison for the Army Corp of Engineers. As it relates to in-sourcing, evaluating and considering the advantages of in- sourcing would generally be a Council Policy direction if they felt it was warranted. However, staff also reviews opportunities for in-sourcing. Finance Director/Treasurer Jason Al-Imam also added that the City has an Equipment Fund, which is an Internal Service Fund in which internal service charges are charged to other departments to recover costs associated with equipment and vehicle maintenance and repairs. Seeing no other comments, Mayor Pro Tem/Chair Stapleton closed public comments. Mayor Pro Tem/Chair Stapleton filed and received the report. B. YEAR END BUDGET RESULTS AND SURPLUS ALLOCATION Recommended Action: Review and discuss this report and provide any recommendations for consideration by the City Manager and City Council. Finance Director/Treasurer Jason Al-Imam reported that in May 2024, an unrestricted General Fund operating surplus of $8.9 million was projected for Fiscal Year 2023-24 based on revenues and expenditures throughout the third quarter. Information available at the end of the fourth quarter indicated an unrestricted General Fund operating surplus of $10.8 million is projected for FY 2023-24, which is $1.9 million higher than previously projected. Council Policy F-5 requires 50% to be used to address long-term obligations and 50% to be used to address infrastructure or neighborhood capital improvement. However, since the City pre-funded surplus funds at the beginning of the fiscal year towards paying down the pension liability, it is recommended that the entire unrestricted surplus be allocated towards infrastructure or neighborhood capital improvements. Deputy Finance Director Shelby Burguan reported the fourth quarter budget update for FY 2023-24 and the preliminary status of the budget after the close of the fiscal year. The FY 2023-24 General Fund expenditure budget totals $315 million which came in at $6 million higher than expected. Additional revenues include property taxes, investment earnings, services fees and charges, parking revenue, and intergovernmental revenues. Spending trends in FY 2023-24 are consistent with prior years and do not indicate any cause for concern. Total expenditure savings of $9.6 million are projected at this time due largely to savings from vacancies as well as savings in contract services. The unaudited actuals include the encumbrances carried forward into FY 2024-25, which draw from the FY 2023-24 budget. The City continues to be in excellent financial health. Conservative budgeting and sound financial policies have resulted in a trend of General Fund operating surpluses and strong reserve levels for several years. The Finance Committee Regular Meeting Minutes October 10, 2024 Page 5 of 6 City is well positioned to continue delivering high levels of services to the community while targeting surplus resources to key priorities each year. A $15.8 million operating surplus for the General Fund is projected for Fiscal Year 2023-24, which is net of non-operating activity that includes one-time transfers out of the General Fund as well as the addition to the Contingency Reserve (pursuant to City Council Policy F-2). The City Council has approved three budget amendments in Fiscal Year 2024-25, which allocate a portion of the Fiscal Year 2023-24 year-end surplus. The City’s financial records are undergoing a customary audit review. Therefore, the financial information presented in this report is preliminary in nature and subject to adjustments as the year-end closing process continues through December. Adjustments are not expected to have a material impact on the financial information presented in this report. If any material adjustments related to Fiscal Year 2023-24 are subsequently recorded, any such adjustments will be reported to the Finance Committee. Per Council Policy F-5, “roughly fifty percent (50%) of the Budget Surplus Funds shall be used to address long-term obligations such as pension liabilities, other post-employment benefits, bonded debt, lease obligations and other long-term needs” and “roughly fifty percent (50%) of the Budget Surplus Funds shall be used to address infrastructure or neighborhood capital improvements.” However, since the City pre-funded surplus funds at the beginning of the fiscal year towards paying down the pension liability, it is recommended that the entire unrestricted surplus be allocated towards infrastructure or neighborhood capital improvements. Committee Member Scarbrough inquired about maintenance and repairs, which has a 12% variance in the staff report. The staff report indicates that there is increased maintenance needed at various facilities as well as fire stations. It was questioned whether this increase is across the board. Deputy Finance Director Burguan acknowledged that the increase in maintenance and repairs is being seen across the board. Committee Member Collopy commented he would agree to wave Council Policy F-5 for the year, but would recommend it not be eliminated entirely, and consider it on a year-to-year basis. Mayor Pro Tem/Chair Stapleton opened public comments, seeing none he closed public comments. MOTION: Committee Member William Collopy, moved to recommend that the City Council waive Policy F-5 for the year and review it year by year, seconded by Committee Member Keith Curry. The motion carried as follows: AYES: Cashion, Collopy, Curry, Scarbrough, Stapleton NOES: None ABSENT: Blom (excused), O’Neill (excused) ABSTAIN: None C. BUDGET AMENDMENTS FOR QUARTER ENDING SEPTEMBER 30, 2024 Recommended Action: Receive and file. Mayor Pro Tem/Chair Stapleton opened public comments. Seeing none, Mayor Pro Tem/Chair Stapleton closed public comments and received and filed the report.