Finance Study Session Yields Good Info
FINANCIAL STATUS AND PROJECTIONS FOR THE FUTURE DISCUSSED
THUMBNAIL... WATCH THE TAPE
I won't attempt to give you a blow-by-blow verbatim description of all the issues. I encourage you to view the meeting yourself for that level of detail. I will try to give you a flavor for the evening, though.
There were about 10-12 of us in the Chambers - a number matched by the members of the staff there to provide support if necessary. This meeting might have been held in Conference Room 1A as has been done in the past, but live broadcast was not available there. I think Hatch expected a larger crowd, but the numbers have been significantly smaller in years past.
TABOADA'S TAKE ON IT
Ralph Taboada was the only member of the public stepped up for Public Comments. Until recently he was a member of several City committees, including both the Pension Oversight and Finance Advisory Committees. He asked that the council consider the recommendations made by the Finance Advisory Committee as they deliberated about how to spend the budget surplus of nearly $11 million. One of his recommendations was to use part of the dollars currently allocated to the replacement of the Library/Community Center - $4 million - to fund the re-build of Fire Station #1. Councilman Jim Righeimer interrogated him on that issue, asking if he thought it was OK to borrow that money for the Library, but not for the Fire Station? The answer was yes.
1) A discussion of the Consolidated Annual Financial Report (CAFR), including a Mid-Year Review.
2) Capital Projects Overview
3) General Fund Review and 5-Year and Current Financial Plans
Dunivent made an excellent presentation on the CAFR, which is impossible to thoroughly capsulize here. Some of the highlights and memorable numbers:
At the end of the 2015/2016 budget period revenues exceeded the budgeted amount more than $8 million and expenses $4.5 million below budget which, after some internal transfers and other tinkering, resulted in a budget surplus of $10.6 million.
Sales Tax ($57,593,561), Property Tax ($25,998,070), Investment Income ($1,019,013), and Transient Occupancy Tax ($8,622,505) were all well above budgeted expectations.
Employee costs were $2,511,577 below budget due to vacant positions.
Operations and Maintenance costs were $1,164,171 below budget due, in part, for reduced water costs for parks and parkways.
The pension liability of $231,897,604 is now included in the City's government-wide balance sheet amounts. Previously it was disclosed in footnotes.
Reserves had been set at $55,000,000 with provisions to receive annual allocations up to $1,500,000 when there is a surplus. The staff recommendation for disbursement of the nearly $11 million in reserves is shown on this slide from his presentation. If you squint you can read it. You can click on the image to enlarge it.
CAPITAL IMPROVEMENT PROJECTS
Public Services Director Raja Sethuraman presented the Capital Improvement part of the program. The following slides give you an idea of the discussions that were held.
FAIRVIEW PARK LIGHTS
One of the interesting discussions revolved around the removal of some of the $650,000 earmarked for lights in Fairview Park for another use. Righeimer had a mini-rant about that. You will recall that those lights were one of Steve Mensinger's pet projects that, although approved 3 or 4 years ago, had not been completed. When interrogated by Righeimer, Sethuraman advised that the engineering on that job had not been completed.(There are many vacancies in Engineering) Hatch chimed in to advise that there were several other projects in the cue ahead of it. Righeimer was clearly frustrated, and demanded that the council vote on it before it is trash-canned. I smiled just a little bit.
Then we heard a discussion of the 5-Year Plan - something that was added to the process a few years ago. The numbers were based, necessarily, on some assumptions about revenues, expenses, health of the economy, etc.
PENSIONS ARE THE BIGGEST ISSUE
One of the biggest discussions in this segment revolved around the Pension Liability and the impact of the reduction in the discount rate recently announced by the CalPERS Board from 7.5% to 7% over three years. CalPERS has used optimistic, unrealistic projections on their returns on investments which had a huge impact when the economy took a dive in 2008. Cities and other entities which subscribed to CalPERS had to make up the difference. As mentioned above, our "difference" is over $230 million and climbing.
"NOT THE EMPLOYEES, BUT..."
Not unexpectedly, several times during this meeting Righeimer made reference to the unsustainability of this situation and back-handedly laid the solution at the feet of the employees. He always prefaced his comments with something like, "I don't blame the employees, but"... His final comment to that effect came very near end of the meeting, around 7:10 p.m., when he said, "I'm not blaming the employees, on the other hand, the employees do get people elected to City Council who give them what they want to be given." He just cannot let go of his hatred of "union" employees - he bleats out this kind of crap at every meeting since the election and will likely continue to do so until he's termed out in two years or when he resigns in frustration. We can only hope...
STAGGERING PROJECTIONS - CAN'T SOLVE IT ALONE
The upshot of the pension discussion was that it's going to take more than anything the City can do to resolve it. Projections provided last night, using the assumptions based on the new discount rates from CalPERS, was that an employee might be able to retire in 2023 at 98% of their current pay! Nobody agrees that it is feasible nor reasonable. Righeimer, correctly, waved the "municipal bankruptcy" flag around during his discussion. I guess that's what he was doing because his arms were waving around most of the night. Sadly, he's correct. As John Stephens said, echoing a comment Mayor Katrina Foley said earlier, it's going to take cities gathering together and working with State Government to resolve this issue. Righeimer wants employees to take smaller retirements and pay more toward them. Watch the tape.
SAYING GOOD BY TO THE SLUSH FUND
I almost forgot... another very interesting discussion revolved around the idea of dumping City Manager Hatch's "Contingency Fund" - the slush fun that Righeimer and his mob instituted so they could use it for their own little piggy bank for pet projects and not take it to the full council for a vote. Hatch suggested reducing it to $250,000. Righeimer had another mini-melt down on this issue, too. One of these days we're going to see him straight out of a scene from Mars Attacks - his head will explode!
FOR YOUR VIEWING PLEASURE
Here is the embedded recording of this meeting. It's worth the time to watch. You can jump forward and back if you wish.