SUSANVILLE CITY COUNCIL Special Meeting Minutes April 21, :00 p.m. City Council Chambers 66 North Lassen Street Susanville CA 96130

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1 SUSANVILLE CITY COUNCIL Special Meeting Minutes April 21, :00 p.m. City Council Chambers 66 North Lassen Street Susanville CA Meeting was called to order at 3:00 p.m. by Mayor Bonham. Roll call of Councilmembers present: Joseph Franco, Vernon H. Templeton, Douglas Sayers and Mayor Kurt Bonham. Councilmember Lino P. Callegari was absent and excused. Staff present: Rob D. Hill, City Administrator; Peter M. Talia, City Attorney; Jeff Atkinson, Police Chief; Ted Friedline, Fire Chief; Debra M. Magginetti, CMC/City Clerk; Craig Platt, Public Works Director; Robert Porfiri, Finance Director; and Deborah Savage, Assistant to the Finance Director. Also present: City Council candidates Nick McBride, Cheryl McBride and Phil Bertanzoni. 1 APPROVAL OF AGENDA: Motion by Mayor Templeton, second by Councilmember Franco to approve the agenda as submitted; motion carried. Absent: Callegari. 2 PUBLIC COMMENT: There were no public comments. 3 SCHEDULED MATTERS 3A FY 2010/2011 Budget Workshop (second workshop) Mr. Hill reported that this is the second of two scheduled workshop meetings for the FY 2010/2011 budget. The first meeting consisted of a budget process overview, discussion of projected revenue for and consideration of the enterprise funds. During this meeting, staff will present information on the General Fund, including a base budget discussion of projected revenue and departmental requests above the base budget. He turned the presentation over to Finance Director Porfiri. Mr. Porfiri explained that staff is not presenting a balanced budget for approval at this time. He is presenting a base budget that incorporates the requests of the department heads and revenue projections. He reviewed the budget calendar and summarized the process. He advised that once the budget is adopted, it can be amended at any regular meeting by the City Council. Mr. Porfiri reviewed the FY 2010/2011 budget assumptions: 1 Revenues are based on the most recent information on hand. 2 The base budget represents essential expenses necessary to maintain current services. It does not include capital expenditures or temporary employees. 3 Increases from the base budget are shown as requests and will be detailed and justified by each department head. 4 No COLA has been included in the base budget for salary projections. Mr. Porfiri explained there are several different types of municipal funds: Enterprise funds: Water, Natural Gas, Airport, Day Care, Geothermal, Golf Course Internal Service funds: Public Works/Engineering, risk management, payroll Governmental; funds: Special revenue funds: CDBG, revolving loans, streets, mitigation funds, federal and state grants, redevelopment, etc. These revenues are legally sp.min

2 restricted to specific expenditures (other than major capital projects). Special revenue funds are governmental fund types and follow Generally Accepted Accounting Practices (GAAP) for governments. Capital projects funds: Proposition 1B, ARRA for streets. These funds account for financial resources used for the acquisition or construction of major capital facilities. Capital project funds are governmental fund types and follow GAAP for governments. Mr. Porfiri explained that there were no new CIPs to propose as of this meeting. There are three active CIPs: Planning Programming Monitoring (2007), Proposition 1B for Streets (3023) and ARRA for Streets (3024). Debt Service funds: City Hall debt service, Marks-Roos. Debt service funds are for the accumulation of resources and the payment of general long-term debt principal and interest. These are governmental fund types and follow GAAP for governments. General fund: City Council, City Administrator, City Attorney, City Clerk, Personnel, Finance, Police, Fire, Planning, Building, Code Enforcement, Community Services, Non-departmental. The General Fund accounts for all financial resources except those required to be accounted for in other funds. The General Fund is a governmental fund type and follow GAAP for governments. Mr. Porfiri provided a graph that showed revenues for a typical California city as follows: 37 percent: Non-restricted 25 percent: Utilities 15 percent: Fees The remaining 23 percent are made up of state revenue, assessments, investments and rents, fines/licenses, taxes and miscellaneous other. He explained that approximately 63 percent of revenue is restricted for specific expenditures, including the following: CDBG program community development Gas tax streets/highways/storm drains POST police training COPS grant police front-line services Proposition 172 public safety Zoning/subdivision fees regulation and enforcement Animal licenses animal regulation Building permits construction and engineering regulation Any grant (federal, state or local) Enterprise fund revenues Mr. Porfiri reported that 37 percent of general revenue is unrestricted as follows: Property taxes Property tax in lieu of VLF Sales taxes Business license taxes Franchise taxes sp.min

3 He presented a pie chart depicting General Fund revenues in Susanville: 51.5 percent: Property tax 22.0 percent: Sales tax 14.7 percent: Other 7.4 percent: TOT 4.3 percent: Business license tax A second pie chart displayed Susanville s General Fund expenditures: 64.5 percent: Public safety (police and fire) 12.7 percent: Non-departmental, transfers 12.3 percent: General government 6.7 percent: Community development 3.8 percent: Community services Another slide compared General Fund revenue to expenditures: Revenue Expenditures sp.min

4 Mr. Porfiri reviewed the budget policies established by the City Council in Resolution No : Adopt budget by June 30 of each year Review all fees and charges annually Fund balance in excess of the reserve requirements may be used to fund one-time expenditures Strive to reach and maintain a GF reserve equal to 20 percent of annual operating revenues Fifty percent of prior fiscal year audited actual surplus (when available) to be set aside until 20 percent goal is reached Cash reserve above the 20 percent set-aside in reserve will become available for spending (one-time expenditure) Maintain fiscal solvency Four-fifths vote is required to bypass or amend budget policies Mr. Porfiri summarized the revenue assumptions he s made relative to property taxes, sales taxes, business license taxes, property tax in-lieu of sales tax and property tax in-lieu of the VLF, all of which are the same as for FY 2009/2010 or between five and twelve percent down over last year. He noted that the City s percentage of the 8.25 percent state sales tax has been reduced from one percent to.75 percent. Mr. Porfiri reported that public safety consumes 68.4 percent of the $5,030,737 base budget. The remainder is split between Planning/Zoning, Building, Parks/parkways, Administration, Legal, Finance/Treasury, code enforcement, civic contributions, transfers to other funds, and nondepartmental, among others. He also reviewed the history of public safety funding as a percentage of the GF over several years: 2004/ percent 2005/ percent 2006/ percent 2007/ percent 2008/ percent 2009/ percent 2010/ percent Estimated Another graph depicted the results of Council decisions to fund public safety first, before considering other allocations. Another graph portrayed GF expenditures from a high in 2006/2007 to a low for 2010/2011. Mr. Porfiri reported that full-time staffing has been reduced from 80 employees in 2002/2003 to 62 in 2009/2010. He reported on the GF base budget: Base Budget Requests over Base Budget Total Revenues: 5,037, ,505 5, Expenditures: 5,030, ,505 5,399,242 Net Income/Loss: 6, , , sp.min

5 Those departments requesting expenditures beyond the base budget are Finance ($17,550), Police ($30,797), Fire/Code Enforcement ($138,724), non-departmental ($5,000) and cash transfers (Streets, Snow and City Care, $230,094). He reiterated that at this time, staff has not attempted to balance the budget. He is waiting for direction from the City Council as to what its priorities are. Mr. Porfiri explained how the relationship between revenue and expenditures affect the fund balance and provided an analysis of GF fund balance over the past three years: Inc/Dec Unreserved Undesignated 06/30/08 2,027,496 1,591, % Rev 5,710,970 Exp -5,466, ,881 % 20% Goal Available for one-time expenditure 06/30/09 2,272,377 1,838, % 1,142,192 Rev (est) 5,087,281 Exp (est) -5,661,208 *-573,927 06/30/10 (est) 1,698,450 1,264, % 1,017, ,853 Rev (base) 5,037,184 Exp (base) -5,030,737 6,447 06/30/11 (Proj) 1,704,897 1,270, % 1,007, ,319 * Transfers to Streets in addition to budget ($176,329); sales tax, TOT and business license down ($177,609) Councilmember Sayers asked what revenue comes to the City as a result of the prison population. Mr. Porfiri indicated that any tax based on population results in additional revenue (i.e., a portion of sales tax and HUTA (gas tax)). Mr. Porfiri explained that fund balance is available for spending only if it available in cash. Some of the fund balance has been loaned out to funds with negative cash balances. If fund balance must be used, it is prudent to use it for a one-time expense rather than ongoing expenses. Mayor Bonham counseled the candidates on the critical nature of understanding the difference between fund balance and cash on hand sp.min

6 Mr. Porfiri outlined the impact of negative cash funds on pooled cash: 06/30/ /20/2010 Natural Gas -646, ,848) Airport -430, ,801 Day Care -266, ,336 Golf course -6,265-47,129 Streets -18,656-8,346 Total neg cash -1,367, ,460 General Fund 1,692, ,071 Water fund 3,052,593 3,692,192 Net cash in bank 3,377,144 3,659,803 Mr. Porfiri reviewed a five-year GF projection using the base budget concept, noting that Susanville is in better shape than many California cities. He concluded his presentation by explaining the importance of adopting a City budget by June 30, 2010: Budget can be amended at any regularly scheduled City Council meeting. Staff will request a budget amendment as more accurate numbers become available. Negative impact of not adopting the budget on time: Violates budget policy Damages the natural gas re-financing Hurts the public perception of local government He described the hand-outs as follows: Summary by fund Departmental requests over the base budget Proposed rates and fees Report (multiple years revenues and expenditures, all funds) Mr. Porfiri indicated that the next components of the budget process are as follows: 1 Public input 2 Council comments 3 Council priorities 4 Council direction to staff for final budget 5 Consider proposed, balanced budget at public hearing on May 19, 2010 Councilmember Franco noted that the State is projecting an increase of revenues, although that increase has not been factored in projected revenue for the City. He asked Mr. Porfiri what he thinks about the state of the economy. Mr. Porfiri responded that everyone is interested in what the State will do. It cannot raise the sales tax for awhile. Because Susanville receives very little from State programs, it has limited vulnerability to cuts. For example, the City may lose the COPS grant that funds a patrol sergeant, but most likely will not. State-issued IOUs can hurt the City s cash flow; i.e., last year the City received IOUs in the amount of $15,000 for water and natural gas services. These IOUs were sp.min

7 deposited after 90 days. While he won t speculate that the market will go through the roof next fiscal year, there are signs that it may improve. Councilmember Sayers stated that the State won t decrease its deficit, and counseled a conservative projection. Mr. Porfiri agreed, advising that State Controller John Chiang had estimated that the State would be out of money by April, but amended the forecast based on having received more income tax monies than projected. Mr. Porfiri clarified that $5,030,000 in revenues for FY 2010/2011 is his best conservative estimate based on what he knows right now. Mayor Bonham asked if there were any questions or comments from the public; there were none. Mayor Bonham stated that the City will have to live with whatever trickles down from the State, estimating that the time between the State s recovery and a favorable impact on cities to be about two years. Mayor Bonham announced the time as 4:00 p.m. and asked to hear from the departments on their requests for funding over the base budget. He called upon Chief Atkinson first. Chief Atkinson justified his requests. He also covered his mitigation fund requests. The Mayor remarked that he has more than enough in mitigation to cover his requests. Chief Friedlilne justified his requests. He also covered his mitigation fund requests. Mayor Bonham commented that he is pleased to see copier costs moved from mitigation to operations. The Mayor observed that his requests for mitigation expenditures are reasonable. Mr. Porfiri reviewed and justified his requests over the base budget. Mayor Bonham commented on the importance of up-to-date hardware and software as well as outside training for departmental employees.. Mr. Platt reviewed his requests over the base budget Councilmember Franco stated that he appreciates the efforts made by the departments to keep expenditures to a minimum without complaints. He hopes that better times are on the way. Councilmember Sayers agreed with Councilmember Franco and praised Mr. Hill and the Finance department for doing a more than adequate job. Mayor pro tem Templeton also agreed. He stated that he can t tell any of the department heads what they need to do their jobs. He defers to them in matters of the budget. Mayor Bonham remarked that in reality, everything comes down to public safety. A fund has been created to accumulate savings, and that fund should be maintained. In reviewing Mr. Porfiri s graphs, he agrees that 100 percent of the property tax and 40 percent of sales tax should be earmarked for public safety activities. Further, a maximum of 65 percent should be spent on labor costs in order to build in fiscal stability. He isn t as concerned with line item expenses as the overall budget. He recommended that the City check with the County IT person to see if collaboration would affect the economies of scale. He strongly supported spending dollars on training, particularly for the Finance department employees sp.min

8 The Mayor asked if Mr. Hill had sufficient direction to proceed with balancing the budget. Mr. Hill indicated that while the direction on the use of mitigation funds is clear, he needs more information on the City Council s priorities. Following additional discussion, he asked if the Council wishes to cut expenses or to use fund balance to balance the budget with the over-base budget requests. He added that it appears that the priorities are public safety and streets. Mayor Bonham agreed with Mr. Hill s statement that public safety and streets were to be prioritized, stating that anything else was extra. Mr Hill commented that he will bring back a blended budget for consideration within that prioritization. Mayor Bonham also remarked that he believes the new City Council should adopt the budget rather than the current Council dictating expenditures to the June Council. He also stated that the rates and fees should be adopted sixty days before the beginning the new fiscal year. Councilmember Sayers disagreed, stating that he has no problem approving a new budget ahead of the new City Council. Councilmember Franco agreed, unless there was some advantage to approve it later. He doesn t see any such benefit, and believes it to be critical to adopt the balanced budget as soon as possible. Motion by Councilmember Franco, second by Mayor pro tem Templeton to adjourn the meeting; motion carried. Absent: Callegari. The meeting was adjourned at 5:05 p.m. Respectfully submitted by Debra M. Magginetti, CMC/City Clerk Kurt Bonham, Mayor Approved on May 5, sp.min