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Home My WebLink About13-City Manager ORIGINAL CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION From: Mark Weinberg Subject: Transfer $200,000 from the Reserved General Fund to the City Attorney's budget as follows: $164,000 to account #001-051-5503 and $36,000 to account #001-051-5177. Dept: City Manager's Office Date: December 29, 2008 Council Date: January 5, 2009 Synopsis of Previous Council Action: Recommended Motion: That the Director of Finance be authorized and directed to amend the FY 2op~-09 budget and appropriate $200,000 from the Reserved General Fund to the City Attorney's budge( 'n Hows: $164,000 to account #001-051-5503 (Litigation - Outside Attorneys) and $36,000 to accou t -051-5177 (Litigation- Expense) Contact person: Phone: Supporting data attached: Ward: FUNDING REQUIREMENTS: Amount: Source: (Accl. No.) -0- (A"'" n"""riptinn) -0- Finance: f:i." J Replacement Pages Agenda Item "No. 13 /...s-ocr ~&VltW.5L'I #-9 /2-/o--()8 San Bernardino, California, January 5, 2009 STAFF REPORT TO: MAYOR AND COMMON COUNCIL FROM: CITY MANAGER SUBJECT: BUDGET AMENDMENT FOR OUTSIDE LITIGATION COSTS RECOMMENDATION: It is recommended that the Mayor and Common Council authorize and direct the Finance Director to amend the FY 2008-2009 Budget and appropriate $200,000 from the General Fund Budget Reserve of $ 7,725,800 to the City Attorney's budget as follows: $164,000 to account #001-051-5503 (Litigation - Outside Attorneys) and $36,000 to account #001-051-5177 (Litigation - Expenses). BACKGROUND: During the 2008-2009 FY annual operating budget preparation process, all departments and offices were called upon to make expenditure cuts in an effort to close a projected $17.4 million deficit during a period of increasing fiscal instability. Regrettably, but typical in the waning moments of budget preparation, departments were asked for additional cuts without the benefit of a careful service impact analysis. Likewise, programs with associated new revenues were added to the budget, for which projections, without the benefit of history, were highly speculative. In some cases, it is likely that achieving the adopted cuts, or realizing new program revenues, will not be practical and adjustments will have to be made intra or inter departmentally. For these reasons, it is prudent for the City to vigorously explore new revenue sources as opposed to suffering unanticipated service cuts, or compromising the public's safety and welfare. Confronted with laying off staff or reducing outside litigation expenses, the City Attorney agreed to accept a $400,000 ($300,000 from contract attorney fees and $100,000 from related expenses) cut in the latter category. This sum represented a 50% expenditure reduction in this category compared to projected costs for the immediately preceding fiscal year. DISCUSSION: Workload in the City Attorney's Office is largely event-driven; the office is required to represent the City in all litigation filed against the City. Several of the currently pending lawsuits are complex and require considerable work by outside attorneys with expertise and experience in specialty areas of the law. In addition to the number of complex cases filed, costs of depositions, experts and other trial preparation have risen. As reported by the City Attorney, as of December 9,2008, out of a total of 90 pending cases, there are 53 wherein the City is represented by the City Attorney's Office and 37 that are handled by outside attorneys. Third parties have picked up the City's defense in 13 cases under insurance or indemnification agreements, which leave only 24 cases which have been "farmed out" by the City Attorney's Office. A comparison with other years is as follows: 12/9/08 2006 2007 2005 2004 2003 1997 1987 Total Cases 90 85 96 87 78 107 115 198 Total In-House 53 58 61 51 44 78 89 -0- Total Outside Counsel 37 27 35 36 34 29 26 198 Paid for by 3rd Party 13 City Attorney's Budget 24 Total Where City Defendant 63 58 63 65 60 85 84 195 Total Where City Plaintiff 27 27 33 22 18 22 31 3 The City Attorney's Office contends that, without additional staff, it cannot handle many more cases in-house and cannot handle any more complex cases. So far this year, the City has spent $148,019 in outside attorney fees and $98,847 in litigation expenses. It is anticipated that an additional $392,000 in outside attorney fees and $72,000 in litigation costs will be needed to handle just the currently pending cases through June 30, 2009. This estimate is predicated on cases which the City Attorney has briefed the Mayor and Common Council on, and for which they previously approved outside attorney contracts, as well as other facets of case planning. The above recommendation clearly will not fully resolve the current problem, but is made with the intent to work with the City Attorney's Office to find a more comprehensive solution to the funding gap. In an effort to contain outside attorney costs, the City Attorney has agreed to participate in the City Manager's expenditure reduction program that requests, and when possible, requires outside contractors, consultants and vendors to accept a 5% reduction in fees and charges. Additionally, it is recommended that the City Attorney review with the MCC all current and pending major cases to determine if outside litigation services and expenses can be trimmed. Finally, it is important for the City Manager and City Attorney to discuss other areas of the Attorney's budget in an attempt to locate areas for possible savings to offset the rising cost of outside litigation. The City Attorney's budget will likely need to be revisited again well before the conclusion of the current FY. However, additional time will permit the next review to be made in the context of the Finance Director's mid-year budget report, and proposed revenue and expenditure adjustment recommendations from the City Manager. FISCAL IMPACT: This budget amendment will reduce the City's General Fund unobligated General Fund balance by $200,000. The benefits of providing the financed legal services are not known at this time, but could result in settlements and judgments which save the City far more than the amendment amount. CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION From: Mark Weinberg, Subject: Transfer $400,000 from the unreserved general fund to the City Attorney's budget as follows: $328,000 to account #001- 051-5503 and $72,000 to account #001- 051-5177. Dept: City Manager's Office Date: December 10,2008 MCC: December 15,2008 Synopsis of Previous Council action: Recommended motion: That the Director of Finance be authorized and directed to amend the FY 2008-2009 budget and appropriate $400,000 from the unreserved general fund to the City Attorney's budget as follows: $328,000 to account #001-051- 5503 (Litigation - Outside Attorneys) and $72,000 to account #001-051-5177 (Litigation - Expenses). Contact person: Phone: 5355 Supporting data attached: Ward: FUNDING REQUIREMENTS: Amount: Source: (Ace!. No.) (Ace!. Description) Finance: Council Notes: 75-0262 Agenda Item No.--9 1'l"IS.tJ8 STAFF REPORT Council Meeting Date: December IS. 2008 TO: FROM: DATE: AGENDA: Mayor and Common Council City Manager's Office December 10, 2008 December 15, 2008 To help balance the City's budget last spring, the City Attorney's Office was requested to reduce its budget by $400,000.00. Because the bulk of its budget is allocated to litigation, the City Attorney elected to make cuts from his litigation accounts ($300,000 from outside attorney fees and $100,000 from litigation expenses). Workload in the City Attorney's Office is almost exclusively event-driven; the office is required to represent the City in all litigation filed against the City. Several of the currently pending lawsuits are complex and require considerable work by outside attorneys with expertise and experience in specialty areas of the law. In addition to the number of complex cases filed, costs of depositions, experts and other trial preparation have risen. As reported by the City Attorney, as of December 9,2008, out ofa total of90 pending cases, there are 53 wherein the City is represented by the City Attorney's Office and 37 that are handled by outside attorneys. Largely through the efforts of the City Attorney's Office, third parties have picked up the City's defense in 13 cases under insurance or indemnification agreements, which leaves only 24 cases which have been "farmed out" by the City Attorney's Office. A comparison with other years is as follows: 12/9/08 2007 2006 2005 2004 2003 1997 1987 Total Cases Total In-House Total Outside Counsel Paid for by 3rd Party City Attorney's Budget Total Where City Defendant Total Where City Plaintiff 90 53 37 13 24 63 27 96 61 35 85 58 27 87 51 36 78 44 34 107 115 198 78 89 -0- 29 26 198 63 33 58 27 65 22 60 18 85 84 195 22 31 3 The City Attorney's Office contends that, without additional staff, it cannot handle many more cases in-house and cannot handle any more complex cases. So far this year, the City has spent $148,019 in outside attorney fees and $98,847 in litigation expenses. It is anticipated that an additional $392,000 in outside attorney fees and $72,000 in litigation costs will be needed to handle just the currently pending cases through June 30, 2009. In an effort to contain outside attorney costs, the City Attorney has agreed to participate in the City Manager's expenditure reduction program that requests, and when possible, requires outside contractors, consultants and vendors to accept a 5% reduction in fees and charges. Therefore, it is recommended that the Director of Finance be authorized and directed to amend the FY 2008-2009 budget and appropriate $400,000 from the unreserved general fund to the City Attorney's budget as follows: $328,000 to account #001-051-5503 (Litigation - Outside Attorneys) and$72,OOO to account #001-051-5177 (Litigation - Expenses).