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HomeMy WebLinkAbout06.A- City Attorney s.a ORDINANCE (ID#2013) DOC ID: 2013 CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION Municipal Code From: James F.Penman M/CC Meeting Date: 09/04/2012 Prepared by: Jolena E. Grider, (909) 384- 5355 Dept: City Attorney Ward(s): All Subject: Ordinance of the Mayor and Common Council of the City of San Bernardino Adding Section 3.05.050 to the San Bernardino Municipal Code Regarding Transferring Restricted Funds Without Mayor and Common Council Approval. (FIRST READING) (Recommended for Approval at the Legislative Review Committee Meeting of August 21, 2012 - Committee Members Present: Jenkins, Kelley, Valdivia.) Financial Impact: None. Motion: Lay over Ordinance for final adoption. Synopsis of Previous Council Action: Legislative Review Committee heard this item on July 17, 2012,and August 21, 2012. On August 21,2012,the Legislative Review Committee approved a motion to place the item on the Council Agenda for the September 4,2012, meeting. Background: On July 17,2012, the Legislative Review Committee requested the City Attorney's Office to draft an ordinance that would hold people accountable and act as a deterrent to people transferring restricted funds into the general fund. On August 21,2012,the Legislative Review Committee approved this ordinance to go to the full Council at the September 4, 2012, meeting. A Resolution will be drafted listing all of the restricted funds that exist in the City and will be placed on the Agenda for the September 17, 2012,meeting. City Attorney Review: Supporting Documents: Ordinance 2013 (PDF) Updated:8/30/2012 by Heidi Aten Page 1 6.A.1 1 AN ORDINANCE OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ADDING SECTION 3.05.050 2 TO THE SAN BERNARDINO MUNICIPAL CODE REGARDING 3 TRANSFERRING RESTRICTED FUNDS WITHOUT MAYOR AND COMMON COUNCIL APPROVAL. a 5 THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN 6 i BERNARDINO DO ORDAIN AS FOLLOWS: c 7 LL 71 d s Section 1. Section 3.05.050 is hereby added to the San Bernardino Municipal Code d 9 to read as follows: c 10 3.05.050 Transferring Restricted Funds-Violation ` 11 It shall be unlawful for the City Manager and/or the City Treasurer or anyone under the City Manager's or City Treasurer's direction and/or control to transfer 12 restricted funds, as defined by law or as shall be defined by Resolution of the Mayor and Common Council, to any other fund without authorization from the Mayor and o 13 Common Council or to pay any bill, invoice, or charges from any restricted fund when a said bill, invoice, or charges are not appropriate to be paid from any such restricted fund without said approval. c 15 d 16 v O 17 0 n 0 15 u c 20 21 T p 22 y E 23 29 25 26 27 28 1 Packet Pg. 38 6.A.7 1 AN ORDINANCE OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ADDING SECTION 3.05.050 2 TO THE SAN BERNARDINO MUNICIPAL CODE REGARDING 3 TRANSFERRING RESTRICTED FUNDS WITHOUT MAYOR AND COMMON COUNCIL APPROVAL. 4 5 1 HEREBY CERTIFY that the foregoing Ordinance was duly adopted by the Mayor and 6 Common Council of the City of San Bernardino at a meeting thereof, held on the _day of 2012, by the following vote, to wit: 7 D a COUNCIL MEMBERS: AYES NAYS ABSTAIN ABSENT N 9 MARQUEZ — rn to JENKINS w 11 VALDIVIA R 12 SHORETT -- D 13 rs KELLEY d 14 d 15 JOHNSON — c 16 MC CAMMACK 40` 17 0 N_ 18 M Georgeann Hanna, City Clerk o 19 N The foregoing Ordinance is hereby approved this day of 2012. m 20 c 21 0 22 PATRICK J. MORRIS, Mayor E City of San Bernardino 23 Approved as to form: 24 a JAMES F. PENMAN 25 City Attorney 26 v 27 By: YYY 2e z Packet Pg.39 Entered Into Rec, at MCC/CDC Mfg: % Z by.--��� Agenda lfem No. ""A ' F� by: - )rr,,�� City Cierk/C 1 Ir �rt1 � viso � M tV DC Secretary n/ -1 e W10 el FORM eM0 OPoL y City of San Bernardino "°FO ^' R � 0�1 Res AL oprrv,�,� INTER OFFICE MEMORANDUM '�etU(� HC'l y� OFFICE OF THE CITY ATTORNEY CITY OF SAN BERNARDINO Legal Memo No. 09-023 TO: Mark F. Weinberg, City Manager FROM: John F. Wilson, Senior Assistant City Attorney/� DATE: February 11, 2009 RE: City Borrowing from Enterprise Funds CC: Mayor and Common Council, City Attorney Question City Manager Mark Weinberg has requested an opinion regarding the legalities associated with the City borrowing money from its enterprise funds including the water, sewer and refuse funds, or from the Redevelopment Agency? Summary Nothing in the Charter of the City of San Bernardino precludes a transfer of revenues from one City fund to another. The fund from which revenues are transferred cannot be reduced to the extent that lawful yearly demands on the fund cannot be met. Loans from the Water Department require the cooperation of the Board of Water Commissioners. Otherwise, any transfer of funds must be made in such manner as not to violate the provisions of Proposition 218. Apparently, a loan of less than one year term may be made from the RDA to the City when such loan is for purposes not related to the redevelopment activities of the Agency. Discussion For purposes of this analysis,the intent"to borrow"from a fund is distinguished from the intent to "to transfer"from a fund. A"transfer" is deemed to be accomplished when money is moved from one fund to another absent the intent to restore those monies at a future date. To "borrow"the money is deemed to be a"temporary transfer"of money from one fund to another with the intent to restore the money at a specified future time, with or without the payment of . ) 1 interest. A legal prohibition against the transfer of money will generally act as prohibition against the temporary transfer of money unless otherwise specified in the law(see e.g. California Constitution Article 16 §6). Absent some legal limitation,the City Council has the authority to move money from one fund to another through an appropriate budget action. Where the money contained in a fund from which the transfer is to be made derives from special assessments based on the value of benefits conferred on property(e.g. water, sewer,and refuse collection), development fees exacted in return for permits or other government privileges, or regulatory fees imposed under the police power(e.g. fees for building permits, business licenses, etc.)Proposition 218 (including Prop. 13 and Prop.62) may become an issue. The issue arises when the fees or assessments charged are in excess of the cost to provide the benefit provided. Evidence that this has occurred is present when there is a direct statement by the government entity assessing the charge that some portion will be used for the general fund or for purposes other than providing the benefit. Evidence may otherwise be found in the circumstance that the money is expended for purposes other than providing the benefit for which it is collected. A transfer of funds, temporary or otherwise,may constitute evidence of such expenditure. In the context of a transfer of funds,it appears that a violation of Prop. 218 is avoided to the extent that the record reflects that money transferred does not have its source in an overcharge for the benefit. The recommended way of demonstrating this is through the creation of record which shows that the transfer is actually a reimbursement of costs of services provided by the fund receiving the transfer. Absent such a record, a possible alternative approach is an accounting that shows that the transfer reduces the money remaining in the fund after the transfer to a level below that necessary to meet outstanding or anticipated demands on the fund. This latter approach would be consistent with a temporary transfer. Money could be transferred from one fund to another with the express proviso that the money be returned before the maturing of demands on the fund from which the money is transferred(see Auerbach v. Board of Supervisors (1999) 71 C.A. 4d' 1427). Absent prop. 218 considerations, the transfer of money between funds in a charter city is generally a matter of local law(See Rancho Santa Anita v. City of Arcadia (1942)20 C. 2d 319; Collier v. City and County of San Francisco(2007) 151 C.A. 4'" 1326;). In San Bernardino, section 135 of the Charter of the City of San Bernardino provides in pertinent part that: The provisions of the laws of the State of California relating to ...the establishment and operation of funds and the transfer of revenue between funds which apply to general law cities shall be applicable to and given full force and effect in the City, provided that the Mayor and Common Council are empowered to and may,by ordinance, prescribe and provide for such matters and other matters directly related thereto and such ordinance after its adoption shall prevail over said provisions of the general law. i To the extent that the transfer of money is not limited by general law or the Charter, the City Council may take action to accomplish a transfer of money between funds (Auerbach id.). Section 134 of the Charter describes the Sewer Service Charges to be assessed by the City and requires their deposit into the Sewer Fund. The section otherwise sets forth the manner of collection of the charges and priority of use. Section 149 describes what shall be paid from the Sewer Fund. The language of the two sections is interpreted as describing what, at a minimum shall be paid from the fund and specifying that as to the enumerated charges the Sewer Fund shall be the source of their payment. The language is not read to create a prohibition on other uses of the money in the fund. Charter Section 164 along with sections 146, and 163(3),prescribes the management of the Water Fund. Section 164 specifically addresses the issue of a transfer of money from the Water Fund to the General Fund of the City. There it is stated that, "...except that the Common Council may, in its discretion,monthly transfer from the Water Fund to the General Fund not more than ten percent(10%) of the revenues of the Water Department during the preceding month...." The appropriate application of this permission granted in the City Charter to extract money for general fund use from the revenues of the Water Department could be the subject of a Prop. 218 Supreme Court case. For the purposes of this analysis I attempt to answer the limited question of whether the 10%is a cap on the money that may be temporarily transferred from the Water Fund to the General Fund. The language is read as controlling as to the authority and the limits of the transfer as opposed to the temporary transfer of money from the Water Fund. Given that reading,to the extent that any money in excess of 10% is transferred and replaced from and replaced in the Water Fund in a timely manner,the cap has not been violated. The question is then as to the length of time the money may be held. If the money is borrowed and returned within a month, the 10% cap is not violated. If the money is held for a longer than a month, a transfer of in excess of 10%would appear to be in violation of the cap. It must be emphasized that the Prop. 218 questions (including Prop. 213 and Prop. 62)must be given due consideration before any transfer of money under this section. The Refuse fund appears as Account Number 527-410 in the City budget. It appears to be a creature of accounting developed to track the costs of Integrated Waste Management within the Public Services Department. The fund is not created by Charter save to the extent that under Section 143, the Mayor and Common Council may generally designate special funds. The adoption of the budget containing the reference to the Refuse fund is such designation. Given the origins of the fund,the use of the money contained in the fund may be directed through adoption by the Mayor and Common Council of an amending document with equal dignity to that by which the budget was adopted (Collier v. City and County of San Francisco, id.). The Redevelopment Agency is a governmental agency, separate and distinct from the City. Borrowing from the RDA would need to be conducted as between different government agencies. Government Code Sections 53820 et seq. through 53850 et seq. establish mechanisms for temporary borrowing between government agencies. There is a question as to whether the Redevelopment Agency is a"Local Agency"for purposes of these statutes. In her e-mail to Ms. McCammack dated February 9, 2009,Ms. Lindseth states in her response to the question can we borrow from EDA as a short term debt?that the answer is yes, with the proviso that the obligation is not for more than a year unless it is related to redevelopment purposes. I can make no offer of authority in support of her statement regarding the ability of the Agency to make loans to the City. This would seem to be problematic if the source of the funds is tax increment. With respect to Ms. Lindseth's comment that any loan to the City by the Agency must be short term, California Constitution Article 16 §18 sets forth the municipal debt limit. It generally provides that a city shall not incur indebtedness in any manner or for any purpose exceeding in any year, the income and revenue provided for that year without the assent of two- thirds of the voters. This has been interpreted to mean that a public entity may incur such contractual liability without voter approval if the contract creates no immediate indebtedness for aggregate installments, confines liability to each installment as it falls due, and each year's payment is for consideration actually furnished that year(City of San Diego v. Rider(1996) 47 C.A. 4" 1473). This is the basis upon which the City enters lease-purchase agreements for the long term purchase of real property, capital improvements, vehicles, etc. Conclusion The Mayor and Common Council may make temporary transfers of money between the funds of the City under such conditions as avoid violations of Prop. 218 and are otherwise in conformance with the Charter. Because the Redevelopment Agency is not a part of the City, different rules apply. Statutory authority exists for short term loans between government entities. It is not clear that the RDA is a local agency permitted to make loans under those statutes. The limitations on the use of tax increment funds would appear to be a source of constraint on the ability of the Agency to make a loan to the City for uses not limited to the Agency's redevelopment purposes. Any borrowing from the Agency would be subject to the debt limitation provisions of California Constitution Article 16 §18. However, a properly structured loan document can overcome the prohibitions of this statute.