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HomeMy WebLinkAbout07-10-2012 Jt. Spe Mtg Minutes O�RNARyZ City of San Bernardino Mayor Patrick J. Morris 300 North "D" Street Council Members o San Bernardino CA 92418 Virginia Marquez > � � Robert D. Jenkins http://www.sbcity.org John Valdivia .s o' Fred Shorett orf QED vk�0` Chas A. Kelley Rikke Van Johnson Wendy J. McCammack MINUTES JOINT SPECIAL MEETING OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ACTING AS THE SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ACTING AS THE SUCCESSOR HOUSING AGENCY TO THE REDEVELOPMENT AGENCY AND MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ACTING AS THE HOUSING AUTHORITY JULY 10, 2012 COUNCIL CHAMBERS The joint special meeting of the Mayor and Common Council of the City of San Bernardino was called to order by Mayor Patrick J. Morris at 4:12 p.m., Tuesday, July 10, 2012, in the Council Chamber, 300 North "D" Street, San Bernardino, California. Roll Call Attendee Name Title Status Arrived Virginia Marquez Council Member, Ward 1 Present 4:12 PM Robert D. Jenkins Council Member, Ward 2 Present 4:00 PM John Valdivia Council Member, Ward 3 Present 5:58 PM Fred Shorett Council Member, Ward 4 Present 4:02 PM Chas A. Kelley Council Member, Ward 5 Present 6:00 PM Rikke Van Johnson Council Member, Ward 6 Present 5:56 PM Wendy J. McCammack Council Member, Ward 7 Present 5:55 PM Patrick J. Morris Mayor Present 5:23 PM James F. Penman City Attorney Present Georgeann "Gigi" Hanna City Clerk Present 2:59 PM Andrea Travis-Miller City Manager Present Mayor and Common Council ofthe City of San Bernardino Page 1 Printed 1!/1/1011 Special Meeting Minutes July 10, 2012 1. Closed Session — Pursuant to Government Code Section(s): A. Conference with legal counsel - existing litigation -pursuant to Government Code Section 54956.9(a). B. Conference with legal counsel - anticipated litigation - significant exposure to litigation - pursuant to subdivision (b) (1), (2), (3) (A-F) of Government Code Section 54956.9. C. Conference with legal counsel - anticipated litigation - initiation of litigation - pursuant to subdivision(c) of Government Code Section 54956.9. D. Closed Session-personnel -pursuant to Government Code Section 54957. E. Closed session with Chief of Police on matters posing a threat to the security of public buildings or threat to the public's right of access to public services or public facilities - pursuant to Government Code Section 54957. F. Conference with labor negotiator-pursuant to Government Code Section 54957.6. G. Conference with real property negotiator - pursuant to Government Code Section 54956.8. City Attorney Penman stated that a motion was made and approved to continue yesterday's closed session to 4 p.m. today. Invocation/Pledge of Allegiance The invocation was given by Chaplain Ray Miller. The pledge of allegiance was led by Mayor Morris. 2. Staff Reports 2A. City Manaser Discuss and Take Possible Action on the 2012/2013 City Budget. Mayor Moms asked staff how long it would take to come up with a proposed interim budget. Andrea Travis-Miller, Acting City Manager, stated that her goal is to have that on the next agenda, but she may need additional time. Council Member McCammack stated that a meeting had been scheduled for tomorrow. Mayor Morris stated that tomorrow's meeting could be cancelled. He suggested continuing the matter to the next regular meeting. V Consensus Motion: Continue the matter to the Council meeting of July 16, 2012. Mayor and Common Council ofthe City ojSan Bernardino Page 2 Printed 111112012 Special Meeting Minutes July 10, 2012 2B. City Manaeer Discuss and Take Possible Action on Authorizing the City Attorney to File a Chapter 9 Petition on Behalf of the City of San Bernardino in the United States Bankruptcy Court. Mayor Morris stated that posted on the City's website is a comprehensive budgetary analysis of the City's budget and recommendations for budget stabilization prepared by the City Manager and the Director of Finance. He encouraged anyone interested in the City's future to review that document that consists of about 45 pages of analysis with charts and attachments. Andrea Travis-Miller introduced Tom Clark, attorney with Stradling, Yocca, Carlson and Roth who specializes in municipal issues; Michael Busch, financial expert and President of Urban Futures; and Jason Simpson, Director of Finance. Mrs. Travis-Miller stated that this is the time that they would normally present the City's annual operating budget. She stated that the Council took action to continue that budget discussion recognizing that there are a variety of financial issues that need to be addressed. For several years the Mayor and Common Council and City staff have been aware of concerns related to the City's financial situation. In fact, an analysis of the last 20 years of the City's budget messages indicates that there has been an ongoing concern with the City's finances. At the same time, they have seen an overall increase in the demand for services and this Council has attempted to address that. Unfortunately, the demand for programs and services and some of the additional programs and services that have been provided and the costs related to those have really outpaced the ability to meet those demands in terms of revenues. The City has experienced an economic decline of major proportions. In one year, this community lost $16 million in sales tax revenue and has had major reductions in revenues, and because of the demand for programs and services, the demand and the costs have not outpaced the economic realities. To avoid significant service and personnel reductions the Council has held numerous positions vacant in all City departments, has looked at reducing costs, has deferred maintenance of facilities and community parks, has used reserved funds, and has attempted to sell assets. At this point the City does not have reserves to draw upon as many communities do to assist them in weathering the economic crisis. Michael Busch summarized the City's financial position over the last 20 years. Jason Simpson submitted into the record and discussed highlights of a document titled, "City of San Bernardino, California, General Fund (by Fiscal Year) Revenue Details," dated July 10, 2012. Mrs. Travis-Miller stated that there are three issues. The City has an immediate cash flow issue and a deficit as it enters into the new fiscal year that needs to be cured in order to make payroll and other obligations. We receive our revenues at various phases within the year. Typically we do see during the first half of the fiscal year fewer revenues coming in, but most agencies plan for that and they have sufficient reserves to be able to move through those dry periods. We really don't have that here and so we are concerned with our immediate cash flow problem. The departments have proposed a status quo budget of about $166 million. The expiration of concessions, an issue that has not been Mayor and Common Council ofthe City of San Bernardino Page 3 Printed/////20/2 AINN� Special Meeting Minutes July 10, 2012 fully materialized, was included in the budget assumptions. Beyond that, we need to �y develop a longer term plan to make sure that into the future this Council is able to C provide the kinds of sustainable programs and services that you want for your j community. So there are really three issues there. Given the magnitude of the problem, a f major restructuring of this organization is needed and staff recommends that this Council consider authorizing the City Attorney to file a restructuring petition that would allow us to do that, and then we will come back in two weeks with a plan on how to cut expenditures to make sure that in this interim time period we are able to meet our obligations. We recognize we have obligations to our employees, to others in this community, and we have to put ourselves in an immediate financial position to be able to do that. l Mayor Morris asked for an estimate in terms of our ability to make payroll over the next 30 to 90 days. I Mrs. Travis-Miller stated that she was concerned about our ability to make payroll not only in the next 30 days but even the next 60 to 90 days. We have obligations that are currently pending and we're looking at how we can defer those in order to be able to make payroll, but we will need to make other adjustments as we move into the next month and even beyond that. So we are currently preparing a plan that would allow us to I do that on an interim basis until we can develop a major restructuring of our organization. j City Attorney Penman stated that we have vendors who have performed services for the { City who have not been paid and some of them have filed stop notices on the City which I O is the equivalent of a mechanics lien notice, which would be filed on a non-governmental entity. Mr. Penman advised that the bankruptcy law is a reorganization law, it's very different from what happens in a corporate bankruptcy or a business or an individual. The City does not lose control of its financial situation as a corporation might or an individual or business might. The City's creditors cannot present a financial plan for the City that we end up having to follow under a court order. The court will not impose a trustee to take over the City's functions. The City's assets cannot be seized by our creditors and we will have time to reorganize our financial structure and our debts. There will be a stay on all of the lawsuits filed against the City. Under federal bankruptcy law the bankruptcy court cannot interfere with any laws that have been enacted by the voters so our City Charter remains basically untouched. Propositions that are voted on statewide such as Proposition 218 which prohibits us from taking money from the Water, Sewer or Refuse Fund and using that in the General Fund will be honored by the bankruptcy court, so we do not have that option. The City is not bankrupt in the sense that most people know bankruptcy. We have a lot of assets. We have a lot of property and the property has been transferred back and forth and some of it is in the Economic Development Corporation's hands, and AB1484, says that corporations of that nature be treated the same as a city. There are some legal issues with that, but basically, we have assets and our creditors cannot get to those assets. The filing of a bankruptcy petition will allow the City to reorganize its finances, will allow the City to establish a plan to be presented to the bankruptcy court and if approved, that plan will lay out to the bankruptcy court and to the public, what the City is going to have to do Mayor and Common Council ofthe City of San Bernardino Page 4 Printed 111172012 Special Meeting Minutes July 10, 2012 and that will include putting money aside for reserve and paying back restricted funds that were borrowed from for a number of years to supplement the City's general fund and keep the City going. The bottom line is that we cannot default on our payments to our employees without violating the law. Mayor Morris stated that under Chapter 9 of the bankruptcy law this body remains intact in terms of making public policy relative to this City and its future. That is both a blessing and a curse because this body therefore has the responsibility to come forward with a plan that will cure the problems that have been identified today through Mr. Busch's and Mr. Simpson's explanation of our issues and offer the opportunity for those who will follow us at this dais and live in the City a solid base upon which to build a new budget future. So this Council retains a critical role here. The bankruptcy court will not impose a plan upon us. We must present a plan to the court, but it's got to be a plan that provides a sustainable strong base to our future. Public Comments: Kathy Mallon, San Bernardino, CA John Matley, San Bernardino, CA Milton Clark, San Bernardino, CA Danny Morales, Riverside, CA William A. Valle, San Bernardino, CA Ed Erjavek, City employee, Anthony Cartagena, San Bernardino, CA Dee Stoddard, San Bernardino, CA { Bonnie Clarke, San Bernardino, CA �►✓ Jennica Billins, San Bernardino, CA Hans Vandertouw, San Bernardino, CA Fannie Lang-Sanders, Highland, CA Arthur William Roberson, San Bernardino, CA Larry Lee, San Bernardino, CA Hayward Jackson, San Bernardino, CA Rebecca Abma, San Bernardino, CA Jim Smith, San Bernardino, CA Council Member Shorett stated that our two choices are to make drastic cuts or file for reorganization under Chapter 9. Mrs. Travis-Miller stated that given the magnitude of the problem and the fact that our cash reserves are depleted we have no choice but to move very swiftly and restructuring is the alternative that will get us to where we need to be. Council Member Shorett stated that if we were to go into Chapter 9 that would give us the ability to review and modify any contracts that we have currently or that are coming up for renewal. Mrs. Travis-Miller stated that it would provide us with the opportunity to evaluate all of © our municipal services and all of our contracts and develop a restructuring plan to the court that balances our budget and places us on a path so that we are sustainable and that we are able to be resilient to the economic impacts that will undoubtedly face this and every other community. Mayor and Common Council ofthe City of San Bernardino Page 5 Printed 1111120/1 Special Meeting Minutes July 10, 2012 Council Member Shorett asked if that plan could include going out to the public to review and perhaps change the Charter. Mrs. Travis-Miller stated that those types of changes are longer term. We really need ! those immediate cuts; we need a longer-term solution and then a much longer term solution such as Charter change. ' Council Member Shorett stated that they could defer things and make some immediate cuts that would get us through the next 60 days perhaps, but even that's shaky. i Mrs. Travis-Miller stated that she would need to bring to this Council some cuts for consideration that will help us with our cash flow in the more immediate term. I think we've resolved some of those issues for this month, but as we enter the next couple of months I will be bringing additional cuts to you as we have cash flow issues. Council Member Shorett stated that he was very concerned that we get a handle on salaries and pensions and benefits that we've been pretty generous with over the years based on money that we had available due to booms in sales tax, property taxes, and real estate. Mrs. Travis-Miller stated that we recognize it's our responsibility to provide all the various policy alternatives so the Council has good options on which to make decisions. With respect to areas of the budget that are problematic, we have several things that we © will need to review; certainly salaries and pensions are among them, but some of it is the way we lease equipment that needs to be reviewed, some of our other contracts for services, and we would propose that during this time period we look at all of those things and bring good recommendations back to you so that we have a plan going forward that makes us more sustainable. City Clerk Hanna stated that if the Council wanted to put anything before the voters on the November ballot, the last meeting that they could approve that would be August 5. Council Member Marquez asked staff to walk the Council through the timeline and what needs to take place as far as filings and deadlines. Mrs. Travis-Miller stated that we really wouldn't be in a position to file for about 30 days. There's a tremendous amount of work that both offices and outside counsel would be responsible for doing, and then it's about a 12 to 18-month process after that. Mr. Penman stated that there will be some other things that have to be done. Government Code Section AB506 will require a noticed public hearing—there's no specific time given for the notice but it will probably be the 72-hour posting that the Brown Act requires—that will probably be accomplished this coming Thursday for the next regular Council meeting on Monday, July 16, 2012. There will be a resolution that will be prepared for the Council's consideration at that time that will have to be adopted. We will have to come up with a list of all of the City's creditors and all the people to whom we owe money for presentation to the bankruptcy court. We'll have to come up with a budget to cant'us through during the period that the City is in bankruptcy. Mayor and Common Council ofthe City of San Bernardino Page 6 Printed 1111/1012 Special Meeting Minutes July 10, 2012 Council Member Shorett clarified that it may be a 10- or a 15-year plan and once that's put in place we are obligated and virtually forced to follow that plan to a tee, which includes future Councils. Mr. Penman stated that he did not know the answer to that question, but he stated that he assumed that in order for the bankruptcy court to approve it that the intention would be that we stick to it. Mayor Morris stated that he thought that because this body would remain in charge of the destiny of the City as a policy body, it would be up to those who follow this Council to stay committed to that discipline. However, once the court discharges us from its jurisdiction, he was not sure that we have anything except a belief that those who follow us will follow whatever plan is laid out by this Council. Council Member McCammack read the following from a document regarding Chapter 9 reorganization and restructuring: "Much depends on what the court believes the debtor can afford to pay and according to that standard, the municipality does not have to discontinue its services." The municipality is supposed to be permitted to continue to operate as a viable entity and provide basic services. It may have to scale down but it only has to pay its creditors what a court finds to be reasonable and that may sometimes be a fairly low hurdle to meet. "A municipality also needs to make sure that it has sufficient cash to pay ongoing operating expenses to maintain essential public services. It talks about the preparation and the projections and fixing the insolvency," which I think is what the City Manager has described. Since we are restricted in using some special funds associated with certain revenues, which is a taxpayer protection, and we need to keep those restrictions intact. Lastly, the document states: "A further advantage of Chapter 9 is that a municipality can operate relatively freely in a Chapter 9 process as opposed to Chapter 11 and it continues its day-to-day operations without interference by the bankruptcy court or other parties. The Chapter 9 debtor stays in control and the court may not intrude into the municipal business or politics of the debtor. The debtor can also obtain financing without court approval." Mr. Penman stated that he had conferred with Paul Glassman, the bankruptcy attorney, who informed him that the plans approved by the bankruptcy court are usually 2-, 3- and perhaps 5-year plans and that it is unusual to have one as long as 10 years. The bankruptcy court does retain jurisdiction even after the bankruptcy is ended, and as part of that jurisdiction the bankruptcy court would require that we comply with whatever plan that we adopt and they approve. Council Member Jenkins clarified that if we do not go down the Chapter 9 road, it would be impossible to pay our employees within 60 days. © Mrs. Travis-Miller answered in the affirmative. She stated that eventually this organization would run out of money. Certainly there are some actions that we've taken to try to reduce costs, but we cannot take the actions fast enough in order to continue to make payroll and meet our other obligations. Mayor and Common Council ofthe City of San Bernardino Page 7 Printed 1111/1011 Special Meeting Minutes July 10, 2012 Council Member Johnson stated that the goal of Chapter 9 is for the debtor to emerge with a successful plan of adjustment to restructure its debt. And when we come up with the plan it's imperative that we have the political will to stick with that plan. It's important that we lay the foundations for future elected officials that follow us; and while we're doing, that it's important that we remain transparent because he believes that our public has really lost trust in the ones that are sitting up here at this table. It's important that we will be in this for the long haul and that we will not make decisions based on politics,but for the betterment of our City. Council Member Kelley stated that we could have implemented revenue options that would have helped this budget to the tune of$1.2 million with our cell phone towers, the parking meters downtown in our courthouse square to generate revenue from out-of-town visitors, the public/private partnerships that were alluded to earlier would have an immediate savings for this City and create revenue. It would save us on maintenance costs, it would save us on PERS costs, fuel costs, worker's compensation, etc., and then probably more likely bring in annual franchise fees. We've had an option to consider LEDs that could save us millions of dollars. He strongly suggested that this Council adopt some or all of these options because they've got to start generating revenues for the City. He stated that his long standing assumption, and those held by residents of the Fifth Ward, has been proven correct; Development Impact Fees have not been correctly allocated. He stated that that's why he has an agenda item set for the LRC meeting on Thursday that will call for some accountability with our municipal ordinance so we can hold people responsible for gross mismanagement of the publics' funds. Mayor Morris stated that in the conclusions to the analysis posted on the City's website, the financial situation in 2012 is a systemic problem held over for years going back to the 1990s. Revenues are simply not sufficient to cover the costs of the services being provided. City management and City residents have both made public safety the top priority for the City having approved a ballot measure, Measure Z, to allocate additional resources to the Police Department. Other services have been cut to support the emphasis on public safety. Clearly, reductions to the expenditure side of the budget are not going to produce the level of savings that would be required to balance the budget. The City has been working diligently to manage its operations through an unprecedented decrease in revenues while experiencing cost increases. As a comparison might note, the City entered this challenge with a distinct disadvantage in that it has the lower level of discretionary revenue and the resultant lower levels of operational expenditures than other cities of similar size. Nevertheless, the City has taken steps to reduce costs over the last several years and has been forced to do so by declining revenues. However, the expenditures have outpaced revenues. In this effort, employee associations have been forthcoming with some compensation changes, yet costs continue to be much more than can be afforded by the City. The revenues forecast shows that significantly lower costs will be required for the © foreseeable future. While the service delivery changes suggested in this report are likely to be resisted because of the changes involved in personnel, the suggestions are not radical and are being used successfully in other similar jurisdictions. Additionally, because other local government agencies are also looking for ways to reduce costs in Mayor and Common Council of the City of San Bernardino Page 8 Printed 1 11112012 Special Meeting Minutes July 10, 2012 response to financial challenges, there is greater opportunity to discuss and implement regionalization or shared services than before. Finally, when it comes to revenues, the analysis indicates the City receives a lower level of revenue than other similar cities, so revenue augmentation should also be on the table; however, options to increase revenues in sufficient significance to provide ongoing budget stabilization are limited and cannot be implemented without voter approval; it will take time for both, even if approved. Motion: Authorize the City Attorney to File a Chapter 9 Petition on Behalf of the City of San Bernardino in the United States Bankruptcy Court. RESULT: ADOPTED [4 TO 21 ;MOVER: Rikke Van Johnson, Council Member, Ward 6 SECONDER: Virginia Marquez, Council Member, Ward 1 AYES: Virginia Marquez, Robert D. Jenkins, Rikke Van Johnson, Wendy J. McCammack NAYS: Fred Shorett, Chas A. Kelley ABSTAIN: John Valdivia 3. Public Comments on Items Not on the Agenda No public comments were received. 4. Adjournment The meeting adjourned at 8:28 p.m. The next joint regular meeting of the Mayor and Common Council and the Mayor and Common Council Acting as the Successor Agency to the Redevelopment Agency is scheduled for 1:30 p.m., Monday, July 16, 2012. GEORGEANN "GIGP'HANNA City Clerk e By G'�ctiYt-fl� $f taC Linda Sutherland Deputy City Clerk Mayor and Common Council ofthe City of San Bernardino Page 9 Printed 11/1/2012