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HomeMy WebLinkAbout03-30-2004 MinutesMINUTES MAYOR AND COMMON COUNCIL AND COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO JOINT ADJOURNED REGULAR MEETING MARCH 30, 2004 MANAGEMENT INFORMATION CENTER 6TH FLOOR, CITY HALL This is the time and place set for a joint adjourned regular meeting of the Mayor and Common Council and Community Development Commission of the City of San Bernardino from the joint regular meeting held at 1:30 p.m., Monday, March 15, 2004, in the Council Chambers of City Hall, 300 North "D" Street, San Bernardino, California. The City Clerk has caused to be posted the order of the adjournment of said meeting held on Monday, March 15, 2004, and has on file in the Office of the City Clerk an affidavit of said posting together with a copy of said order which was posted at 8:45 a.m., Tuesday, March 16, 2004, on the City Hall breezeway bulletin board. The joint adjourned regular meeting of the Mayor and Common Council and Community Development Commission was called to order by Mayor/Chairman Valles at 10:10 a.m., Tuesday, March 30, 2004, in the Management Information Center, 61h Floor, City Hall, 300 North "D" Street, San Bernardino, California. Roll Call Roll call was taken by City Clerk Clark with the following being present: Mayor/Chairman Valles; Council Members/Commissioners Estrada, McGinnis, Derry, Kelley, Johnson, McCammack; Senior Assistant City Attorney Carlyle, City Clerk Clark, City Administrator Wilson. Absent: Council Member/Commissioner Longville. Council Member/Commissioner Longville Arrived At 10:42 a.m., Council Member/Commissioner Longville arrived at the Council/ Commission meeting. 1. Review - City and Economic Development Agency (EDA) Mid -year Budgets Economic Development Agency Barbara Lindseth, Director of Administrative Services, advised that approximately 95 percent of the Agency's budget is obligated to pre -approved 3/30/2004 contracts and agreements, so there is not much fluctuation during the year from the original budget projections. She stated that the only variable the Agency has in terms of revenue is the tax increment, which is projected every year. Ms. Lindseth distributed three documents, as follows: 2003-04 Fiscal Year Budget - Report as of February 29, 2004 (blue paper) • Tax Increment Projections versus Actual through February 29, 2004, Fiscal Year 2003-04 (green paper) • Tax Increment Fund Projections as of May 1, 2003 - Preliminary Update February 29, 2004 (goldenrod paper) Ms. Lindseth began with the 2003-04 Fiscal Year Budget, reviewing the various sources of revenue and expenditures. She advised that $17.7 million had been projected as tax increment, and as of February 29, 2004, $12 million had been received. She added that, by law, 20 percent of the tax increment money must be set aside for low/moderate housing. She noted that expenditures were right on target and explained how the Education Revenue Augmentation Fund (ERAF) affects the Agency's budget. She explained that the ERAF is mandated by the State and goes back as far as the early 90's, when the Agency was hit for two years. Starting in 2002-2003, when the State began having budget problems and was looking for other revenue sources, it mandated that the cities and redevelopment agencies must pay ERAF to the schools, in lieu of the State's payment to the schools, supposedly as a temporary fix. She noted that in 2003 the Agency was mandated to pay $622,000; the mandated payment this year of $1,054,000 is due in May 2004. Ms. Lindseth pointed out that of the $1,054,000 that must be paid this year, the State has allowed that half of that amount can be a loan from the low/moderate income housing fund. She added that the governor has proposed $135 million from all redevelopment agencies for next year, which is the same amount the agencies are paying this year. Mayor/Chairman Valles advised that cities have been forced to compete for sales tax dollars and generate other sources of income, such as utility taxes, in order to compensate for all the money being taken by the State. Gary Van Osdel, Executive Director of the Economic Development Agency, stated that if the governor continues this practice indefinitely, whether it is $135 million or $200 million, the Agency has to start thinking about downsizing, because when it runs out of properties to sell to make up at least half of that payment and can't make good on its payments, the debt falls to the City; and everybody knows the City can ill afford to pick up another cost. 2 3/30/2004 Ms. Lindseth stated that the Agency was going to see an increase in projected tax increment; however, 20 percent has to go to low/mod housing, so expenditures increase also, including ERAF. She noted that the projected tax increment for Fiscal Year 2004-2005 is $18.5 million, but $16.7 million goes for bond payments and 20 percent set -aside funds, leaving only $1.8 million for other costs of the agency. The addition of other revenue results in $4.9 million available for expenditures (out of tax increment only). She added that bottom line, after paying other expenditures, the Agency has $323,000 of tax increment money. Therefore, if the Agency has to pay the entire ERAF of $1,054,000 out of tax increment it would end up being $730,000 to the negative. Even if half was paid out of low/mod funds, it would still result in being a small amount to the negative. Council Member/Commissioner Estrada asked if there were any bonds that could be refinanced. Ms. Lindseth advised that the Agency has basically maxed on its refinancing — that it can only be done a limited number of times. Council Member/Commissioner McCammack inquired whether there were any older loans the City has taken out that are at a rate that could be reduced by refinancing, and Ms. Lindseth answered in the negative. City Barbara Pachon, Director of Finance, provided an overview of the staff report and backup materials. She advised that the City will end this fiscal year about $3.5 million better than what was originally anticipated in the budget. She noted that revenues are just over $4 million more than budgeted; however, transfers in were a little less than predicted, resulting overall in a General Fund balance this year which is approximately $3.7 million higher than budgeted. Ms. Pachon reviewed various individual line items which accounted for this change, including sales tax which is predicted to be $785,000 over what was budgeted, and the Utility User's Tax which is coming in more than $2 million more than expected. Ms. Pachon advised that the motor vehicle in -lieu fee used to be very steady and predictable; however, in this fiscal year the State took a loan from the City, and even though it shows that the City is going to get $11.6 million in motor vehicle in -lieu revenue, all of that is not going to be in the form of cash —approximately $3.7 million is going to be loaned back to the State. She added that because cash will be down, this will also affect the City's interest earnings, which will be lower than projected. 3 3/30/2004 Ms. Pachon explained that when the City loans the money back to the State, it can still be recognized as our revenues, but then we must recognize that we have our budget reserve and we have to earmark some of the budget reserve to keep as cash to make up for the cash we will be losing here until the State pays us back. She noted that the State is not projected to pay us back this loan until 2005-2006. Ms. Pachon explained that the motor vehicle in -lieu fees are collected by the State when people pay their taxes to the DMV; however, a lot of that money comes back to the cities through motor vehicle in -lieu —the State gives a monthly check to the cities. A couple of years ago, when the State budget was much better off, the governor decided to lower the motor vehicle taxes, which the cities fought against. The State said the cities would not lose anything —that there was enough money in the State's General Fund to enable the State to keep the cities whole. She noted that this worked relatively well until recently when the State's budget went bad. The new governor changed legislation so the fees are lowered, and the State needs to take some of the cities fees as loans because the State has a budget shortfall. Ms. Pachon noted that staff was not sure if the City would get its fee for booking fee subvention, so they budgeted zero for this year, but the State did come through with $689,000. However, it already looks like it is going to be hard for the City to keep this money next year. Ms. Pachon continued by reviewing budget expenditures, starting with department budgets. She noted that in the General Government account the City is considered super over -funded in our Miscellaneous PERS (Public Employees Retirement System) account, so we will get a little higher credit this year than what was anticipated. She explained that when an excess is built up in a PERS account, PERS allows the City to use these existing funds to make its payment, rather than actually sending PERS a check. She advised that this is the last year the City will be able to do this—PERS has officially notified the City that there is no longer an excess and we will have to start making our regular payment for Miscellaneous employees beginning July 1. This will increase next year's budget by approximately $2 million. Council Member/Commissioner Longville asked how much the City anticipated being reimbursed by the Federal Emergency Management Agency (FEMA). Ms. Pachon advised that neither the fire nor the mudslides were included in the budget figures presented today —that from the outset the Finance Department set up a completely separate fund in accounting, and all those expenditures have been pulled out and are not included in the General Fund figures shown in 4 3/30/2004 today's documents. She stated that there are two items remaining to be discussed/resolved and ultimately submitted to FEMA, and at that time she will provide a final accounting of what the City will get back in reimbursements. Ms. Pachon noted that although the reserves "look like money" right now, this money had to be used for the fire and mudslides, with the idea that the City will get this money back from FEMA. She noted that the budget reserves are shown as $6.7 million; however, staff is holding $3.7 million for the State loan for the Vehicle License Fee, leaving about $3 million. She stated that approximately $1.5 million is being used for the fire fund. Ms. Pachon stated that FEMA, which is the federal side of the disaster, will pay 75 percent of what they deem to be an eligible claim, and the City is pushing the State to pay the other 25 percent. City Administrator Wilson advised that there will be some costs; for example, the removal of debris from private property is not FEMA eligible, and there are probably 25-30 properties that the City will have to clean off. If the City doesn't lien the cost for this cleanup, it will have to absorb these costs, which will come out of Code Compliance's budget. Another example is that the tree removal on Del Rosa was eligible, but tree replacement is not eligible, so the City needs to make a decision on how to handle those issues. Ms. Pachon distributed a document titled, City of San Bernardino, Projected General Fund Balance, Fiscal Years 2003-2004 to 2006-2007, which she reviewed with the Council. She advised that the next two years are going to be some of the toughest the City has had. In reviewing the revenues, Ms. Pachon noted that there was going to be an ERAF tax for the City and also something called a Triple Flip, wherein the State is taking the City's sales tax to make their bond payment and in turn giving the City some additional money back in property tax. She pointed out that one problem with this approach is that sales tax is paid to the City every month; however, property tax is only paid twice a year. Plus, the additional money we will be given in property tax will be calculated on prior year sales tax, so the City will still be behind. Council Member/Commissioner Estrada stated that she would like to obtain the total dollar amount between EDA and the City that the State is taking. Council Member/Commissioner Longville stated that state-wide it is now estimated to be $6 billion. In summation, based on all of the assumptions the Finance staff has made, the City will have a $6.7 million shortfall for 2004-2005, assuming both FEMA and the State pay back the monies owed to the City; and a shortfall of $17.5 million for 2005-2006. 5 3/30/2004 City Administrator Wilson advised that the City is working on two things to help give the City some budget relief, which have already gone to the Ways and Means Committee. The first is the ability to do a refinancing of PERS payments. He explained that currently the Safety payments are amortized over 15 years. However, PERS allows the City to change the amortization and go up to 30 years, which would save the City about $2.3 or $2.4 million on an annualized basis. Secondly, the City is also exploring pre -paying its PERS payment. Right now PERS is paid through the payroll process every two weeks. Staff believes that if the City would pre -pay its PERS payment on July 1, there would be a discount for doing that which would save the City $200,000-$400,000. This can be accomplished through a League of Cities program called a TRAN (Tax and Revenue Anticipation Note), which essentially allows the City to do a bond issue through the League, pre -pay PERS, and pay the money back over the course of the year, resulting in a bottom line savings by using this approach. Mr. Wilson stated that staff has also been working with the departments on budget reduction proposals, which they hope to submit to the Council as part of the budget process. 2. Adjournment At 11:35 a.m. the meeting adjourned. The next joint regular meeting of the Mayor and Common Council and Community Development Commission is scheduled for 1:30 p.m., Monday, April 5, 2004, in the Council Chambers of City Hall, 300 North D Street, San Bernardino, California. No. of Items: 3 No. of Hours: 2.25 RACHEL G. CLARK City Clerk By: 4,1, e Linda E. Hartzel Deputy City Clerk 6 3/30/2004