HomeMy WebLinkAbout26-Ad Hoc Budget Reduction Committee
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Cit~ ut San Bernardino
CITY OF SAN BERNARDINO
AD HOC BUDGET REDUCTION COMMITTEE
REPORT AND RECOMMENDATIONS
JUNE 1997
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The Ad Hoc Budget Reduction Committee was established by the Mayor
& Common Council on March 31, 1997 with the idea that the group
would be able to look at the City's expenditures from a new
perspective, and make innovative recommendations based on committee
members collective knowledge of the community. The committee had
its initial organizational meeting on April 28, 1997.
The committee met twice each week since then and four times in the
week of June 9-13, 1997. All meetings were public. The initial
meetings were concerned with developing an understanding of the
nature of the budget problems facing the City, identifying the
appropriate data necessary to make recommendations, soliciting
input from interested parties and encouraging participation in the
process. Subsequently, the committee heard presentations and
received letters from a number of individuals and organizations
offering suggestions to ameliorate various parts of the City's
budget problems or asking that specific programs not be subject to
draconian cuts.
The committee then proceeded to develop a "brainstorming list"
containing recommendations from committee members and incorporating
suggestions made by the public through letters or presentations.
That brainstorming list was then divided in two ways:
1. a set of long and short term revenue
enhancement and budget cuts;
2. recommendations in specific areas, e.g.
operations, personnel, organization structure,
etc.
Most recommendations were fully discussed and five lists generated
as part of this report. List A contains all of the brainstorming
recommendations. List B contains the set of recommendations to the
Council as approved by the committee. List C contains those items
which were, by majority vote, not recommended. List D contains
those items which were struck off the main list by majority
committee vote. List E contains the brainstorming recommendations
not acted upon due to time constraints.
In looking at these recommendations, we would like the Council to
understand some of the constraints facing the committee:
TIME
The committee was allowed six weeks to develop an understanding of
the City budget, figure out where possible cuts could be made, make
recommendations on possible enhancements and do this in ways that
would be politically acceptable. The time period was not
sufficient for us to develop a comprehensive understanding of the
operations of the City. Certainly, we understood the consequences
of major issues, e.g. the financial consequences of the elimination
of the special assessment district, the failure of Measure S, the
inability of the City to find a willing buyer for the Cemetery and,
thanks to staff, a keen awareness of the revenue raising
difficulties posed for municipalities by passage of Prop 218. In
addition, we quickly got up to speed on the structure of. the City
budget, the dominant role played in that budget by public safety
services and the part played by the City Charter in influencing
personnel costs. However, time pressures did not allow us to
develop any real understanding of the consequences of possible
cuts to various City departments. This time pressure and its
consequences was strongly influenced by a second constraint, the
committee composition.
COMMITTEE COMPOSITION
While no one questions the good intentions of individual committee
members in regard to this process, the fact remains that there were
three characteristics of the committee that made its operation
somewhat problematic. First, the committee did not have the kind
of knowledge necessary to identify and recommend changes that would
enhance administrative efficiency. Broad-based recommendations,
e.g., suggesting a 5 to 10% across the board cut, while possible
for us to make and was indeed suggested, would not have been based
on an understanding of the ability of certain programs to remain
viable in the face of such cuts. To the extent that we had
information to support cuts, e.g., the Fire Audit, the Harvey Rose
Audit, it was clear that political/legal/safety considerations
would override purely fiscal ones. This lack of expertise,
compounded by a lack of time influenced the nature of the
recommendations in ways that will be addressed later.
Secondly, the make up of the committee, containing a number of
major players from the Measure S campaign, a campaign on an issue
central to the budget problem, ensured polarization on a number of
recommendations. While Measure S was not fought out again, the
positions of the parties in that debate were reflected in the
difficulties in developing compromises on potential budget
solutions.
Thirdly, with one-third of the committee comprised of employee
organization representatives and senior management representatives
available for information but not able to vote, recommendations
that could negatively impact employee pay and benefits were not
subject to a full and thorough debate.
IMPACT OF CHARTER AMENDMENT 186
Compounding the difficulties created by the absence of senior
management personnel as voting members and the strength of employee
organization membership, is the City Charter and its detailed
structure concerning pay determination procedures for public safety
employees. Given that public safety represents 66% of the City's
general fund budget [Fiscal Year 1997/98], and that 83% of that is
in personnel costs, it quickly became apparent that the Committee's
options in this area would be limited to:
2
. recommending the modification or elimination
of Charter Section 186.
. recommending that non-salary compensation items for
public safety employees be severely curtailed.
. concentrating personnel cost reductions in
other programs either through elimination or
service reduction.
. development of alternative funding mechanisms.
The committee voted not to recommend the modification/elimination
of Charter Section 186, thus precluding that option but did ask the
Council to delay approval of MOUs with benefit cost increases.
Since cuts in public safety personnel costs were effectively
precluded when the Council voted to approve the Firefighters' MOU,
the committee felt it would be unfair to concentrate personnel
savings on people in bargaining units not covered by the Charter.
COMMITTEE CORE VALUES
In going through the brainstorming exercise, it became clear that
there were some common assumptions regarding the preservation and
possible enhancement of government services. Of particular concern
was the maintenance of quality safety services. This became
obvious when the Fire Chief indicated that the consequences of a 5%
cut to the Fire Department would be the closure of an identified
fire station and the committee's response was to not make that
recommendation. A more cynical person, however, may suggest that
the committee responded to an age-old budgetary ploy by accepting
that the threat was real. Here the lack of knowledge and the role
of the employee organizations on the committee were crucial.
Additional core values included the belief that the EDA is a major
engine of economic revitalization and job creation. in the
community, and while we recommend that it be folded into the
regular City administrative structure, that recommendation was
designed to realize personnel cost savings and not to diminish its
entrepreneurial activities.
Thus, given the limited time frame available, the limited knowledge
of the consequences of across the board cuts, the absence from the
committee of senior management and the dominant role on the
committee of public employee organizations, as well as the belief
in the importance of maintenance of quality services, the thrust of
the committee' recommendations was on revenue enhancement.
While the list of recommendations is attached as part of this
report, it is important to highlight some of the most important
ones. The first of these is that the City proceed with the
"issuance of not to exceed $16,250,000 public facilities lease
revenue refunding bonds 1997 Series A" [otherwise known as "the
1997 Refunding Bonds."]. This recommendation is made with an
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important caveat. The committee, by majority vote, made this
recommendation with the clear understanding that it is a short term
solution and that it would require some, heretofore, unexercised
discipline on the part of the City. unless the proposed revenue is
used to provide time to develop at least a mid-range strategic plan
for City finances, adoption of this recommendation will have
serious long-term negative financial consequences. A second point
in relation to City finances, while not of direct budgetary impact,
was, nevertheless, of concern to the commi t tee. The commi t tee
recommended that the City establish, as part of its grant
application process, where appropriate, a methodology to identify
funds that will be used to pick up the long term commitment costs
of short term grants. Failure to do so will result in the
continued distortion of the City budget and its effective
determination outside the normal political processes.
A second and equally important recommendation is that the Council
place on the ballot, an initiative establishing an assessment
district specifically for the Library. Recent votes in such
assessment districts have been approved overwhelmingly and the
creation of one for the City of San Bernardino would allow the
Library to plan its operations with much more security.
CONCLUSION
The committee has made revenue enhancement and cost cutting
recommendations in a number of areas including organizational
structure, personnel, etc. We do so with the clear understanding
that in the General Fund budget, there is, political statements to
the contrary, little "fat." Indeed, the demand for services
continues to expand and the CPI increases are higher than the
increases in the General Fund. We believe that the City is at a
turning point and that these recommendations will allow a two-year
window of opportunity as the Council debates what range of services
should be provided by public funds. Should the City be one that
accepts responsibility for the overall quality of life of its
residents and the consequent costs associated with that or should
it provide first class public safety and utility services and allow
the private or non-profit sector to provide the remainder. As
Oliver Wendell Holmes said, "Taxes are the price we pay for
civilization." How civilized does the Council and citizenry of San
Bernardino want to be?
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APPENDIX
A. COMPLETE BRAINSTORMING LIST
B. ITEMS RECOMMENDED FOR APPROVAL.
C. ITEMS NOT RECOMMENDED FOR APPROVAL.
D. ITEMS STRICKEN FROM CONSIDERATION.
E. ITEMS NOT ACTED UPON BY COMMITTEE.
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I
A. COMPLETE BRAINSTORMING LIST
KEY: SHORT TERM -- IMPACT ON FY 97/98 BUDGET
LONG TERM -- IMPACT BEYOND FY 97/98 BUDGET.
Prooosed Revenues-Short Term
1. Projection of estimated new funds from the State into 97/98 Budget.
2. Increase by 1.75% local bed tax.
3. Implement photo-radar enforcement for traffic violations.
4. Enhance parking citation enforcement/collection program.
5. Enhance business license collection services.
6. Create a five year plan in which to mortgage City-owned property to stop
immediate deficit (caveat - restructuring of current City operations).
7. Market KCSB services enabling self-sufficiency and potential profit making
operation if EDA is absorbed by the City.
8. Market Fiscalini Field for summer concerts and additional events for optimum
utilization.
9. Create franchise fee for private ambulance services.
10. Cat licensing/breeding ordinance.
11. Establish user fees for library and park services.
12. Suggest that the Council put out Request for Proposal for a non-profit agency that
can also sell gravesite markers to operate cemetery.
13. Active marketing on emergency medical services subscription plan.
14. Evaluate current fee schedule in comparison to other municipalities.
15. Review allocation of General Fund personnel to other funds.
16. Increase Code Enforcement and collections for billing violators pertaining to solid
waste nuisances and illegal dumping.
-1-
17. Utility peak cost agreement.
18. Revisit the concept of Parks & Recreation partnering with YMCA for the
Hernandez Center and other non-profit organizations capable of similar services.
l8a. Recommend that the City aggressively pursue partnering with private,non-profit
groups to operate recreation, parks and community service programs at City
facilities to maximize use of facilities and reduce operating costs.
19. Contract with county for land-locked unincorporated parts of the city.
20. Liquidate any equipment associated with failed ambulance service.
21. At a minimum, require safety recruits to repay their academy training costs if
they leave the departments within three years.
22. Negotiate with cable company to sell off local access air time to other cable network.
Suggest to Council to direct the City Administrator to negotiate with the local cable
company to sell half of Channel 3's air time to another cable network. This can be
done to generate revenue to either support any cuts in Channel 3 or used as revenue for
the City's General Fund. (same as #7; contingent upon EDA absorbing by City).
23. Transfer all or part of 20% administration of CDBO from EDA to City.
24. Explore marketing of police and flTe dispatch service or other services to other
agencies or communities.
25. Establish mandatory painting of street numbers on curbs for a $10 fee billed on
water bill; This enhances public safety response time and preserves positions.
26. Fund 20% of Director of Public Works salary from Refuse Fund, contingent upon
reorganization proposal.
27. Sell portion of City Yard to Refuse Fund.
28. That the Mayor and Council refrain from approving new MOUs that would
increase the budget deficit until the budget crisis is addressed as the Council has
the legal discretion to do so.)
29. Establish City Towing Service.
30. Contract with the County to provide services to unincorporated, landlocked parts
of the City.
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31. Raise fees for Police Records Unit. (See hand-out from public.)
32. Sell Convention Center to EDA.
33. Mayor and Council should approve Joint Powers financing and lease revenue
refunding bonds of 1997 (AS-1I5-29-97)
Prooosed Revenues-Lonl! Term
1a. Suggest Council support the placement of a library initiative on upcoming ballot.
lb. Suggest Council place special assessment district for street sweeping on ballot.
1c. Suggest Council place special assessment district for street lighting on ballot.
2. Explore regionalization of fire with neighboring jurisdictions to provide the best
fire protection at lowest possible cost.
3. Market City planning, design, engineering/development services.
4. Regionalized planning, design, engineering/development services.
5. Preserve current utility tax revenue by assessing tax on usage not cost of energy .
6. Sell branch library property (in event of branch closures).
7. Reorganize Economic Development Agency. (See #3, pg. 3)
8. Privatize City refuse services.
9. Support the city's participation in the development of a downtown water project
if found to be fiscally sound. City should position itself to participate in
restructuring of electric industry to maximize savings on January I, 1998.
10. Explore AB1890 for increased revenue possibilities.
lOa. City should explore the purchase of electricity as an aggregater and supply direct
to the marketplace earmarking savings to be split between the customer and
general fund.
11. Ensure full cost recovery for all City services.
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12. Develop 5% incentive for employees that live in city.
13. Maximize use of City jail.
14. Area assessment districts to provide specific, identifiable services.
15. Sell Fiscalini Field.
16. Bring Channel 3 back to City once it reaches break even point.
Prooosed Reductions-Short Term
1. Eliminate Affmnative Action Office from Mayor's Office and move functions to
Personnel.
2. Eliminate Human Relations Commission funding.
3. Operate EDA as a City under Civil Service Board control.
4. Investigate collaborative effort between libraries and city schools.
5. Negotiate better utility deals, especially telephone.
6. No more unfunded mandates (do not take short term money with long term cost
implications. )
7. Eliminate Fine Arts funding ($180,000).
8. Eliminate (from non-department budget) $40,000 league membership/sister cities,
etc. (P.1I0)
8a. New management and general unit employees pay own share of PERS retirement
for 3 years.
9. Modify Little League scheduling in order to minimize nighttime usage and
lighting fees. (See 9a).
9a. City Parks and Recreation to develop formula to minimize abuse of ballfield
lighting ($440,000) by Youth Sports Leagues.)
10. Deny waiver of fees for groups/organizations using City personnel/resources.
lOa. Establish "non-profit" rate equal to 25% ofnorma1 fees for public events held by
non-profit groups and organizations. Council shall not waive these fees. Waivers
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1--
to all other groups and organizations shall be denied.
11. Implement Fire audit recommendations.
12. No General Fund revenue to be used for Stampede Stadium expenditures.
13. Close branch libraries.
14. Utilize paralegal services in lieu of attorneys in City Attorney's office.
15. Reduce City Attorney's litigation budget.
16. Request employees to forego pay increases.
17. Research use of and develop utility peak cost agreement.
18. Eliminate hours available in employee MOUs for union activities.
19. Eliminate fire ladder truck (if feasible).
20. Reduce street sweeping services.
20b. Eliminate street sweeping services.
21. Two tier retirement system for new employees.
22. Privatize Print Shop functions.
23. Rotate used vehicles within City departtnents to reduce of new purchases.
24. Furloughs -- Examine the possibility of implementing a furlough program that is
the equivalent of a 5 % personnel reduction. Most common practice is to give
employees the Friday before holidays off as furlough days. Furloughs would
effect all employees and managers except safety employees.
25. Holiday closure of City Hall -- Close City Hall from December 24 through
January I, 1998. Employers experience low productivity during this period and
customer demands are at their lowest. Employees annual pay should be reduced
to compensate for closure of City Hall during holiday season.
26. Layoffs -- Implement layoffs to gain a 5 to 10% savings in personnel cost.
26a. Police and Fire Chiefs to present specific 5% cuts from 96/97 $45 million
budgets for Council decision.
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27. Examine need for Neighborhood Police Centers open only in daytime.
28. City attorney budget. Examine Harvey Rose audit., etc.
29. Reduce City Attorney investigators from 2 to 1.
30. Fire audit: Eliminate 3 battalion chiefs and close one fire station.
31. Police audit: Eliminate Captain position. .
32. Get inventory of reserve equipment in Fire Department. Eliminate any excess
that might exist.
33. Privatize street sweeping services.
34. Privatize City park and cemetery landscape maintenance.
35. Incorporate savings of golden handshake reduction.
36. Consolidate safety personnel background checks with surrounding jurisdictions.
37. Recruit and train volunteer code enforcement officers.
38. Place 22 currently hired police officers in the 22 COPS positions for 3 years and
plan for the general fund to reassume the cost of these positions at the expiration
of the grant.
39. Change in benefits for new hires. Require new employees to pay their own share
of retirement for the three years of employment with the City. The City would
still pay the employers portion of retirement. This would apply to management
and general employees. Applying this method to safety employees could free up
money and allow the City to hire additional police.
40. Removal of 994 "perks". As 994 has expired, all "perks" gained from 994
should be removed and Police and Fire personnel benefits should return to pre
1990 benefits, if those benefits can be tied to the revenue gained from 994 (one
example would be survivor benefits). However, employees should have the
ability to pay into the survivor benefit package on their own or through employer
matching contributions.
41. Removal of constant manning. Request City Council take appropriate action to
remove constant manning as a requirement of the city's Fire Department.
42. Modification of constant manning. Based on customer service demands, relax
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constant manning during the low fife season. Example, if during the months of
January through April, historical data showed that the number of calls for fife
safety demands were consistently lower during this period, then constant manning
should be relaxed during this period. The department should be requested to
provide fife call data to the committee and the administrative office should
develop several scenarios.
43. Direct administrative staff to review fife personnel alternatives. As the City of
Colton and the County of San Bernardino are examining alternatives to fife
agency services, the administrative staff should be directed to contact the City of
Colton and review their staffs information on paid on call fife employees and the
County of San Bernardino utilizing trainees as the third or fourth man on an
engine. These concepts could result in dramatic savings for the city's Fire
Department.
44. Review of 186. Direct staff to provide an analysis of the cities used to compare
cost of living increases under charter amendment 186. Request Council to direct
staff to incorporate cost of living as the base to determine raises under 186. Cost
of living includes housing within the City of San Bernardino, Department of
Finance Sales Tax information and unemployment information. If staffs formula
for determining salary comparisons do not include the information above, the
committee should make recommendation to Council to make that part of future
stipulations.
45. Review of allocation to committees from General Fund employees. Request
Budget Director appear before committee to provide an overview of cost
allocation for Mayor and Executive staffs time and their allocations to projects
like Redevelopment and Inland Valley Development Agency. In addition, staff
time, such as police and fife's time, should be allocated for time on committees,
such as Development/Environmental Review Committee. Fees should be adjusted
to cover cost of staff time or number of employees attending such meeting should
be reduced. (See #15 - Page 1)
46. Remove maintenance of redevelopment projects from General Fund. Request RDA
Director advise the City Council about the removal of the maintenance of redevelopment
project's form the General Fund. Example, up keep and care of Stampede Stadium is
estimated to cost $300,000 per year. Since proceeds from project go to payoff
redevelopment bonds, the upkeep and maintenance should be allocated to the
Redevelopment Agency. (See #12, Page 4)
47. Examine the purchase of previously owned vehicles. For non-safety personnel,
the City should examine the purchase of used vehicles from rental car companies.
Most vehicles are covered under full warranty and still have a substantial life
period. (See #23, Page 5).
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48. Cooperative purchasing with surrounding agencies. Though cooperative
purchasing power of the County and surrounding Cities, the City could purchase
vehicles and receive volume discounts. This requires advanced planing and
communication with other agencies. Committee request that Council request staff
look into volume savings. Another option is to buy vehicles off the State's
purchasing list.
49. Eliminate 4/10 plan in the Police Department. Especially eliminate Dispatch and Patrol
to 2-hour overlaps. More efficient to have three 8-hour shifts in a 24 hour operation.
50. Eliminate or reduce Traffic Division (motorcycles) and use CSR's exclusively on traffic
accidents.
51. Eliminate City paid time off for union activities in voter issues and campaigns.
52. Eliminate DARE program which has been shown ineffective and replace with peer
counseling and one-on-one program which is the only technique proven to reduce drug
usage in young people. Move DARE officers back to regular duty and eliminate 3
positions.
53. Develop fire safety response standards in order to assess work force, equipment
and fire station reductions.
54. Expand mutual response fire agreements in order to reduce workforce costs at fire
stations closest to city borders.
55. Place Charter Section 186 on ballot for repeal.
56. Replacement 994 Assessment District for:
a. Street Lighting
b. Graffiti Removal
c. Street Sweeping
d. Traffic signals
(See la, b, c on Page 3)
57. Allow libraries to contract for landscaping.
58. Regionalize library services with County or other cities.
59. Establish a Director of Administrative Services, eliminate Assistant City
Administrator and Assistant to City Admini~trator. Reduce salary level of
positions reporting to Director. Change Purchasing Manager to Buyer.
($197,817) Adjust span of control accordingly for all managers and mid-
8
managers.
60. Eliminate Facilities Management Project Coordinator.
61. Eliminate Director of Animal Control and move function to existing Captain in
Police Department.
62. Do not fill Assistant Police Chief position when it becomes vacant. (Elimination
prohibited by 186).
63. Eliminate overtime and Administrative Leave for Battalion Chiefs.
64. Charge Youth Sports Leagues for ballfield lighting (See 9a on Page 4).
65. Focus volunteer coordinator on recruiting volunteers for graffiti removal.
66. Identify other city services that volunteer coordinator can have volunteers
complete. Establish paid call fire persons to serve as 3rd or 4th person on fire
equipment to reduce constant manning overtime.
67. Require volunteer coordinator position costs to be offset by reduction in other city
costs .
68. Look at efficiency of City business and streamline. Eliminate duplicate services
particularly within City or between City and anything funded by EDA..
69. Establish Director of Public Works, eliminate Director of Public Services and
Assistant City Engineer as well as Director of Public Works/City Engineer.
Create City Engineer position.
70. Consolidate Code Enforcement with Fire Marshall to eliminate Supervisor of
Code Enforcement.
Prooosed Reductions-Lon!! Term
1. Pre-pay health insurance premiums through bonds or other funds.
2. Leveling of retirement benefits. Require Public Safety Employees to pay the
difference between their employee contribution toward their retirement and the
miscellaneous employee contribution. The net result may be offset by tax breaks
as the deduction occurs before taxes.
3. Remove 186 from Charter. Replace 186 with a pay-for-performance program.
(See #55, Page 8)
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4. Examine how city pays retirement and benefit fees. Based on the information
obtained from the County of San Bernardino, a substantial savings was gained by
restructuring how the County paid retirement and benefit fees. More information
can be obtained through conversation with the County Administrative Staff.
5. Maximize usage of City vehicles where cost savings can be realized by placing
non-assigned vehicles in a central pool where they can e used by any City
department where appropriate.
6. Review incidence of disability versus regular retirement in safety.
7. Traffic Division/Police Department -- elimination of motorcycle enforcement --
revenue vs. expenses.
8. Modify general unit employee retirement system to 2% at 55.
9. Two tier retirement system for new employees.
10. Offer management staff health insurance through a medical savings account
program. City will save money because it costs less to purchase catastrophic
coverage and fund employees' medical savings accounts, which are paid to
employees as taxable income at year end if they are not spent. Expand each year
to other employees. Study Jersey City results.
11. Order comprehensive report in regionalizing Fire Services. Look at El Monte
study which shows dramatic savings and enhanced protection. See current
location of ten stations within two miles of each other. (See #2, Page 3)
12. Increases in Safety Employee salaries and benefits resulting from Charter
Amendment 186 shall be tied to the annual growth of the City's General Fund.
The percentage of the Safety Bargaining units personnel appropriations to the total
budget of the General Fund shall determine the maximum allowable increase in
salaries and benefits for the following fiscal year.
If the growth in the General Fund is less than the new average salary derived
from the formula within Charter Amendment 186, the safety employees shall
receive the percentage of growth in the General Fund.
13. Recommend benefit cuts to 5 employee bargaining units to enhance City Budget.
14. Engage the Rose Institute to do a comprehensive review of the city's revenue and
expenses.
15. Implement a BEST Program (See handout provided by member of Public).
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B. ITEMS RECOMMENDED FOR APPROVAL
Proposed Revenues Short Term
3. Request staff analysis of feasibility of affordable
photo-radar enforcement for traffic violations.
4. Enhance parking
program. ($36,000).
citation
enforcement/collection
5. Enhance business license collection services. ($162,000 -
25% cost)
B. Market Fiscalini Field for summer concerts and additional
events for optimum utilization.
9. Create franchise fee for private ambulance services.
10. Cat licensing/breeding ordinance.
12. Suggest that the Council put out a Request for Proposal
for a non-profit agency that can also sell gravesite
markers to operate Cemetery.
13. Active marketing
subscription plan.
on
emergency
medical
services
15. Review allocation of General Fund personnel to other
funds. ($195,000 in 1997/9B).
16. Increase Code Enforcement and collections for solid waste
nuisances and illegal dumping.
1Ba. Recommend that the City aggressively pursue partnering
with private, non-profit groups to operate recreation,
parks and community service programs at City facilities
to maximize use of facilities and reduce operating costs.
19. Contract with County for land-locked unincorporated parts
of city.
20. Dispose of excess equipment associated with emergency
medical service.
21. As a minimum, require safety recruits to repay their
academy training costs if they leave the department
within three years.
24. Explore marketing of police and fire Dispatch service or
other services to other agencies or communities.
-1-
27. Sell portion of City Yard to Refuse Fund.
28. That the Mayor and Council refrain from approving new
MOUs that would increase the budget deficit until the
budget crisis is addressed as the Council has the legal
discretion to do so.
29. Establish City Towing Service. ($600,000)
30. Contract with the County to provide services to
unincorporated, landlocked parts of the City.
31. Raise fees for Police Records Unit. ($129,600)
33. Mayor and Council should approve Joint Powers financing
and lease revenue refunding bonds of 1997. (AS-1/5-29-
97) . ($3.155 million) .
pronosed Revenues - Lonq Ter.m
1a. Suggest Council support the placement of a Library Tax
Initiative on upcoming ballot.
lb. Suggest Council place a special assessment district for
street sweeping on ballot.
1c. Suggest Council place a special assessment district for
street lighting on ballot.
2.
Explore regionalization
jurisdictions to provide
lowest possible cost.
of fire wi th neighboring
the best fire protection at
9. Support City's participation in the development of a
downtown water project if found to be fiscally sound.
10. City should position itself to participate in
restructuring of electric industry to maximize savings on
January 1, 1998.
lOa. City should explore purchase of electricity as an
aggregater and supply directly to the marketplace
earmarking savings to be split between the customer and
general fund.
11. Ensure cost recovery for all City services.
13. Maximize use of City jail. ($325,000).
14.
Area assessment districts
identifiable services. (See 1a.
- LonoTerm. A List)
to provide specific,
lb. 1c. Prooosed Revenues
-2-
Proposed Reductions - Short Term
3. Operate EDA as a City department under Civil Service
Board control.
4. Investigate collaborative effort between libraries and
City schools.
5. Negotiate better utility deals, especially telephone.
B. Transfer $40,000 league membership/sister cities, etc. to
EDA.
Ba. New management and general unit employees pay own share
of PERS retirement for three years.
9a. City Parks and Recreation to develop formula to m~n~m~ze
abuse of ballfield lighting ($440,000) by Youth Sports
Leagues.
lOa. Establish "non-profit" rate equal to 25% of normal fees
for public events held by non-profit groups and
organizations. Council shall not waive these fees.
Waivers to all other groups and organizations shall be
denied.
12. No General Fund revenue to be used for the Stampede
Stadium expenditures.
14. Analyze potential of enhanced paralegal services in lieu
of attorneys in City Attorney's Office.
17. Research use of and develop utility peak cost agreement.
20a. Reduce street sweeping services.
21. Two-tiered retirement system for new employees.
23. Rotate used vehicles within City departments to reduce
purchases.
3B. Place 22 currently hired police officers in the 22 COPS
grant positions for three years to plan for the general
fund to reassume the cost of these positions at the
expiration of the grant. ($1,500,000).
42. Modification of constant manning. Based on customer
service demands, relax constant manning during the low
fire season. Example: if, during the months of January
through April, historical data showed that the number of
calls for fire safety demands were consistently lower
during this period, then constant manning should be
relaxed during this period. The department should be
-3-
requested to provide
the Administrative
scenarios.
fire call data to the Committee and
Office should develop several
43. Direct administrative staff to review fire personnel
alternatives. As the City of Colton and the County of
San Bernardino are examining alternatives to fire agency
services, the administrative staff should be directed to
contact the City of Colton and review their staff's
information on paid on-call fire employees as well as the
County of San Bernardino.
4S. Review of allocation to committees from General Fund
employees. Request Budget Director to appear before
committee to provide an overview of cost allocation for
Mayor and Executive staff's time and their allocations to
projects like Redevelopment and Inland Valley Development
Agency. In addition, staff time such as police and fire
time, should be allocated for time on committees, such as
Development/Environmental Review Committee. Fees should
be adjusted to cover cost of staff time or number of
employees attending such meetings should be reduced. (See
#1S. prooosed Revenues-Short Term - A List)
46. Remove maintenance of redevelopment proj ects from General
Fund. Request RDA Director to advise the City Council
about the removal of the maintenance of redevelopment
proj ects from the General Fund. Example: Upkeep and care
of Stampede Stadium is estimated to cost $300,000 per
year. Since proceeds from proj ect go to payoff
redevelopment bonds, the upkeep and maintenance should be
allocated to the Redevelopment Agency. (See #12. Prooosed
Reductions-Short Term. A List)
47. Examine the purchase of previously owned vehicles. For
non-safety personnel, the City should examine the
purchase of used vehicles from rental car companies.
Most vehicles are covered under full warranty and still
have substantial life. (See #23. prooosed Reductions-
Short Term. A List)
S2. Eliminate DARE program and eliminate three positions
associated with it.($230,000)
S3. Develop fire safety response standards in order to assess
work force, equipment and fire stations reductions.
68. Look at efficiency of City business and streamline.
Eliminate duplicate services particularly within City or
between City and anything funded by EDA.
70. Consolidate Code Enforcement with Fire Marshall to
eliminate Supervisor of Code Enforcement.
-4-
pronosed Reductions-Lonq Term
2. Leveling of retirement benefits. Require Public Safety
Employees to pay the 2% difference between their employee
contribution toward their retirement and the
miscellaneous employee contribution.
5. Maximize usage of City vehicles where cost savings can be
realized by placing non-assigned vehicles in a central
pool where they can be used by any city department where
appropriate.
9. Two tier retirement system for new employees.
10. Offer management staff health insurance through a medical
savings account program.
11. Order comprehensive report in regionalizing Fire
Services. Look at El Monte study which shows dramatic
savings and enhanced protection. See current location of
ten stations within two miles of each other. (See #2.
Prooosed Revenues-Lona Term.)
13. Recommend benefit cuts to 5 employee bargaining units to
enhance City budget.
-5-
C. ITEMS NOT RECOMMENDED FOR APPROVAL
Proposed Revenues Short Term
2. Increase by 1.75% local bed tax.
25. Establish mandatory painting of street numbers on curbs
for a $10 fee billed on water bill. This enhances public
safety response time and preserves positions.
Proposed Reductions - Short Term
1. Eliminate Affirmative Action Office from Mayor's Office
and move functions to Personnel.
2. Eliminate Human Relations Commission funding.
7. Eliminate Fine Arts funding ($180,000).
26a. Police and Fire Chiefs to present specific 5% cuts from
96/97 $45 million budgets for Council decision.
30. Fire audit: eliminate three Batallion Chiefs.
34. Privatize City park and cemetery landscape maintenance.
41. Removal of constant manning. Request City Council take
appropriate action to remove constant manning as a
requirement of the City's Fire Department.
49. Eliminate 4/10 plan in Police Department. Especially
eliminate Dispatch and Patrol to 2-hour overlaps. More
efficient to have three 8-hour shifts in a 24 hour
operation.
55. Place Charter Section 186 on ballot for repeal.
62. Do not fill Assistant Police Chief position when it
becomes vacant. (Elimination prohibited by 186) .
63. Eliminate overtime and Administrative Leave for Battalion
Chiefs.
65. Focus volunteer coordinator on recruiting volunteers for
graffiti removal.
66. Identify other city services that volunteer coordinator
can have volunteers complete. Establish paid call fire
-1-
persons to serve as 3rd or 4th person on fire equipment
to reduce constant manning overtime.
prooosed Reductions-Lonq Ter.m
12. Increases in Safety employee salaries and benefits
resulting from Charter Amendment 186 shall be tied to the
annual growth of. the City's General Fund. The percentage
of the Safety Bargaining Units personnel appropriations
to the total budget of the General Fund shall determine
the maximum allowable increase in salaries and benefits
for the following fiscal year.
If the growth in the General Fund is less than the new
average salary derived from the formula within Charter
Amendment 186, the safety employees shall receive the
percentage of growth in the General Fund.
-2-
D. ITEMS STRICKEN FROM CONSIDERATION
Proposed Revenues Short Term
7.
Market KCSB services
potential profit making
City.
enabling self-sufficiency and
operation if EDA is absorbed by
14. Evaluate current fee schedule in comparison to other
municipalities.
18. Revisit the concept of Parks and Recreation partnering
with YMCA for the Hernandez Center and other non-profit
organizations capable of similar services.
22. Negotiate with cable company to sell off local access air
time to other cable networks. Suggest to Council to
direct the City Administrator to negotiate with the local
cable company to sell half of Channel 3's air time to
another cable network. This can be done to generate
revenue to either support any cuts in Channel 3 or used
as revenue for the General Fund. (same as #7; contingent
upon EDA absorbing by City) .
26. Fund 20% of Director of Public works salary from Refuse
Fund, contingent upon reorganization proposal.
32. Sell Convention Center to EDA.
Proposed Revenues - Lana Term
3. Market .City planning, design, engineering/development
services.
4. Regionalized planning, design, engineering/development
services.
5. Review feasibility of current utility tax revenue by
assessing tax on usage not cost of energy.
6. Sell branch library property (in event of branch
closure) .
15. Sell Fiscalini Field
-1-
ProDosed Reductions - Short Te~
10. Deny waiver of fees for groups/organizations using City
personnel/resources
11. Implement Fire Audit recommendations.
18. Eliminate hours available in employee MOUs for union
activities.
20b. Eliminate street sweeping services.
22. Privatize Print Shop functions.
24. Furloughs -- Examine the possibility of implementing a
furlough program that is the equivalent of a 5% personnel
reduction. Most common practice is to give employees the
Friday before holidays off as furlough days. Furloughs
would affect all employees and managers except safety
employees.
25. Holiday closure of City Hall -- Close City Hall from
December 24 through January 1, 1998. Employers
experience low productivity during this period and
customer demands are at their lowest. Employees' annual
pay should be reduced to compensate for closure of City
Hall during holiday season.
27. Examine need for Neighborhood Police Centers open only in
daytime.
31. Police Audit: Eliminate Captain position.
33. Privatize street sweeping services.
35. Incorporate savings of golden handshake reduction.
37. Recruit and train volunteer code enforcement officers.
39. Change in benefits for new hires. Require new employees
to pay their own share of retirement for three years of
employment with the City. The City would still pay the
employer's portion of retirement. This would apply to
management and general employees. Applying this method
to safety employees could free up money and allow the
City to hire additional police.
48. Cooperative purchasing with surrounding agencies.
Through cooperative purchasing power of the County and
surrounding cities, the City could purchase vehicles and
receive volume discounts. This requires advanced
planning and communications with other agencies.
-2-
Committee requests that Council request staff look into
volume savings. Another option is to buy vehicles off
the State's purchasing list.
51. Eliminate City-paid time off for union activities in
voter issues and campaigns.
54. Expand mutual response fire agreements in order to reduce
workforce costs at fire stations closest to city borders.
57. Allow libraries to contract for landscaping.
58. Regionalize library services with County or other cities.
59. Establish a Director of Administrati ve Services,
eliminate Assistant City Administrator and Assistant to
City Administrator. Reduce salary level of positions
reporting to Director. Change Purchasing Manager to
Buyer ($197,817). Adjust span of control accordingly for
all managers and mid-managers.
60. Eliminate Facilities Management Project Coordinator.
61. Eliminate Director of Animal Control and move function to
existing Captain in Police Department.
ProDosed Reductions - Loner Term
10. Offer management staff health insurance through a medical
savings account program. City will save money because it
costs less to purchase catastrophic coverage and fund
employees' medical savings accounts which are paid to
employees as taxable income at year end if they are not
spent. Expand each year to other employees. Study
Jersey City results.
-3-
E. ITEMS NOT ACTED UPON BY COMMITTEE
Proposed Revenues-Short Term
1. Incorporate projection of estimated new funds from State
into FY97/98 Budget.
6 .
Create a five
property to
restructuring
year plan in which to mortgage City-owned
stop immediate deficit (caveat
of current City operations.)
11. Establish user fees for library and park services.
23. Transfer all or part of 20% administration of CDBG from
EDA to City.
Proposed Revenues-Lona Term
8. Privatize City refuse service.
12. Develop 5% incentive for employees the live in city.
16. Bring Channel 3 back to City once it reaches break even
point.
Proposed Reductions-Short Term
6. No more unfunded mandates (do not take short term money
with long term cost implications.)
13. Close branch libraries.
15. Reduce City Attorney's litigation budget.
16. Request employees to forego pay increases.
19. Eliminate fire ladder truck (if feasible) .
26. Layoffs -- implement layoffs to gain a 5% to 10% savings
in personnel costs.
27. City Attorney's Budget. Examine Harvey Rose audit, etc.
29. Reduce City Attorney Investigators from 2 to 1.
32. Get inventory of reserve equipment in Fire Department.
Eliminate any excess that might exist.
-1-
40. Removal of 994 "perks." As 994 has expired, all "perks"
gained from 994 should be removed and Police and Fire
personnel benefits should be removed and Police and Fire
personnel benefits should return to pre-1990 benefits, if
those benefits van be tied to the revenue gained from 994
(one example would be survivor benefits.) However,
employees should have the ability to pay into the
survivor benefit package on their own or through employer
matching contributions.
44. Review of 186. Direct staff to provide an analysis of
the cities used to compare cost of living increases under
Charter amendment 186. Request Council to direct staff
to incorporate cost of living as the base to determine
raises under 186. Cost of living includes housing within
the city of San Bernardino, Department of Finance Sales
Tax information and unemployment information. If staff's
formula for determining salary comparisons does not
include the information above, the committee should make
recommendation to Council to make that part of future
stipulations.
50. Eliminate or reduce Traffic Division (motorcycles) and
use CSRs exclusively on traffic accidents.
56. Replacement 994 Assessment District for:
a. Street lighting.
b. Graffiti removal.
c. Street sweeping.
d. Traffic signals.
(See 1a,b,c Proposed Revenues-Long Term, A List.)
64. Charge Youth Sports Leagues for ballfield lighting. (See
9a, Proposed Reductions-Short Term.)
67. Require volunteer coordinator position costs to be offset
by reduction in other City costs.
69. Establish Director of Public Works, eliminate Director of
Public Services and Assistant City Engineer as well as
Director of Public Works/City Engineer. Create City
Engineer position.
ProDosed Reductions-Lona Term
3. Remove 186 from Charter. Replace 186 with pay-for-
performance program. (See #55, Proposed Reductions-Short
Term - N List.)
4. Examine how City pays retirement and benefit fees. Based
-2-
on information obtained from County of San Bernardino, a
substantial savings was gained by restructuring how the
County paid retirement and benefit fees. More
information can be obtained through conversation with
County Administrative staff.
6. Review incidence of disability versus regular retirement
in safety.
7. Traffic Division/Police Department elimination of
motorcycle enforcement -- revenue vs. expenses.
8. Modify general unit employee retirement system to 2% at
55.
14. Engage the Rose Institute to do a comprehensive review of
the City's revenue and expenses.
15. Implement a BEST Program. (See handout provided by member
of public) .
-3-
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BUD6ET
RECOMMENDATIONS
#c2f>
v~/f7
.
.
In reviewing the present situation condition of the city budget for fiscal year 1997/1998, it
was determined that a macro approach to solutions would assist in the adjustments to the
budget without hindering the flexibility of the individual in charge to act in the best interest
of the city.
,
i.
In this review, it was also determined that our organization should recommend long term
solutions instead of a short term band aid approach. In look at these solutions, the city
should also consider revenue enhancement alternatives without increasing or initiating fees
or taxes.
1. The city should pursue grants not yet obtained, for funding of police at the present
level (No additional matching funds should be needed because Measure S was a good
faith effort).
2. Immediately begin the process of evaluating the benefit to the City of becoming an
aggregate for the purchase of electrical power and determine the potential revenue
enhancement (for the general fund) derived from such a venture. See Attachment A
.
3. Incur no new debt including the issuance or refinancing of bonds and cease creative
supplementation of general funds with RDA funds.
4. Become innovative in having city departments compete with private industry for
lowering basic cost operating expenses. See Readers Digest article Attachment B.
5. Restructure Code Compliance supervision to the Police Department and Code
compliance to the Fire Department in conjunction with the City Attorney. This can be
accomplished as part of their regular schedule without adding additional personnel.
.
6. Oppose anything that cuts programs that provides services to senior citizens, youth,
and city residents.
7. Convert benefits to a cash basis to the unions to manage the benefits.
.
Prepared by We The People, San Bernardino
Subrnilled to San Bernardino City Council
June 16,1997
Page 1
.
8. Develop a cost efficient system making the city more business effective and friendly to
increase revenue basis by increasing new business.
9. Develop budget vs. actual spending accountability with a public awareness system for
the transfer of funds between city department.
.
10. Consider abolishing the four day-ten hour work schedule for non safety employees (or
the nine day-40 hour work schedule), returning to 40 hours-five days a week.
II. Look at total shortfall and add the fire equipment needed and then the two figures
becomes the shortfall
As a last resort, the following item needs to be considered to make up any
shortfall iu the budget.
.
12. Since approximately 85% of the budget is personnel related, you need to take a strong
look at the total compensation package for city employees; not just the Fire and Police
Department but all departments. The standard in today's economy for benefits
expense distribution in private industry is 50/50.
.
.
.
Prepared by We TI,e People, San Bemanlino
Submitted to San Bemanlino City Council
June 16,1997
Page 1
.
~ roT sooN
An IiDISOH /NTl:."RNATlONIIL Company
I
Itf--/-Ct c h 111 ?tL f /I
Thursdav, May 8, 1997
CPUC Decisions: Direct Access & Unbundling
.
On Tuesday, May 6, 1997, the California Public Utilities Commission (CPUC) issued
decisions supponing direct customer access and the unbundling of metering and
billing services. Edison has received a copy of the actual decisions and is completing
a comprehensive analysis of them, The company has reserved formal public comment and
reaction to the decisions until that analysis has been completed. Following is a summary of what
we know at this point.
.
Direct Access
The first decision significantly accelerates the transition to customer choice. Beginning January I,
1998. all of California's investor-owned utility customers will be allowed to choose-{)r have
direct access ttr-their electricity producer. This means electricity customers will be able to buy
power from any generator-including Edison-through the Power Exchange. which will open in
1998, or they can contract directly with either independent power producers or retail electric
service providers such as power brokers, marketers, and aggregators. Utilities will continue to
transmit and deliver power to customers.
.
Metering & Billing (Unbundled)
The second CPUC decision introduces customer choice to the traditional distribution services, such
as billing and metering, which historically have been provided by California's investor-owned
utilities. Beginning in January 1998, customers may choose to have their utility or another electric
service provider render consolidated (energy + distribution) bills. or they may choose to have
separate billing from each service provider, In addition, beginning in January 1998, customers with
demands above 20 kW can choose Edison or any other supplier to provide metering service to
measure consumption of their electricity. All other customers may choose this service beginning in
January 1999.
.
Other Comments
While these PUC decisions did not support the positions Edison advocated. it appears that based on
oral comments, key safeguards will be included in the new electric service markets. For example.
compensation to frrrns providing customers with metering, billing, or other traditional distribution
service will be based on the actual net avoided costs to provide service. instead of Edison's average
costs. This will mitigate customer "cherry-picking" in which lowest cost-to-serve customers are
captured by competitors, driving up costs for those who remain with Edison.
Another important provision is that Southern California Gas Company will not be allowed to enter
this new market as a service provider until it, too, has unbundled its distribution services. or has
received approval from the CPUC to enter the market.
There are many more proceedings that will occur between today's decisions and the end of the
year. The issues to be determined are complex and the system requirements are enormous. The
timetable is such that great care must be exercised to ensure continued system reliability. Edison
will continue to work with the CPUC and other parties to provide a smooth transition to the new
market structure.
.
"~'~~"'~~::'J
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e;;'/ FAIRNESS FOR
f'e SMALL BUSINESS
.
Chairman
(;us Owen. President. Owen Prop1:rlies
Geor~e Bernard. President
Babnce Industries. Inc.
Jim CampbelL Owner
:\rroro Seta Food & Beverage Co,
Demm \r Chiniacff. \-ice PresltJem
Kemper Cummunit\' De\"eiopmelll Co
FrankColonnJ
Frank Colonna and Company
Jim Conran. President. Cunsumers First
'\elson Dam,Owner
\elson [);j.ris Tderision Productions
.\V:1 G. DOller. \\'estem Senior Director
Women Construction Owners.& ExeCUllres.
t',),,-\. 1(.1,)
John Eagle. CEO
Pipt! Fabncating:mdSupplrCo
Richard L. Faussel. President
Fausset&.-\ssociales
Gene Hale. Chairman
Tlw Greater Los Angeles Afric:m ..\.mt!r1can
Chamber of Commerce
[;a,,' Johnson. Owner/Proprietor
COIlsolid:ued .\licroSen'iCcs
Rohert A. Lovingood. President
Hi De$en Pelionnel Se,,'ices
Kos:lr1o \brm. Chair
SoUthe~1 Derelopment .\ssocia[joll
Harold .\1, .\\afimez. Chairman
.\linorrtr Delegate (aucus. The Whllt!
Ilouse l:onference on Small Business
Doug \!ills. rice Presldenl
FeI1Jer.\\usic:\[ Instrument eo'll.
,.1,nd\' .\lolin:J.. Pre::;ident
Larin [lu~ineisAssoclation
\lak \:J.kal':Ill1:l. President '* CEO
San Gabriel railer .\ledic:ll (etller
Robert P:lcheco. President
L:ttlllUs for Economic;\wareness
~lIld llel'elopment
Curren Price. PDQ Printers
[)o[oI"l's R:ltcliff. President
I:orita Communication. Jnc.
\Ii R:lli. President Stl",ltham (;roup
CI:1\{on;\' RtXoru. rice PresIdent
\US/Low!'\'
Bob Reynlllds.I'I"l'Sldent. T:\E.lnc.
\1:l11 SdlW:mz. .\\anaging Panner
S:lm u:\'y [lln.'Slmems
]:lckSieg:l1. Presidelll
Chagal Communicalions KFOX R:ldio
Hollis D. Smilh. Prl'Sidcnt
Southern CalifornlaRe~ionaJ
Purch:L~itlg Council
Joan Sp:lrkmall. (:ommunity Dereloprnem
Director. Sh:ull.\\edic:ll Care
y. Scolt \\'al11(. PI"l'Sident
:bi:m Business ASSOCiation
\\'al'l1e\\'edltl. President
Wedin EntcrprJ$es
WilliamS, While. President
110bert It. Peterson Co
':Icques S. Ye:lger. Ch:limmn &: CEO
r:. L Ye:lKer (lJll~lructioll Cu.. Inc.
.
.
.
.
I
Ill; l Stn'et, Suite C316
\ti('rmlJl!/Ilo, (~'I f)jfU-I-9H6Y
VOICING THE CONCERNS OF SMALL BUSINESS
How DOES RESTRUCTURING AFFECT YOUR BUSINESS?
Small businesses, similar to other electricity users, incur costs for utilities
which are necessary to function day to day. But, the state's plans for
deregulation of the gas, cable, and telecommunications industries have
resulted in small businesses paying higher rates to offset the special rates
offered to residential consumers and group rates granted to large commercial
users by these utilities.
However, Fairness for Small Business has helped to ensure that similar cost-
shifting does not occur with the electric industry deregulation. Beginning in
1998, the state will start the electric power industry restructuring plan,
introducing customer choice to all electricity users in California.
For almost three years during the plan's development, FSB has helped to
protect the interests of small businesses in California. Our organization was
fonned as a means for small business voices to be heard in the decision-
making process. Our members are the force behind our effort to ensure that
small business benefits from the restructuring of the electric utility industry.
FSB has fought hard to support a fair electric utility restructuring plan that
will create a competitive marketplace where the state's investor-owned
utilities compete on a level playing field, and where California's small
businesses can benefit from quality service, reliability and lower rates. Now,
this electric restructuring proposal (Assembly Bill 1890), endorsed by FSB
and passed nnanimously by the legislature, has become law in California to
the benefit of millions of electricity consumers in the state.
ADVOCATES FOR SMALL BUSINESSES
Small business interests would not be represented if it were not for the .
involvement of our members in the process to restructure the electric industry.
Over this past year, small business owners throughout the state participated in
small business forums and public hearings, and testified before the California
Public Utilities Commission and the Legislature on behalf of small business
interests. Our strong effort helped convey to decision-makers that small
businesses are a powerful constituency.
.
By adhering to a restructuring plan that includes our principles of equity,
opportunity, and fairness, the Legislature sent a clear message of support to
small business owners in California. The new law provides an integrated
mechanism for the necessary control, coordination and operation of a
restructured electric utility industry.
.
FSB will not stop there, however. We will continue our efforts to ensure that
this plan is implemented with a smooth transition from a regulated market to a
competitive environment.
Also, as the Federal Government considers how best to deregulate the
electricity industry on a national level, we want to protect the interests of
California's small businesses.
For these reasons, our organization needs your added support so the voice of
small businesses in California is heard.
.
WHAT You CAN Do
Your membership with FSB strengthens the muscle of our private sector
industry. As a business owner, we know your time is valuable, so
membership in our organization is free and involves minimal effort and
participation.
.
Your association with FSB will, however, enhance our commitment to
helping your business, your neighbor's business, and most of all, the heart of
our state's economy. It is imperative that we all support our state's
accomplishment as the model by which other electric restructuring proposals
are measured, particularly at the Federal level.
The growth of small businesses relies not only on a competitive market, but
also on the fairness and equal opportunity of our regulatory structure. Small
businesses must remain writed to ensure that the restructuring law is
implemented and small business owners are provided with the rate reductions
and benefits of a competitive market, which will result under AB 1890.
.
We urge you to join us today.
.
{~..~:i.::'~"_.~,V/:-fl'"...." .'
~~
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.",~.
~1 FAIRNESS FOR
'k,' SMALL BUSINESS
.
Chairman
t;usOwen,l'resldent.Owen Properties
{;t'\lrge llernard. Presidelll
Balance Industnes. lnc
Jim Lunphell. O\lmer
Arrol"O Seeo Food & Ik\'era~e Co
Dt!nnis \\' Chini;udT. \'ice President
Kemper Commulllty De\'elopment (Il
Fr'JllkClllonna
Frank Colonna and Compan~'
Jim Conran. Presldem. Consumers Fillt
\elson Davis. ()wner
\elson Davis TelevIsion Productions
\\"a(;. Doner, \\'~ternSenior[)irector
\\'omen Construction Owners & Execul1\'es.
C,:)..\. ((~\)
John Eagle. CEO
Pipe f;Jbricaling and Supply Co.
Richard L Faussel. President
FJUS5et & Associates
Gene Hale. Chairman
The l;rcater Los Angeles Atric:ll1 American
Chamber of Commerce
Gal'\' Johnson. Uwner/Proprietor
COJlslllidated .\licroSernces
Robert :\. LOVingood. President
Iii Desert PersonnelSernces
RtlsJrio .\larin,Chalr
Southe3..'it Oevelopment Association
Harold .\1. .\lartinez. Chairman
.\linorit\. l)ele~pte CJUCUS. The White
House Conference on Small Business
Doug.\lills.\"icePresldent
Fender .\IU5lcallnSlfumentCorp.
.\ndr .\lolinJ. President
!.;ltii, HusinessAssoclallon
.\lak .'iakJ\':una. Presidenl &: CEO
~an (;abricJ \'alley .\lrtlical r.elller
f~ohert P:lcheco. President
Luiuos fur Economic;\wareness
~ll1d Ot'\'elopment
Curren Price. PDQ Printers
Dolores Ratcliff. Pftosidelll
Curit:! Comll1UniCJtlon. fnc.
.\Ii R:izi. Pft'Slucnt. SIr'JthamGroup
Cl:illon:\. Record. \ice Presidem
\IlSll.owr....
l~()b Remolds. PI't'Sldent. TAE. Inc.
.\l:iu~hwart7...\lal1;lgingPartner
S;uI1I.e\~' [Il\"estmeuts
JackSil'gal. President
Ch:lgal COllllTlunications KFOX Radio
Hollisl). Smith. President
SOllthem Califofnl:i Region:ll
Purch:lsillgCouncil
Joan :'p:irkmJu. Commllnlt\" Derelopmem
Director. Sharp .\ledica[Care
YScOlt\\':Ulg.l'residcnt
.\sian UusineSsAssocl:ition
\\':tl'lll' \~ftJ.in. PreSident
\\"edinEllIerprises
\\ilJiamS. White. President
RnherlH. Peler..oll Co.
;lcqUl.'S S, Ye:lgcr. Chainn:m & CEO
E. r.. YeJgerCollslructlOn Co.. Inc.
.
.
.
.
1)1.; LStreet. SuiteC316
'\tlcmm/!/I1o. C4 1);811-9869
KEy FEATURES OF CALIFORNIA LEGISLATION (AB 1890)
Assembly Bill 1890 will create a competitive electric generation market by
restructuring the electric industry as outlined by the California Public Utilities
Commission (CPUC) and the State Legislature.
This restructuring effort will bring competition and customer choice to the
electric utility industry and will result in improved efficiency, higher levels of
customer service. and lower overall electricity prices. It will allow generators
of electricity to compete to serve customers in the state, while also continuing
current regulation of power distribution.
Among the significant provisions in the legislation are the following:
Power Exchange (PX)
The plan establishes a Power Exchange - similar to other commodities
markets -- where power producers will compete to sell their power and where
the lowest-priced power will be utilized first. The Power Exchange will
assure consumers competitive prices because most power suppliers, including
all investor-owned public utilities, will compete to buy and sell power through
the exchange.
Independent System Operator (ISO)
A private, non-profit entity will be created to provide market participants non-
discriminatory access to the transmission system while maintaining system
reliability and security.
Direct Access
A simultaneous initiation of direct access will begin with the operation of the
PX and ISO for the purpose of allowing customers -- on a phased-in schedule
-- to buy the generation portion of their electric service directly from power
producers or marketers of their choice.
Rate Freeze
Regulated utility rates will be frozen at their June 1996 levels for all
customers, including large commercial and industrial customers, whose rates
will remain at those levels for the duration of the 1998-2001 transition.
Rate Reduction
A financing mechanism will enable utilities to achieve a 10% decrease for
residential and small commercial customers beginning in 1998. with the
.
expectation of a cumulative :;0% reduction in regulated electricity rates for
these customers by 2002.
Public Benefit Programs
Energy conservation. low-income programs. and renewable resources (such as
solar power) development will continue to be funded through a non-
bypassable component of distribution.
.
Transition Costs
All customers will be obliged to incur a non-bypassable Competition
Transition Charge (CTC), providing utilities with a reasonable opportunity to
recover costs made uneconomic by the change in public utility law and the
move to a competitive market. Employee-related transition costs, power
purchase obligations, and certain nuclear-related and other costs would be
recovered over a longer time period.
.
For small businesses. this crc is not a new expense. but rather a more
equitable distribution of the costs among all electricity customers.
Municipal Utilities
The plan also allows for expansion of market participation to include
municipal utilities.
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FILE f.b. 021 C5/21 '!:Ii 1f3::)4 ID:I~ CI fl 2, D
619 '79::: 83.1:,
PeiGE 1
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ASTHUIVI ENEHGY SERVICES, LLC
'. Date: May 20, 1997
To: Frank Shnetz
From: Len Viejo, Project Manager
qoq
Facsimile 919-888-51 t 9
. Subject Electric Utility De-regulation
.
.
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4G.2 S~e\.C(IS AVerillI'::. ~;\.Ilr,~ ]lJij .:. 5()ldll':113N'ICl). C:\ Q207!5 .:. T; (iDOl 7~).:;<i!){H.I .;. I'::: (760j 7D.].tfj.IO
FILE No. 021 C5/21 '97 1G: :)4 ID :f; IJ N 8, D
619 79:;: 83J:,
Pr::GE 2
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ELECTRICITY DEREGU1.ATrON
AND
'filE CITY OF SAN BERNARDINO
Issue:
.
i Beginning January 1, 1998, all electric consumers, inducing the City of San Bernardino,
("City"), will be able LO competitively purchase electricity, The C.ity c:a~ also serve as the
community aggregator of electricity for its re:iidents and businesses.
Recommendations:
Act now and the City .:an provide an opportunity for aU residents :md bU3inesses to access the
competitive electricity market on January I., 1998. Enter into a risk-free approach with
ASTRUM. Energy Services, Inc. (ASTRUM) that will give the Cit'J and community the ability
. to aggregate their electricity purchases, thereby reducing ';i~nificanIJy their .;nergy costs.
Options:
Fnder State Ia';,' and directives to be issued by the Caiifctrnia Public Utilities Commission
(UCPUCU), beginning January I, 1998, il1vestor-own,~d :Jtilitks can no longer sell the
electricity they generate directly .0 electric consumers in California. Instf:ad, the utilities must
sell power to a new ~ntity called the Power Exchange. Electric consumers who choose to
continue to purchru;e electriciry from a utility will be served thrcugh utility purchases from the
Power Exchange.
.
Beginning January I, 1998, utility rates for residential and small commercial customers will be
reduced 10%. Rates for large commercial and industrial ,:ustomcrs. who purchase energy
from the utility, will b: frozen until 2002. Utilities will be able te) recover their uneconomic
investments until then. Customers who want to reduce their electri:it~. bills will be able to
contract directly witl~ independent generators in order to redu.:e tbeir co~t bdow that set by the
Power E.~change.
Disi:lIsnon:
· Aggregation permits mclllicipalitles to combine energy rec;uir~oment.s al all lccations or combine
these requirements witI'. their constituents. It will ai10w tlM CilY (0:
· Leverage its :omm'Jnity's purchases to achieve volume p'lrchas.: d~s:olJn.ts;
· Set attractive eeono mic development rales:
· Lower the transaction costs;
· Arrange ee,st effective tax-exempt financing;
· Provide additional revenues to or reduce expenditures from, the general fund; and
· Perhaps be the or.l) feasible way in which residentiill,Uld imall m medh:m size commercial
custcmers can partidpatein, and benefit from, c. competir:eve ell=rf.Y m~u'ketplace.
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FILE '<0. 021 OS/21 '97 16::)5 I[':f~ IJ ~I :1 D
p~r;E
61'3 7% ~:N:)
There is a surplus of electricity in the Western U.S. and Cmada. Power suppliers are
motivated to secure arrangemems to serve California cClnsumers directly and not sell power
into the new Power E:'(chat1ge. This wa:; recently demonstrated wh~n thirty-six power
suppliers responded to the City of Palm Springs request for ener,sY serVlt::s. However, the
amount of electricit'J available at lower pnt:es is limit(:d and will be :;~:ured by the early
entrants into the market. Capturing this benefit is a key r~asc'n for timely il.1alysis on behalf of
. the City.
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ASTROM has compH:hensive knowledge of and hands on exp::!rience in Restructuring and
AggTega~on. A STRUM offers the City a number of adv,Ultages:
· ASTIUJM will provide Ihe personnel, expertise and adviCl~ necessary t:' enable the City and
community ~stablh b the strul.:ture and pmcure the energ)I and related ;ervices at the most
favorable pnces.
· ASTRUM'S compensation is based solely on the amount of monl:Y sa\ed when compared
to the Power Exch,ange price. Therefore, the City and ec,mm:.l1lity wculd enjoy a risk-free
approach 10 tapping into the new market, because they would pay A,STRUM nothing if
their price does not beat the Power Exch:U1ge price.
· By using ASTRUM, the City can take advantage of thi!; opporumit) '"ithout adding any
staff or capital equipment facilities, and without adding ar.y fixed Ilvectad.
· ASTRUM's persOl\nel are uniquely qualified to struct,m~ Oppc'l1un:ties and provide an
array of choices nCII likely to be forthcoming from ,Tarketcrs :lnd bmk~rs or utilities with
speci fie resource~ they are obligated to sel!.
· Retaining experienc;e personnel provides the opportunity 10 cilp~ur~ Ihe i2vings on a timely
basis.
· ASTRUM can combine the energy requirements of other COlllrTllldtie! to improve the load
profiie end lower t!;e cost of energy.
· ASTRUM can arrange cost effective tax-exempt finandng.
· The contract cr,n be exten,jed. by agreement of the parties, but WLI have a limited term.
By acting now the City will help to position ils resident> "nd bllsir.essl';s 1,0 ceg:in the substantial
effort required to aec::ss the competitive market on J3.Jl'Jary 1, 1998, and to tap other cost
savings opportunities.
May 14, 1997
2
.
I
City of San Bernardino
Electricity Costs
1995-96 actual
1996-97 budget
3,048,000.00
2,667,900.00
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Potential budget savings due to aggregation
250,000.00
Electricity Utility Tax Revenue
199596 actual 7,903,000.00
1996-97 budget 7,538.000.00
.
Electricity consumed within the City, 1996-97
Approximately 89,000,000.00
Potential Revenue Enhancement
4,500,000.00
Less Incentive Discount to Customers
1,500,000.00
Total Potential Budget Savings and Revenue Enhancement 3,250,000.00
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FIL::: No. 084 06/02 'Sl7 11 :,5 ID :f~ 0 N & D
619 79~: 834':)
PAGE 2
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II~
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,CAPTUR,ING ,THE, .BE,NEFIIS
';',I<:.:~, ':,,' ,;)~~:, ,;" '_,\}-': .,J:,': \:" ,i':i(:,.-I:,_" '::;,' ::::~;: ',,:<: ',' .,-':':::t!,
OF
I
-'1""-
...,....'"
ELECTRIC HlltlTV R~$TIRHCTlJRIN6
. '1.,'1
1-'.
FO~'"
I '
....1
THE CITY o'F SAN)QI:RN4RDllr~O
, i I:'
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BY
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ASTRUM ENERGY SERVICES, LLC
MAY 29, 1997
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FILE No. 084 C6/02 '97 11::6 !D :f~ 0 N & D
6l 9 79~: 8340
PAGE 3
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Capturinf the 8e"~/iu' ol Elec:/ric Utility Restructuring
CAPTURING THE BENEFllS OF
ELECTRIC UTlUTY RESTRUCTURING
FOR THE em OF SAN BERNARDI"'O
.
TABLE OF CONTENTS
raGE
l/!g:'iCRI PTIID!!
..,
..
EXECUTIVE SUMMARY
3
CALlFORNJA ELECTRIc UTILITY RESTRUCTURING LllGTST_ATTON
.
.1
A Cl'JREOATJON PROVIDES
MUNTCIPALITlF.S
CAL1FORNIA MUNTCTPALITIES ARE POsmON"fNCi THEMSELVES
TO PART1CJPATE IN THE RESTRUCTURING OF UnUT.IES
MANY
ADVA~AGES
TO
5
6
FOllMA nON OF THE ENERGY CONSORT:~ IS STRAIGHTFORWARD
7
SCOPE OF SERVICES
.
A'ITACIIMIlN1'S
A ?R{'~rMINAMY WORK PLAN
B CITY OF PALM SPRINGS AIWERTlSEMENT
.
c
SAMPLE RESOLUTION
D T'tTICAL QCESTIONS AI30L:T AOOREGATlOX TO BE ADDRESSED
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Page / of?
FILE No. 08406/02 '9711:[6 ID:f( 0 '~2. D
61'~ 790: 834'J
PAGE 4
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Caplurlng tile Benefits .2!.~mc Utility RlJstructuring
EXECUTIVE SUMMAR'V
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~ Competitive energy market provides unprecedented oppon!Jl1ity to'recure lower price
power, acce~s the capital markets, reduce rate.s, offer attractive: ecDllomic development
rates. and provide additional funds to municipalities.
:>- Beginning January 1, 1998, California law allow:, customers 10 sc:lt~;t their electricity
power supplier. The local utility will continue to prov;de other electrical service (e.g.,
transmission and distribution services), Customer:. can aggIC;;ate their energy
requiremenlll.
.
)> Aggregation permi:s cllstomers to combine their ellt:rgy reqJirements at an locations or
combine these requirements with other customers. Aggregation allows customers to meet
California Public Utility Commission's (CPllC) minimum load requiTt~ments and capture
the benefits of a more competitive purchasing power,
~ Public agencies can join together and combine their enerl:Y requirements and/or serve as a
community aggreglltOr for their constituents.
~ A regional energy consortium provides the lle"ib;1ity, with minimal risks, for each
member to determine the level of energy !;ervices it wJI purchase and provide.
);> Formation of the consortium can: be accomplished by adopti01 of a n:solution; represent
. one or all the public agencies in the City of San 8emardi~o; provide specific services to each
agency; requir,: no additional costs; and allocate ofdsi,::ns and savings on the basis of
energy purchases.
;;.. Regional energy Gluthorilies, that were formed to capture :hc hendits from the de-
regulation of natllr!" gas, realized the greatest savings in tile early years.
;r. Public agencies can issue f.ax-exenlpt bonds to prepay the capaeity po;:-tlon of their electric
bills and lower the cost of energy.
· ;. Many power :narkf;ters aH~ positioned to sell electriclt:1 into ,he California energy markets.
To meet the January I, 1998 deadline, mUllicip,ilities hllve formed regional power
consortiums to purchase lower price energy.
;;.. Astrum Energy Services, LLC (AstTum) has compl ehensive knowl<:c!ge about evolving
electricity m;Hket dynamics alld is uniquely qualified :c identify alld promote opportunities
10 reali7,e substantial sav'Jlgs in energy ~upply cosH,. Astmlll'" compensation is based
solely on the amount of money saved.
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Page 20'7
FILE No. 084 06/02 '97 11 :17 ID:K 0 N & D
619 78~: 8340
PAGE 5
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Capturing me Benefits of Electric utility Restructuring
CAUFOR~IA ELECTRIC UTIUT\' RESTRUCTURING LEGISLATION
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~ On September 23, 1996, Governor Wilson signtxl legislalion that provides for competition
in the Sllpply of ebctric power and aUows retail customers to ch,)(Ise their supplier. TIle
legislation creates ,I new electricity market structure, i;(uthonzes direct transactions between
competing electTichy suppliers and retail customer:;; provides c:quai a,;;cess to tnmsmission
and distribution services; and establishes a charge to recover the utilides' generation costs
that may become ulIleconomic as a result of a competilive generation market.
.
);. Utility rates for residential and small commercial custome,rs of investor-owned utilities will
be reduced 10% through 2002. Utility rates ror large commc:rdal and industrial
customers, who remain with the investor-owned utilities, will Ix [r02.lm at current levels
through Decem:!ler 31, 200 1.
,. Customer's bills will reflect separate charges for energy, transmission, distribution, public
benetit programs and recovery of uneconomic costs, Initially, customers who purchase
electricity from a c'Jmpeting energy supplier, pay the same component charges. other than
energy.
,. Beginning January 1, 1.998, all customers willllave tile ('PpoJ1unity to choose their power
supplier,
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;;.. Aggregation of clIstomer electric load shall be authorize::! by ::he CPUC for all customer
classes, Public: age.ncies can combine their energy requirt!ment!l to meet the minimum load
requirements. [f a public agency seeks to serve as 11 community agli:r'~gator on behalf of
residential customer:;, it shall be obligated to offer the opportunity to purchase electricity to
all resident.ial customers within its jurisdiction.
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);.. CPUC had bee,n directed to resolve the outstanding issues. These indude: unbundling ,of
transmission and distribution charges; how much CTC wiIl the utilities be allowed to
. collect; how the [ndependent System Operator and Power Excllange WJ.ll operate, and the
utilities' div(!stiture of generating facilities.
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,Page 3 ofl
FILE No. 084 06/02 '97 11 ::8 ID :f~ 0 N & D
619 7~::<~: 8340
PAGE 6
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Capturing tile B~.2!. Electrie; utility Restructuring
I\GGREGATIOI'J iPRO"IDE8 MI\I'J" I\D"I\I'J1'46E8 TO MUNICIPALITIES
~ Qualify to sc:lect an, alternative energy supplier.
.
);. Lower energy costs.
~ Offer attracdve ewnomic development rales.
... Improved load promc.
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.. Greater control owr your energy future.
> Cost effective Ialt-e:xempt tinancing.
... Opportunity to provide additional revenues or lower costs for the general fund.
. )0. Minima~ financial clnd legal risks.
>> Formation and participation in the energy aggn~ga.tor is straightfor.varc!. (A preliminary
work plan is attached - Attachmem A.)
~ Designed to meet each member's requirements.
.
... Positioned to captlJre the beneti(s From the ['ulure un)undJing of electric distribution
services.
;;.. Positioned to become aggregator nn behalf of residc:ctiaJ and s,'11an c.ommercial customers.
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Page 4 of 7
FILE No. 084 C6/02 'm 11:~3 IDa, 0 N & D
619 ?J~: 8340
PAGE 7
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Capturing tilt' B~ of Eltlctric Utility Restructuring
CALIFORNIA MUNICIPALITIES ARE POSITIONINt] THEMSELVES
TO PARTI(~IPATE IN THE RESTRUCTURING ()If lJTILlTlES
.
Y The City of Palm Springs' "Request f,)r Proposal," to me,~t the community's energy
requirements, eHcit"d thirty-six responses. The City selel:tecl Portland General Corporation
(PaC) to create a new utility called City of Palm Springs En=qJY Services (PSEG). I'SEG
guarantees to have Jawer rates than the Southern Calitornia lJdiscn.
.
y The Association of Bay Area Governments (ABAG) is also ~.cting ass regional power authority
to supply the energy requirements of their members. Twenty eller~y suppliers responded to
ABAG's "Request for Qualifications and Proposals". FOllr suppliers were selected to provide
power. ABAG expects to lower the cost of energy to its members by 5 % and proposes to open
the power poolta all juriSdictions in Pacitic Gas & Electric's servke [erril:ory.
y The Northern Catif(:'lnia Power Agency entered into a pIJbli<:-privilte alliance with Enron Corp.
to seH power to th., agency's 700,000 cuswmers in 11 cities and four utility districts, along
with other services. Although it is not an exclush'e supply agreement, it will take the benefits
of competltion dOWfl to the residential and commercial clistomer.
;;.. San Diego ASSiociat:,on of Governments planned projrarn is to en;able de~ision makers in each
of the region's il1terested local governments and public ageneies the opportunity to begin pooled
purc~ases of power .on the open market in January of 1998.
. ~ The Independent Colleges of Soudlern California (ICSC) exoclli:od an agreement with New
Energy Ventures (NEV) that will allow its sixteen members to aggregate their electric loads.
Beginning in 1998, savings to ICSC colleges are expected to be from 10 \0 15% and grow to
30 to 35%.
')0 The University of California and the CaliFornia State University Systl~ms issued a "Request for
Qualification for an Electri,: Procurement Service Prcvider". It is anticipated that provision of
electric senko will .,tart on January 1, 1998.
.
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;;.. The County of Los Angeles has completed an extensivo slrategi.; plan on California electric
restructllring. The plan inclllded: aggregation options for govemment~.1 entities; factors to
consider in evaluating those options; the range of future elel;tricit:i cost savings; risks and
be.nefits of pllrsuirg the various options; processes to pursue direct access aggregation
programs; and key regulatory issues. The Board of Supervisors re:sponded favorably to the
analy.ses and plan to issue a "Request for Proposals'" fDr alternative energy suppliers in July
1997.
,. The County af Kern issue.;' a "Request for Qualiticatiolls" to a,s,isr the County, other publie
agencies and members of the community to prepare for and take advantage of cost savings that
illY be available I>y purchasing pooled electric power.
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~ILE No. 084 G6/02 '97 11 :19 ID:K 0 N & D
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619 79::: 8340
PAGE 8
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Capturing tire Benetirs of EleGtric utility Restructuring
FORMATlOIltil OF THE EIltiIERGY COIltilSORTIlJM IS STRAIGHTFORWARD
:r Aggregation permits municipalities to combine their en~l'gy requiIemems at all locations or
. combine these requirements with other municipalities and/or tlwir conHiruents.
:>> Through aggregation municipalities can enhance th,eir bargaining po~;ition and quickly
capture the benefits of the competitive power market.
:;;. The energy consortium IS a financing entity through whidl energy is purchased from
energy suppliers and resold to the end-user at advantage rates. The investor-owned utilities
are required to provide access [0 their facilities at cornpamble p:cices.
.
j;> Required services can be contracted through an energy brokf:r:o prc;.cure the necessary
services. The consortium will not require new staff, capital e<luipment, an operational
location, or budget,
,. The consortium can be opened to surrounding municipalities ,md public agencies. One,
several or aU the municipalities and public, agenc;ies ~ire wdcorn-ed.
.
". The tlexible .~tructure allows each public agency to tletermine th~: level of services it will
purchase and provide. A member's participatiOll can vary irom purchasing energy
requirements to meet its own needs to serving as a community aggregator for their
constituents,
:Y Administrative decisions and cost savings can beallocattlc on thll basis of energy
purchases.
.
... Each public agency can estahlish the rates chargt:d to its consumer:.;.
,.. Participatiun is acwmplished by adoption of a resolution approving the creatlOn of the
consortium. (A sample resolution is altaclled - Attachment C.)
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FILE No. 08406/02 'm 11:19 ID:f; 0 N & D
619 79~: 8340
PAGE 9
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Capturing tile Benefits of Elactn'c utility Restructuring
ASTRUM E~ERG\' SERVICES, llC
SCOPE OF SERVICES
.
J;> Participate in information meetings convened for thll purpose of positioning an effective
response to Catife'rnia's restructuring of electric 111:iliti,~s for tile City and other local
agencies. (Typical questions about aggregation is attached - Al.ta(:hmf:nt D).
, Coordinate the Chy's planned activities with the. various State agf:ncies, including the
CPUC, to assure the City's earliest selection of an alu:rnative energy supplier.
.' Solicit ::ntt:rest in participating m an energy consortium from other surrounding local
government entities.
, Assist in the formation of a quasi-public lllcal agenc)' .a.nd interested party working group to
provide for ongoing synergism and effective energy purchases from alternative suppliers.
.
... Determine the electric power and relatul services needs of the p.trticipants and other
peter..tial pooling entities.
,. Prepare "Requests for Qualifications and Proposals for Electrkity Supply and Related
Services" ,
.
, Conduct. bidders' conference, evaluate proposals for electricity supply and related services,
recommend short. list of prospective bidders, interview selected bidders, conduct.
competitive negotiations, recommend energy supplier, complete contract negotiations,
recOl:1mend contract for approval, and coordinate contra.ct l'equiremcmts with other local
government entities.,
~ Underwrite tne tax--exempt financing of energy supplies.
};;;- Monitor the power purchase contract performance for its duration.
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Page 7 of 7
FILE No. 084 06/02 '97 11 :20 ID :f~ 0 N & D
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PAGE 10
Capturing tl~:!!!!!!!. of Elactnc: utility Restructuring
JUNE 1997
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JULY 1997
0,
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o.
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THE ell\' OF SAN BEnNt~RDlNO
EVAILUATION OF PURCHASINti POOtED POWER
PRELIMINARY WORK PLAN
DocwTlenl the activities and approaches other publiC agendlls ;lre eXJ:,loring and the types of
or'~anl,:aUons and groups that are considering pool'ng,
Sol/oil inlereslln pa1iclpating rrom potential poolir.J entities,
Regier,sl wor1<6hop 10 discuss electrio utili~ reslructurino and tile llggregE,lion proposal with public
iIilenobs and other potential pooling entities.
Form interested party working group.
Solicit publiC input, need and discussion.
Deterrrine the objeoUves of a power pool or pools:n thi; Citl', including p,-j.:;ing structure, length of
contrac~ guarantee of performance, and mlnlmuf'l !eJhnicai req,kerrents.
AUGUS71997
;.;.. Determine the electr:c power needs of the plrticipants anel o1hElf ~'olenUaI pooling entities.
... Surrmillize the electric power needs of several of thE! I11cstlikeJy pooling options for the region.
~ Identify additional S91Vioes that power pool could pr<)vide includin~ power qu!dity, reliabilily, energy
efficiency and load manageman~ metering, billing an:j financing.
SEPTEMBER 1997
.. Coordinate planned activiUas with the CPUC.
). Develop consensus with the Work G oup on the rnos~ \Vonabie p<lW1;r puml1,ase & pooling options.
;;. Prepw3 and issue !he request for qualifications and pml'Jsals "01' p<X~ed p:.vler procurement
.
OCTOBER 1997
, Intervil~w selected bidders and recommend portfolio of energy pl'tlVidel's.
" Po!9ntial pool participants review and select winning I)ids If no bkJs .re ao;eplable, project ends.
);0 Coordinate contract requirements willl poolin;; amiUe:].
NOVEMBER 1997
).> \:)(ecu19 agreements among pool pal tIcIpants, and nllgo~.rte lind I;XElDUta (lOt;! effeo1lve contracts
between pool participants and power marketers 10 provide energy.
:>> RegislE;r as an Aggregator with the CPUC and inbrr the utility Cof 'lour selected alternative supplier.'
.
DECEMBER 1997
~ Fina~loo energy supplies.
JANUARY J.99~
... ServiCE' delivery .::ommences.
ONGOI/l.G
)i- Monilo' the power purchase contract performancE for i's duratlor,
.
Attachment A
L
FILE. No. 08406/02 '97 11:20 ID:K 0 N & D
619 79::: 8340
PAGE 11
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Captl/l1(lg me Benefits of E/eotnc utility Restructuring
THE CITY OF
.
PALM SPRINGS
HAS FOUND A
.
BETTER WAY TO
CONDUCT
.
ELECTRICITY.
.
For yc.n.n;, the dlU"nt l\nd hlllljl~1I "rPalm Sprill6J:lI Wod ti;ll' ,. liItlIlllion"''' Ihi;ir0!4m""11I11tb.iric:ity nllN, bul only ~\:!iYQd "Iii. in ruklm.
St'. met Ci~y look: 11i;:lilVl ftmllt~r:n.:1J un allwllI.'o wiLh Penllnd G~~",l. bri~ina cht'ltc1lM arA rri.:~ Ad'/antollJilll10 Ill!)' hUlIil'IOIili ill thl) ma.b1:. For
murc brormaliDn, :.all cu:" e..~OIlt'lI!)jC OI!Vol'll'lll~nt dr.lI'J.rI~nr nl 619.)2J..H259. And nOli Qui .....hu bllli~ JPl'Ol1unili~ yuu can I.....,.to in
~lm5pril1U'_'
(!J PORTLAND GENERAL CORPORATION _
POWERING PALM SPRINGS.
A. Ad'."I."" In The Will Slreet Journal OIl DllCfJfllber , E;. 1,96
.
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Attachment B
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PAGE 14
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ELECTRIC1TV DEREGUl.ATrON
AND
THE CITY OF SAN BERNARfllNO
Jssue:
.
Beginning January 1, 1998, all electric consumers, induding the City of San Bernardino,
("City"), will be able to competitively purchase electridty. The City Gan also serve as the
community aggregator of electricity for its residents and businesses.
RecommendatilJns:
.
Act now and the City can provide an opportunity for all residents and businesses to access the
competitivc electricity market 011 January 1, 1998. Enter into a risk-free approach with
ASTRUM Energy Services, Inc. (ASTRUM) that will givc: the City and community the ability
to aggregate their electricity purchases, therehy reducing signifiGlmly their energy costs.
Options:
Under State law and directives to be issued by the California Public Utilities Commission
("CPUC"), beginning January I, 1998, investor-owned utilitic:s can no longer sell the
electricity they generate directly to electric consumers in Califomia.. Instead, the utilities must
sell. power to a new entity ~'alled the Power Exchange. Elecll:ic consumers who choose to
continue to purchase electri.city from a utility will be served tllrolJgh llti~ity purchases from the
Power Exchange..
.
Beginning January 1, 1998, utility rates for residential and small commercial. customers will be
reduced 10%. Rates for large commercial and industrial Gustomel's, who purchase energy
from the utility. will be frozen until 2002. lJtilities will be able to recover their uneconomic
investments until then Customers who want to reduce their elec:tncity bills will be able to
contract directly with independent generators in order to redu.;e lneir cost below that set by the
Power Exchange.
Discussion:
. Aggregation permits municipalities to combine energy requirt'ment!; at a!llocations or combine
these requirements with their constituents. It will allow the City to:
· Leve"age its community's purchases to achieve voluml~ purchase cllscounts;
· Set attractive economic development rates;
· Lower the rransaction costs;
· Arrange cost effechve tax-exempt financing;
· Provide additional "evenucs to or reduce expenditures from, the general fund; and
· Perh"ps be the only feasible way in which residential and small to mediL:m size commercial
customers can participate in, and benefit from, a competitive ,m,~rn' marketplace,
.
i=ILE No. 084 C6/02 '97 11 :~2 lD:K 0 N & D
61.9 '79~: 8340
PAGE 15
.
.
There is a surplus of electricity in the Western U.S. and Canada. Power suppliers are
motivated to secure arrangements to serve California CConsumers directly and not sell power
into the new Power Exchange. This waH recently demonstmed when thirty-six power
suppliers re&1Xmded to the City of Palm Springs request fOI energy servic:es. However, the
amount of electricit:'j available at lower prices is limil€,d and will be se,;ured by the early
entrants into the markeL Capturing this benefit is a key neason for timely analysis on behalf of
the City.
ASTRUM has mmpTf,hensivc knowledge of and hands on experience in Restructuring and
Aggregation. ASTRUM offers the City a number of advantages:
.
· ASTRUM will provide the personnel, expertise and advice necess<,ry to enable the City and
community,establish the structure and procure the energy and related services at the most
favorable prices.
· ASTRUM'S compensation is based solely on the am{)~nt of fIlo)ney savf'.d when compared
to the Power Exch,ange price. Therefore, the City and e,a,mmunitJ' would enjoy a risk-free
approach to tapping into the new market, because they would pay ASTRUM nothing if
their price does not beat the Power Exchange price.
· By using ASTRUM, the City can take advantage of thi!i OPIXlTtuuil.)' without adding any
staff or capital ~ujpment facilities, and without adding any fixed over~{~1.d.
· ASTRUM's personnel are uniquely qualified to stmct!Jre opportunities and provide an
array of chnices not likely to be forthcoming from !Tiarketers and bmk,eTs or utilities with
specific reSOurces tlley are obligated to sell.
· Retaining experience personnel provides the opportunity 10 cap:ure thll :lavings on a timely
basis.
· ASTRUM can combine the energy requirements of o'her cOl11munhiel, 10 improve the load
profile and lower the cost of energy.
· ASTRUM can arrange cost effective tax-exempt tlnancing.
· The contract can be extended, by agreement of the parties, bUl wiJI have a limited term.
.
By acting now the City will help to position its residents a.nd businesSf'5 ':0 begin the substantial
effort required to acce,ss the competitive market on January I, 1998, an,j to tap other cost
savings opportunities.
.
May 29, 1997
.
2
FILE No. 084 C6/02 '97 11 :~3 ID:K 0 N & D
619 79:,: 8340
PAGE 16
.
ASTRUM'S SPECIALIZED EXPERIENC:E AN[) EXPERTISE
. Electric industry restructunng is dramatically changing how electric serilices 21Rl provided and priced. These
significant changes crealB possibilities for savings for the well positioned and informed, but introduce also a
greater polBntial for losses for customers who are unprepared after December 31 ,1997.
ASTRUM Energy Servictll, LLC (ASTRUM) has developed stra1egies, lactic:s anei prO!Imms to assist it's clients
navigalB the unchartered, but not unfaniUar, waters of the new electric market. maximizing polBntial savings
while ninimizing risk. ASTRUM has assembled a lBam uniquely qUalme,j to undertake a sinilar program for the
City of San Bemardino and! its constituents. Each of the principals h as been in the California energy induStry for
at least fifteen years All have also worked extensively with local governments, and have established successful
track records in assisting clients meet their objectives. Members llf thll lBam ha ve structured and negotialBd
. transactions between Ihe public and pJivalB sectors and will effecti~~y lTIeet thE' srlecifir: needs of the City. The
lBan includes:
Kinsell, O'Neal, Newcomb & De Dias, Inc, (Kinsell), providss compn3hensive investment banking
services to municipalities and other public agencies. Its principals, with combined 60 years of hands on
experience in planning complex transactions. have completed over 53 billion in financings. Kinsell has
assisted clients to: finance energy supplies; restructure exi~;ting loan CC!I'rmilmElnts; develop competitive
utility rates: analyze utility acquisitions: and model financial p rejections.
.
Grueneich RllOLlrce Advoclltn (GRA~ is led by Dian Grueneich, a reCl)gnized leader in Federal and
Califomia electric industry reslrucluring. Dian has twenty YE!ars Ilxperiencfl in California energy mailers.
She is currenUy worldng with public entities to evalualB ag"regation options and design and undertake
energy services bidding processes.
HMH Resources, Inc. (HMH), specializes in planning, dellEJcpment assemTle.nt and creative financing
of energy projects. For 16 years the firm has: (i) analyzed load requirements; (ii) prepared extensive bid
documents; (iii) developed comprehensive financial models to ac(;umtely evaluate and compare
responses 10 electric aggregation proposals: and (iv) succe~;sfully negoilallld contracts.
.
Fulbright & Jaworski, L.L.P. (F&J~ is one of the largest intemationallaw finns, and is organized
around C{)fe practices including: business and finance, entlrgy regula1ion, litigation, public finance and
administration, ami tax law. This structure enables it to provda current and comprehensive advice on: (i)
the purchase, sale and financing of energy assets; [ii) strur:turing and negotiating energy-relalBd
transacUons; (iii) jOint power authority agreements; and (Iv) energy regulation and !egislation.
PCF Associates, Inc. (PCF~ has over 15 years experience workin'l with eJ<ecutives who face new
levels of uncertainty and are struggling to chert and execute ,In etfel:tivl! course of action. The firm
assists clients to: Ii) understand complex business stra'189l issues: Oil fecus ;3/1d manage large-scale
data ':olle:tion effi:,rts; (Iii) build and support cross-functicnallBarns; (iv) cc,Tlmuni,;ate complex issues in
si11ple terms; and (v) manage changes in how things get done.
.
I
FILE No. 084 C6/02 'm 11:,3 ID:< 0 ~j & D
I
619 79~,: 8340
PAGE 17
'.
.
T ean members have effEiCtively wor1c.ed together and will provide 10 lhe Ciljr of San Bernardino coordinated
expertise in a broad range of areas. I ~ addition, the team has: (i) wOrked succe!,sfully with all major municipal
and inves1Xlr-owned utilitie!i in Califomia; (Ii) developed wor1<ing relalionst:ips v,ith rrany Itlird party energy service
providers; and Oii) avold a~y conflicts of interest in appearance or in l:a...i. The lei3lT1 can be expected, on behalf of
the City, to negotiate ell'ectively and work collegiaJly with every utility. enmgy servk:e provider, regulatory agency
and other major s1akeholdE!rs In California
The Ieam principals remain on the culling edge of new ideas to !ieM c1iellh;' r,eedsi in the rapidly changing
elec1Jic industry. For example, HMH has played a significant role in :!he devejoplTlf.!nt, e'J!Oluation and negotiation
of one billion dollars worth of energy-related projects. GRA and HMH prepamd stratE:gic plans on Caifornla's
electric restructuring for LCis Angeles County and California Stale IJnivllmity. They subsequenUy assisted the
California State University and the University of Califomia issue :~ CCmprehl!nsive E!lectric services provider
requesl for qualifications. HMH also developed a sophislicafedijnancial rmdEI to accurately evaluate and
compare prices and risks ~'Om respondents against a base case, each olher, and trle 00& utility alternatives.
The attorneys at F&J provided the legal structure to form the Southern California Publil: Power Au1hority. They
· have has also provided legal services individually to nine municip.~ utilities ali weil as the Northern California
Power Agency, Sacramento Municipa Utility District Transmission Agency of Northern California, and the
Financing Authority for Resources Efficiency of California.
Over the past twelve )'el,rs, Kinsell has successfully turned complex financiiJl challenges into successful
transactions for more thaI" 50 muniCipalities and public agencies. Kinsell recEln1Iy assisted a rural electric
cooperative, serving 16,000 membem, reduce its power cost 50% and become competitive with surrounding
inveslor-owned utilities' currenl rares.
.
ASTRUM proposes to provide 10 the City of San Bernllrdino:
· A progran to help exet:utives and staff. (i) understand electric: i~iJustry res:TlJcluring; Qi) seek public input; (iii)
determine the .objectivt,s and power requirement of a power pool; (iv) build l;onSl!OSus to take action; (vi)
solicit pamcipaton; and (v) produce well organized, easily understanclable and pracl!cal reports,
· The specific services will include: (I) develop a workshop and sC~ledule speakers 10 inform public agencies of
electric industry restructuring; (ii) summarize reqllirements of power pool; (iii) apply the team's knowledge
and existing documents 10 help prepare the City of San Bernardino's comprehensive request for
qualifications and proposals; (Iv) evaluate the responses to the P;lqUllSls for qualifications and proposals; (v)
conduct detailed financial model analysis of alternative propOSals; (vii) coonjinille planned activities with the
. California Public utilitiEts Commission; (viii) assist in the formaljcn of a regi01a1 power pOOl; (ix) assist in
drafting agreements a!'nong the power pool parlicipants; (~) negotiate wilh ':he ~ower supply finalists to
optimize Savings and manage risks; and (xi) assist In drafting a,~reement ~elween Ite regional power pool
and power suppliers.
ASTRUM would lVelt::ome die oppO:Tunity to contribute towards the C,~'S :;uccsss iI' evaluating aggregation
options, and positioning the community :0 meel new challenges, and =ap~alize 011 opportJnities as restructuring
of the electric induslry gathe!rs momentl.im.
.
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