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HomeMy WebLinkAbout01/27/2014 B A K E R S F I E L D /s/ Steven Teglia Committee Members: Staff: Steven Teglia Willie Rivera, Chair Assistant to the City Manager Ken Weir Terry Maxwell AGENDA SUMMARY REPORT SPECIAL MEETING OF THE BUDGET AND FINANCE COMMITTEE Monday, January 27, 2014 12:00 p.m. City Hall North – Conference Room A 1600 Truxtun Avenue, Bakersfield, CA 93301 The meeting was called to order at 12:02 p.m. 1. ROLL CALL Committee members: Councilmember Willie Rivera, Chair Vice Mayor Ken Weir and Councilmember Terry Maxwell City Staff: Alan Tandy, City Manager Steven Teglia and Chris Huot, Assistants to the City Manager Caleb Blaschke, Management Assistant-City Manager’s Office Virginia Gennaro, City Attorney Josh Rudnick, Deputy City Attorney Nelson Smith, Finance Director Sandra Jimenez, Assistant Finance Director Raul Rojas, Public Works Director Nick Fidler, Assistant Public Works Director Georgina Lorenzi, Assistant to the Public Works Director Ralph Braboy, Wastewater Manager Zac Meyer, Wastewater Treatment Supervisor Roseanne Padley, Accountant - Wastewater Doug McIsaac, Community Development Director Ryan Bland, Community Development Coordinator Tony Jacquez and Nina Carter, Associate Planners Ed Dorsey, Assistant General Manager – Rabobank Arena, Theater, Conv. Center Eddie Chavez, Director – Information Technology Dave Hecht, Assistant Director – Information Technology Greg Williamson, Chief of Police Others present: Eric Xin, Brown-Armstrong Members of the Media AGENDA SUMMARY REPORT Budget and Finance Committee Meeting Monday, January 27, 2014 Page 2 2. ADOPT NOVEMBER 25, 2013 AGENDA SUMMARY REPORT The Report was unanimously adopted as submitted. 3. PUBLIC STATEMENTS None 4. NEW BUSINESS A. Discussion and Committee Recommendation Regarding FY 2014-15 CDBG, HOME, and ESG Action Plan Community Development Director McIsaac reported that there are three primary funding sources from the United States Department of Housing and Urban Development (HUD): Community Development Block Grants (CDBG), which can be used for public works or housing projects; HOME funds, which are used for housing; and Emergency Shelter Grants (ESG), which are primarily used for emergency shelter and assistance to the homeless population. The total allocation anticipated for this year is slightly more than $4.2 million. The actual amount the City will receive will not be known until later in the year; but for planning purposes, staff based their estimate on the current fiscal year’s allocation minus five percent (5%). Mr. McIsaac referred to a chart that had been included in the packet related to the budget for Fiscal Year 2014-15. Of the approximately $3.35 million, 20% is allocated for administration, and there is approximately $1 million allocated for principal and interest payments on two existing Section 108 loans. Funding is provided for three projects historically funded; the Fair Housing program in the amount of $25,000; $85,000 for the Senior Center; and $230,000 for police patrols in Wards 1 and 2. This will leave approximately $1.7 million for discretionary spending. Additionally, there is approximately $2.7 million that has been held in reserve to pay costs related to housing projects. These monies had been challenged by the State Department of Finance as enforceable obligations; however, the court has ruled in favor of the City to allocate the funds towards the housing projects, so the full amount that had been held in reserve will be available for use. Mr. McIsaac reported that approximately 90% of the CDBG-eligible areas exist with Wards 1 and 2. Staff proposes to reconstruct curb, gutter and sidewalks in the following areas: California/Palm/Oleander/H ($500,000); Flower/Kentucky/Beale/ Virginia ($500,000); 4th/Brundage/P/Union ($532,000); and Wilson/H/Railroad Tracks/Chester ($700,000). Other projects include $54,000 for a new shade structure at Jefferson Park, approximately $358,000 for reconstruction of the restroom at Planz Park, and $102,000 for improvements to the Martin Luther King Jr. gymnasium. AGENDA SUMMARY REPORT Budget and Finance Committee Meeting Monday, January 27, 2014 Page 3 The HOME allocation is approximately $898,000, minus 10% for administrative costs and another 15% for community housing development organizations. The remaining balance is $446,000 for new construction assistance, for which a specific project has not yet been identified. Staff is recommending use of $250,000 as the final allocation for the first-time home buyers’ down payment assistance for the Parkview Cottages; $50,000 for the Home Access Grant Program; and $30,000 in CDBG funds for handicap improvements for single-family homes for low-income residents. There is approximately $192,000 in ESG funds available, minus administrative costs. These are the funds that will be used to fund the non-profit activities mentioned previously. Committee member Weir asked about the $2.7 million that should be released by the Department of Finance. City Manager Tandy said that a verbal Order was made, and it will be followed by a written Order. City Attorney Gennaro stated that the Order is before the judge for signature. While it is possible the State will appeal the ruling, the City cannot hold onto the funds for much longer. City Manager Tandy said that the funds must be spent by a certain deadline; and if they are not, they must be returned. Committee member Maxwell asked about the patrols. City Manager Tandy explained that two officers are assigned to the CDBG-eligible areas; but should there be an emergency, they can be redirected. Committee member Maxwell asked about the down payment assistance for the Parkview Cottages. Community Development Director McIsaac said that it is a privately-funded project, but the City offers up to $35,000 in down payment assistance for qualified, low- to moderate-income buyers. Most current homeowners accepted the assistance either in the entire amount or a portion of it. Community Development Coordinator Bland said that it is a loan with a 30 -year term. According to HUD guidelines, a covenant is placed on the land, so that if the original buyer defaults, it must be offered to another low- to moderate-income buyer. If the buyer refinances, the City is paid back first. Of the 74 units planned for the development, 50 have been sold. The remainder are either under construction, or yet to be built. AGENDA SUMMARY REPORT Budget and Finance Committee Meeting Monday, January 27, 2014 Page 4 Committee Chair Rivera asked about the Section 108 Loan in the amount of $4.1 million. City Manager Tandy said that it is for the McMurtrey Aquatic Center. Committee Chair Rivera asked about the $800,000. Community Development Coordinator Bland reported that is for a Southeast Bakersfield street reconstruction project in either 2003 or 2004. Committee Chair Rivera asked about the patrol component. City Manager Tandy replied that the maximum amount that can be used under the grant criteria for public services is $456,000, and the City has used $340,000 to date. Of this, $230,000 was initiated when the first phase of the Mill Creek was being constructed, and the Council asked for additional protection for the improvements being made in the downtown area. This was during the recession when positions were being frozen. Committee Chair Rivera asked what else qualifies as public service. Community Development Director McIsaac said that the focus is on services that provide assistance for predominately low- and moderate-income areas. Committee Chair Rivera asked if a proposal had been made to move the cost for the officers from CDBG to the Police Department’s budget so that the CDBG funds can be used for other purposes, such as infrastructure. City Manager Tandy said that it is within the Council’s legal authority to make such a change. It is within the Committee’s purview to amend the application and forward it to the full Council with the revision. If approved, it would take effect at the beginning of the next fiscal year. Committee member Weir asked about continuing the assistance on new construction. Community Development Director McIsaac said that HOME funds are used for existing projects and those under construction. There is no specific project proposed for these funds at this time. City Manager Tandy confirmed to Committee member Weir that CDBG funding for public services can be used for infrastructure, and other services that qualify under the guidelines, although continuing to fund the patrol officers is the recommendation. Community Development Director McIsaac stated that the proposed funding plan begins October 1, 2014. AGENDA SUMMARY REPORT Budget and Finance Committee Meeting Monday, January 27, 2014 Page 5 City Attorney Gennaro stated that the patrols were also initiated based on some social issues that were occurring in Wards 1 and 2. At the time, the City had a Community Prosecution Program, so the patrols may have complemented that Program. She suggested asking the Police Department to investigate the circumstances and report back before any changes are made to the allocation. Committee Chair Rivera confirmed with Community Development Director McIsaac what the different proposed projects are, and from what funding source they would be paid. Committee member Maxwell asked if the down payment assistance for the Parkview Cottages could be modified to a formula whereby the amount of assistance offered would depend on the value of the property. Community Development Director McIsaac replied that the City has an agreement with the developer to offer $35,000 to each qualified homebuyer, regardless if they choose to use all or a part of that amount. The funding was originally from Redevelopment Funds combined with a small amount of HOME funds. The discussion continued, following the conclusion of Item 4.B. Police Chief Williamson reported that funding two officers through CDBG funds began when the economy took a downturn in approximately 2007. Several positions were being frozen, making it difficult to fill positions that had been vacated by attrition, so the City Council made a determination to fund two positions through CDBG funding. These officers cover a portion of Ward s 1 and 2, bounded specifically by Union Avenue, Truxtun Avenue, F Street, and the Garces Circle. Committee Chair Rivera requested that funding for the two officers be tra nsferred from CDBG to the General Fund, and use the CDBG funding for additional infrastructure, such as curbs, gutters and sidewalks. Further, it is his desire to retain the two officers, and that they continue to be deployed in the same area. City Manager Tandy noted that transferring funding of the two officers to the General Fund will reduce the approved compliment increase by two officers, as the additional personnel are to be funded by the General Fund, also. Nothing will change, however, until the beginning of October, when all of the current CDBG funds are expended. Committee Chair Rivera asked about the deadline for submission of the plan. Community Development Coordinator Bland said that the deadline is May 14, 2014. There is a 30-day publication requirement before the item is brought before the City Council, so staff anticipates putting on the agenda for a Council meeting in April. If Council requests any changes, there is time to revise the plan and submit it before the deadline. AGENDA SUMMARY REPORT Budget and Finance Committee Meeting Monday, January 27, 2014 Page 6 Committee member Maxwell asked how closely the plan will be reviewed, and if there are any penalties for data that is questioned. City Manager Tandy replied that the program is subjected to a detailed audit; and while they are authorized to withhold disputed funds, it has never happened to the City of Bakersfield. Committee Chair Rivera made a motion to return the CDBG plan, with the exception of the public safety component, to the City Council for approval. The public safety component would then return to the next Committee meeting with suggestions on how to replace the applicable funding in the General Fund to ensure that there is no reduction in the approved amount of new officers to be hired. The motion was unanimously approved. B. Discussion and Committee Recommendation Regarding the Sewer Utility Rate Study Public Works Director Rojas reported that the last sewer rates utility study, which is required by the State and Proposition 218, was performed in 2001. The purpose is to make sure that everyone is paying their fair share and rate allocations are fairly distributed by user types, which can vary, depending on the strength of what is put into the system. City Manager Tandy noted that a surcharge is assessed for particular business types that have an unusual discharge composition, such as car washes, restaurants and gas stations. Assistant to the Public Works Director Lorenzi gave a presentation on the topic. Proposition 218 governs how property-related fees are calculated and charged, and it mandates that property-related fees cannot exceed the cost of providing service and must also be proportionate to property. The goal is to establish a new rate structure that is easier to explain to end users, while remaining compliant with Proposition 218 and State guidelines. If approved, the new methodology will be phased in over the next five years. Staff first determined the cost of operating and maintaining the treatment plant, and then factored in annual debt service payments. The wastewater characteristics were identified, such as flow; biochemical oxygen demand (BOD), which measures the strength of the effluent; and total suspended solids (TSS), which measures the particulate matter in the effluent. AGENDA SUMMARY REPORT Budget and Finance Committee Meeting Monday, January 27, 2014 Page 7 A flat fee is added to property taxes for all residential and commercial customers; but, for commercial customers, a surcharge is also assessed when the business’ flow exceeds what is paid in the baseline amount. Of the over 4,200 commercial sewer customers, approximately 1,700 are subject to the surcharge. Staff proposes to blend the rates originally calculated separately for the three wastewater characteristics, and then categorize them by the different commercial customer types to simplify the methodology for calculating new rates. Flow for irrigation will be eliminated from the equation, as will the amount paid through property taxes. The net amount is the surcharge, and it is billed in 12 equal installments. Some examples were shown. The study revealed that residential rates should be modified, but that would impact the commercial rates, as the baseline amount is determined by the typical single-family residential flow. One requirement of Proposition 218 is to provide notice to those customers who will be affected by the change. In order to meet the deadline for the next fiscal year, the proposed changes must be considered by the City Council in March so that the notices can be sent in April. The revenue program must be updated to formally document the new rate calculations and how the fees are charged. Staff anticipates submitting that to the City Council in June. Committee member Maxwell asked about the irrigation credit. Assistant to the Public Works Director Lorenzi replied that staff looks at the actual water flow for 12 months, taking either the lowest amount or what is used during the winter months. Committee member Maxwell asked about the increase that will be phased over five years. Public Works Director Rojas reported that it will vary, depending upon the customer, with some seeing an increase, and others, a decrease. Committee member Maxwell asked if the methodology proposed by Bakersfield is consistent with other cities in the County, or other comparable cities in the State. Public Works Director Rojas said that most other cities in the County are not near as complex, as large, or have the issues that Bakersfield has. In relation to comparable cities, however, he said that it is one of the methodologies used. Committee member Maxwell confirmed with Public Works Director Rojas that staff receives daily reports on the flow into and out of the treatment plants. AGENDA SUMMARY REPORT Budget and Finance Committee Meeting Monday, January 27, 2014 Page 8 Committee member Weir confirmed that the rates are blended by category, separately. He also confirmed that while the issue is complicated, staff will take the time to explain it to the customers. The Committee unanimously approved a motion to send the study to the full Council for approval. C. Discussion and Committee Recommendation Regarding Annual Audit Reports FY ending 2013 Finance Director Smith gave an overview of the materials in the packet, which had been provided to the City Council and then referred to this Committee. The first item is a comprehensive financial report that produced a report of no findings by the outside auditor. The second item is a report to management, for which the internal control processes are reviewed, and recommendations on how to improve certain processes are made. Two conditions were noted: 1) A notice must be sent to all departments to verify that all capital assets still exist; and 2) The notification process between Human Resources, Information Technology and any affected department be expedited to remove employee access to City systems when that employee is either terminated, resigns or retires. The third item is an audit report containing a schedule of federal expenditures, which resulted in no findings; the fourth item is a wastewater management compliance report that ensures the City is properly complying with necessary requirements; and the fifth item is a calculation of the appropriations limit that is performed by the auditors. The sixth item contains financial statements for operations at the Arena, Convention Center, ice rink and amphitheater. This report covered the operations of those facilities while under the control of SMG, which ended June 20, 2013, and the operation by AEG, which assumed control on July 1, 2013. Under the operation by SMG during the time period, the structure lacked a financial director. The auditors recommended that additional controls be put in place to better review and supervise the accounting functions. AEG has a finance director who reviews both the operational finance statements and payroll, so this issue has been addressed. The motion to return this item back to the City Council was unanimously approved. AGENDA SUMMARY REPORT Budget and Finance Committee Meeting Monday, January 27, 2014 Page 9 D. Discussion and Committee Recommendation Regarding Adoption of the 2014 Committee Meeting Schedule Assistant to the City Manager Teglia reported that all meetings are scheduled on the last Monday of the month. When there are instances that no items have been referred by the City Council, meetings can be canceled. The schedule was unanimously approved. 5. COMMITTEE COMMENTS Committee Chair Rivera thanked the Public Works and Community Development Departments, and the City Manager’s office for doing a great job on the CDBG items. 6. ADJOURNMENT The meeting adjourned at 1:47 p.m.