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Home My WebLink About06/26/19 PUBLIC SAFETY VITAL SERVICES OVERSIGHT COMMITTEE AGENDA PACKETB A K E R S F I E L D Special Meeting of the Citizens Oversight Committee for Bakersfield Public Safety and Vital Services Measure (PSVS) Of the City Council - City of Bakersfield Wednesday, June 26, 2019 4:00 p.m. City Hall North 1600 Truxtun Avenue, Bakersfield CA 93301 1St Floor, Conference Room A AGENDA 1. ROLL CALL 2. ADOPTION OF MINUTES FROM THE APRIL 1, 2019 OVERSIGHT COMMITTEE MEETING 3. PUBLIC COMMENTS Time is open to members of the public to comment on any issue connected with the PSVS Measure. Speakers may elect to speak after an agenda item should they prefer. 4. NEW BUSINESS A. Budget Process Update and Measure Related Adjustments - Newly Drafted Reserve Policy - Tandy/Huot Board Member Questions or Comments 5. BOARD COMMENTS 6. ADJOURNMENT • /XWWW�� B A K E R S F I E L D Special Meeting of the Citizens Oversight Committee for Bakersfield Public Safety and Vital Services Measure (PSVS) Of the City Council - City of Bakersfield Monday, April 1, 2019 5:15 p.m. City Hall South 1501 Truxtun Avenue, Bakersfield CA 93301 Council Chambers MINUTES 1. ROLL CALL Present: Chair Sanders, Vice -Chair Hibbard, Committee Members Holt, Prince, Rowland, Louie, Tobias Absent: Committee Member Keller 2. ADOPTION OF MINUTES FROM THE MARCH 25, 2019 OVERSIGHT COMMITTEE MEETING Motion by Committee Member Tobias, second by Committee Member Prince, to adopt the minutes from the March 25, 2019 Oversight Committee meeting. The motion was approved with Committee member Keller absent. 3. PUBLIC COMMENTS Curtis James Bingham offered blessings to the Committee and commented on the benefits to the members of serving on the Committee. He expressed his support for public safety, city management and the Mayor. Michael Turnipseed, Kern County Taxpayer's Association, provided public comments and written materials. He commented on the need for the presentations to have more detailed data and outcomes. Expressed concern regarding hiring people for economic development and stated the city should focus on their branding initiative. He further stated that although he is in support of the city's efforts as they relate to homelessness, he would like additional information regarding who the partners will be and what services they would provide. He requested the development of a deferred maintenance list and he thanked the city for the light study and requested an additional study for the urban trails program. Tee Daniels, President of the Bakersfield Senior Center, provided comments regarding the comprehensive services provided by the senior center, requested that the committee not forget the senior citizens and requested additional financial resources. 4. NEW BUSINESS A. Human Resources Support Function - Assistant City Manager Huot Assistant City Manager Huot made staff comments and provided a PowerPoint presentation and Human Resources Manager McGranahan answered additional questions from the committee. Committee Member Louie confirmed with Assistant City Manager Huot that the three HR position requests were not currently filled but were already approved by the City Council outside of the Measure N requests and are currently in the process of being filled to assist in the recruitment needs for positions added as a result of Measure N. Committee Member Rowland asked and Assistant City Manager Huot confirmed that the positions will be filled regardless of whether the Council approved Measure N funding using the general fund. Committee Member Prince asked questions regarding the number of supervisor positions and their roles. Human Resources Manager McGranahan explained that the department currently has only one newly promoted supervisor and the intent is when the new supervisor position is filled, that the current supervisor would focus on employee relations issues, investigations and recruitments and the new supervisor would assume oversight over the front office operations, leaves of absence, retiree benefits and all other benefits administration. Vice -Chair Hibbard asked regarding outsourcing certain non-core functions such as general recruitment in order to avoid fixed costs that may not be needed once initial hiring efforts were complete. Human Resources Manager McGranahan explained that the expense of such a service and the education and certification requirements for conducting recruitments for certain positions such as police make it inefficient for regular and ongoing recruitments. She further explained that outsourcing had been explored and due to the complexity of civil service rules it is not a model that really suits the business. B. Public Works Department Proposal - Director Fidler Public Works Director Fidler made staff comments regarding the Public Works Department proposal including Capital Projects, Fleet and General Services Support Functions; and provided a PowerPoint presentation. Public Works Director Fidler explained that the 7.5 year return on investment is based on a PG&E estimate of the fixtures that are proposed to be replaced, that the 1.1 million dollars request includes contingencies and that rebates following the project completion were also included in the return rate following a question by Committee Member Prince. Committee Member Prince asked regarding future plans to increase the lighting of the bicycle or walking paths to improve safety. Citizens Oversight Committee Meeting Monday, April 1, 2019 Page 2 Director Fidler explained that lighting along the multi -use trail, Kern River Parkway, has been studied and there are some limitations to installing lighting but in the future there is the possibility to add some additional lighting. He further explained that it would be included in the proposed streetlight study. Committee Member Tobias asked whether the streetlight study will be done based on our current standards which he believes are too low. City Manager Tandy explained that that the study will analyze police records regarding crime, bicycle and vehicular accident information and traffic engineering records to address safety and crime related concerns. In response to a question from Committee Member Tobias regarding whether the street lighting standards were low, Public Works Director Fidler stated that the city's standards are pretty robust. He further explained that due to rapid development and annexations we have areas that are not consistent. Following a question from Committee Member Louie, Director Fidler explained that solar lights are not ideal as they do not provide adequate lighting for the amount of time that it is needed. C. Return on Investment Memorandums - City Manager Tand City Manager Tandy provided staff comments regarding the return on investment memos. Committee Member Tobias requested that outcomes are measured geographically, to show how the funds are used throughout the different districts. City Manager Tandy noted that Police, Fire, homelessness issues and economic development are distributed throughout the city, but certain capital outlays such as the sports complexes are located on the periphery of the northeast and southwest. Assistant City Manager Huot pointed out that although the sports complexes are located on the periphery they benefit the community as a whole. Following a discussion with Mr. Tandy, Committee Member Prince requested that the current actuals along with the percentage increase be provided for the performance indicators. Committee Member Rowland questioned when the Committee will be able to look at whether goals have been met and where the money was allocated. Mr. Tandy stated that the expenses can be viewed monthly on the online system and stressed that six months would be needed to provide data regarding how the funds have affected services. He offered that the Committee could meet should the City Council make changes and further reminded the Committee that they would meet to review the year end audit reports which contain the expenditure information in detail and the analysis from the auditor. In response to a question regarding the timeline of the 2021 budget from Committee Member Rowland, Mr. Tandy indicated that the Committee would meet around the same time the following year to address that budget. Vice Chair Hibbard and Committee Member Holt requested clarification regarding the Committee's role. Citizens Oversight Committee Meeting Monday, April 1, 2019 Page 3 City Manager Tandy advised that the Committee's role was to decide whether the department requests fit within the scope of the thirteen spending priorities and to provide comments. D. Proposed Budget Amendments - City Manager Tandy City Manager Tandy provided staff comments regarding the proposed amendments including the streetlight study, expansion of the police maintenance garage, and the Spectrum Amphitheater seating proposals. Chair Sanders requested that the new chairs for the Spectrum Amphitheater be tried out by multiple people to make sure they are comfortable. Committee Member Prince expressed concern regarding the low number of events at the Spectrum Amphitheater and mentioned that comments he has received from the community indicate it is cost prohibitive. Committee Member Prince and Committee Member Rowland asked questions regarding the Spectrum Amphitheater and AEG General Manager Eckerson provided comments regarding the number of events and seating. Concern was expressed by Committee Member Louie regarding the small increase of 35 ticket sales projected and Mr. Eckerson explained that it is a conservative estimate and reminded the Committee that this will not add additional seats. Troy Hightower, Independent Consultant, provided comments regarding the need to increase the scope of the streetlight study, and requested that existing streetlight programs are funded. He further expressed concern regarding the rapid pace to spend the money and expressed his support for geographic outcomes. Committee Member Rowland and Committee Member Prince discussed with City Manager Tandy the streetlight study including the cost of such a study and the inclusion of street crossing lighting. Committee Member Tobias requested that development standards are examined in conjunction with the streetlight study. Finance Director Smith summarized information regarding the timing of funding received and detailed data from the CDTFA in response to a request from Committee Member Louie. Committee Member Louie and Mr. Tandy discussed what would happen if the projections were not met. Chair Sanders called for a brief recess at 7:07 pm. Meeting reconvened at 7:14 p.m. Citizens Oversight Committee Meeting Monday, April 1, 2019 Page 4 5. DEFERRED BUSINESS A. Fiscal Year 19-20 Measure Revenue Allocation - City Manager Tandy Staff recommended that the Committee find that the proposals are consistent with the Spending Priorities within the ballot Measure Assistant City Manager Huot provided staff comments and a PowerPoint presentation. The Committee discussed the Fire Department requests with City Manager Tandy and Fire Chief Galagaza providing responses. Chair Sanders opened up the discussion for general dialogue. Committee Member Rowland stated that he would like more of the Measure N money set aside in reserves. He further expressed his concern regarding the amount of money going toward the expansion of the sports complexes in particular the Kaiser Permanente complex and suggested putting off the expansion of that facility. City Manager Tandy provided clarification regarding the $1.5 million dollars proposed to go towards the Kaiser Permanente Sports Village. Committee Member Rowland recommended to trim money from other areas and do additional street maintenance. City Manager Tandy explained that street maintenance wasn't high on the citizen's list of needs and additionally, several positive changes in the city's economic circumstances for road related revenues will eliminate the need to use Measure N funds. Committee Member Holt expressed concern regarding the proposed funding for the sports complexes and questioned who the outside service providers were going to be to address the homelessness issue and asked whether the $450,000 would be enough. Committee Member Prince spoke in support of Committee Member Rowland's recommendation for street maintenance and also spoke in support of setting aside additional reserve funds. Committee Member Tobias also offered his support of additional reserve funds and commented that we should have a 90 -day reserve within five years. He stated that he was in support of the two large regional parks but would like to see some balance with the neighborhood parks in the next two years. He requested additional information regarding street repairs and potholes and requested a review of the standards for streetlights. He commented on homelessness and encouraged staff to work closely with the providers and look for best practices throughout the state. Vice -Chair Hibbard encouraged staff to engage in disruptive thinking and to find ways to bring private and government ideas together in the discussion on how we maximize the dollars to get our city elevated to where we all want to be. Citizens Oversight Committee Meeting Monday, April 1, 2019 Page 5 Mr. Tandy reiterated that streets was not one of the thirteen items and would not be in harmony with the ballot measure. He affirmed that increasing the reserves to the $36 million -dollar level within the next three years and the balance between the regional and neighborhood parks is appropriate and could be incorporated in the future budget. Committee Member Louie stated that although he is in agreement with saving money, it is not necessarily good to have money sitting in reserves if we have a better use for operational purposes. In response to a question from the Chair, Mr. Tandy and Mr. Huot explained that saving money was not part of the survey results from the public but occurred as an internal discussion regarding fiscal stability and the need to build reserves back up to an acceptable level. Following a request for clarification by Committee Members Rowland and Prince and further discussion with Finance Director Smith, Committee Member Tobias suggested that the committee make the recommendation to the City Council to develop a plan that will increase the general fund reserves to a 60 -day reserve of $34 million within the next three years. Committee Member Tobias made a motion, to recommend to the City Council to develop a plan to develop a 60 -day minimum cash reserve. Vice -Chair Hibbard seconded. Motion was approved with Committee Member Keller absent. Vice -Chair Hibbard made a motion that the $20,362,950 proposal from the Police Department is consistent with the spending priorities of Measure N and that it be approved. Committee Member Rowland seconded. Motion passed with Committee Member Keller absent. Committee Member Prince made a motion, that the $3,344,375 proposal from the Fire Department is consistent with the spending priorities of Measure N and that it be approved. Committee Member Rowland seconded. Motion was approved with Committee Member Keller absent. Vice -Chair Hibbard requested that the Fire Department provide the City Council with a benchmarking showing how efficient we are in comparison to other fire departments to inform the voters that the Fire Chief and his leadership team are doing everything they can to produce an efficient product on the street that still meets the safety needs and eliminates waste. He requested that his comments be forwarded to the Council. Vice -Chair Hibbard made the motion that the Rapid Response Team/Security proposal from the Recreation and Parks Department of $1,235,289 is within the spending priorities of Measure N and that it be approved. Committee Member Louie seconded. Motion was approved with Committee Member Keller absent. Committee Member Rowland made a motion that the Reforestation of Trees and Shrubs proposal from the Recreation and Parks Department of $1,550,000 is within the spending priorities of Measure N and that it be approved. Committee Member Rowland seconded. Motion was approved with Chair Sanders and Committee Member Louie voting No and Committee Member Keller absent. Citizens Oversight Committee Meeting Monday, April 1, 2019 Page 6 Committee Member Louie and Chair Sanders stated that replacing trees and shrubs should not be a priority at this time due to comments received from the public and because part of this item was the drip or the sprinkler irrigation which has an underestimated long-term cost. Committee Member Tobias made the motion that the Kaiser Permanente Sports Village proposal by the Parks and Recreation Department of $1,550,000 is within the spending priorities of Measure N and that it be approved with a recommendation that the Council over the next three years look at more evenly spreading the dollars from the Measure N funding to the local neighborhood parks throughout the community. Committee Member Louie seconded. Motion failed with Chair Sanders, Vice -Chair Hibbard and Committee Members Holt and Rowland voting no and Committee Member Keller absent. Vice -Chair Hibbard suggested that the City Council look at the best use of those funds as the budgets are inflated significantly from where they need to be. Committee Member Louie made a motion that the Mesa Marin Sports Complex proposal from the Recreation and Parks Department for $7,852,000 is within the spending priorities of Measure N and that it be approved. Committee Member Prince seconded. Motion was approved with Chair Sanders, Vice -Chair Hibbard and Committee Member Holt voting no and Committee Member Keller absent. Comments by the opposition were received stating that although the proposal was in line with the spending priorities there may be more efficient ways to achieve the same result by looking at public-private partnerships and as a large percentage of taxpayers would not use the sports complex the money could be better spent elsewhere. Vice -Chair Hibbard made a motion to approve the Homeless Rapid Response Team proposal by the Development Services Department of $1,795,899 and that it falls within the spending priorities of Measure N. Committee Member Prince seconded. Motion was approved with Committee Member Keller absent. Committee Member Prince made a motion that proposals by the Development Services Department of $14,734,472 falls within the spending priorities of Measure N and that it be approved. Vice -Chair Hibbard seconded. Motion was approved with Committee Member Holt voting no and Committee Member Keller absent. Committee Member Holt stated that he is okay with the item overall except he had concerns regarding the $450,000 and whether that amount would expand to meet future needs. Committee Member Louie made a motion that the Arena/Convention Center proposal of $2,353,548 is within the spending priorities of Measure N and that it be approved. Committee Member Tobias seconded. Motion failed with Chair Sanders, Vice -Chair Hibbard, Committee Members Prince and Rowland voting no and Committee Member Keller absent. Citizens Oversight Committee Meeting Monday, April 1, 2019 Page 7 Comments from the Committee Members who voted no were received stating that although the upgrades may be necessary in the long run they are not a priority at this time. It was further suggested that upgrades are prioritized and creative thinking used to find different sponsors or donations instead of having to pay from the general fund. Committee Member Rowland made a motion that the Human Resources proposal of $388,092 is within the spending priorities of Measure N and that it be approved. Committee Member Louie seconded. Motion was approved with Vice -Chair Hibbard and Committee Member Prince voting no and Committee Member Keller absent. Comments from the opposition were received stating that Council is encouraged to explore other options such as contracting for certain activities instead of hiring additional personnel. It was also stated that the addition of a supervisor position is unnecessary based on the type of work that will be performed. Committee Member Rowland made a motion that the Technology Services proposal of $1,023,546 is consistent with the spending priorities of Measure N and that it be approved. Committee Member Louie seconded. Motion was approved with Committee Member Keller absent. Committee Member Louie made a motion that the Fleet Services proposal of $384,416 is within the spending priorities of Measure N and that it be approved. Committee Member Prince seconded. Motion was approved with Vice -Chair Hibbard voting no and Committee Member Keller absent. Committee Member Hibbard recommended that the City Council request an analysis on buying new versus certified used vehicles particularly for non -police vehicles or vehicles that don't require a large modification. Committee Member Holt made a motion that the General Services proposal of $662,997 is consistent with the spending priorities within the ballot measure and that it be approved. Committee Member Louie seconded. Motion was approved with Vice -Chair Hibbard voting no and Committee Member Keller absent. Vice -Chair Hibbard recommended that the Council be provided a report showing how hiring a tenant improvement contractor can be more expensive than hiring full-time staff to do repairs as he does not believe that to be the case. Committee Member Tobias made the motion that the Fiscal Stability Energy Savings Project proposal by the Public Works department is within the spending priorities of Measure N and that it be approved. Committee Member Prince seconded. Motion was approved with Committee Member Keller absent. Committee Member Prince made the motion that the Street Light Study proposal of $100,000 is within the spending priorities of Measure N and that it be approved. Committee Member Holt seconded. Motion was approved with Vice -Chair Hibbard voting no and Committee Member Keller absent. Committee Member Hibbard stated that he is concerned that the $100,000 to do the study is too high and that the Council maywant to look at alternative vendors to produce that study and he questioned the scope of the study. Citizens Oversight Committee Meeting Monday, April 1, 2019 Page 8 Vice -Chair Hibbard made a motion that the Expansion of the Police Fleet Maintenance garage proposal of $30,000 is consistent with the spending priorities of Measure N and that it be approved. Committee Member Prince seconded. Motion was approved with Committee Member Keller absent. Committee Member Louie made a motion that the Rabobank Arena, Convention Center, and Spectrum Amphitheater Stadium Seating proposal of $97,500 is within the spending priorities of Measure N and that it be approved. Committee Member Tobias seconded. Motion failed with Chair Sanders, Vice -Chair Hibbard, Committee Members Holt, Prince and Rowland voting no and Committee Member Keller absent. Comments from the Committee were received stating that the proposal was not the best use of funds. b. BOARD COMMENTS Chair Sanders thanked her colleagues for their transparency and due diligence. City Manager Tandy thanked the Committee for the time, energy and effort invested. Committee Member Rowland made a motion that the Committee Members each be assigned a city email address to receive email comments from the public. Motion failed due to lack of second. City Attorney Gennaro explained that it is not the City's policy to assign emails due to the Brown Act and the Public Records Act. She further explained that as the item was not on the agenda it can't be voted on. She suggested that the Committee be assigned one email address managed by the City Clerk, similar to what the City Council use. In response to a question from Committee Member Louie, City Manager Tandy explained that the Committee would be advised as to the disposition of the proposals following Council action. The Committee would also meet for the mid -year budget consideration and to review the year- end report in January. 7. ADJOURNMENT The meeting was adjourned at 9:05 p.m. ATTEST: JULIE DRIMAKIS, CMC CITY CLERK and Ex Officio Clerk of the Council of the City of Bakersfield Citizens Oversight Committee Meeting Monday, April 1, 2019 Page 9 OFFICE OF THE CITY MANAGER MEMORANDUM June 20, 2019 TO: Public Safety and Vital Services Citizens Oversight Committee Members FROM: Alan Tandy, City Manager SUBJECT: Budget Process Update and Measure Related Adjustments Summary The City Manager's Office presented the Fiscal Year 2019-20 Proposed Budget to the City Council on May 8, 2019. Formal adoption of the FY 2019-20 budget is scheduled for June 28, 2019 for the fiscal year beginning July 1, 2019. In presenting the budget to the City Council staff provided summary and detail information regarding your Committee's feedback and recommendations on FY 2019-20 Bakersfield Public Safety and Vital Services Measure (PSVS Measure) allocation plans. This information was provided via presentation to the City Council and detailed within the City's proposed budget document, which is available on the City's web site at: https://bit.ly/2xl ahTy. Over the past two months, there have been several detailed budget presentation meetings, a formal public hearing and a new quarterly sales tax report for the first quarter of 2019. As a result of multiple factors, staff is proposing several positive changes to the current year FY 2018-19 budget, as well as the FY 2019-20 budget specifically related to the PSVS Measure, as outlined in further detail below. These changes are in addition to the items that were presented to your Committee over the four meetings between February and April. The purpose of this memo is to outline these staff recommended changes and illustrate the correlation with the Measure priorities. Staff will reach out to each of you in the near future to poll for dates and times for the Committee to meet to review the revised allocation plans. In the interim, if you have any questions, please do not hesitate to reach out to my office. Measure Revenue Projections The first quarter 2019 sales tax revenues showed a 14.5 percent growth compared to the same quarter last year. As a result, staff is now projecting sales tax revenues will exceed budget projections for the current fiscal year. This includes an estimated increase to both historic sales and use tax revenues, as well as revenues derived from the PSVS Measure allocation. Staff is now estimating an increase of approximately $1 million above current budget projections in the current fiscal year for PSVS Measure revenue. This increase in sales tax revenue projections in the current fiscal year has a corresponding impact on revenues for the FY 2019-20 budget. Staff is now anticipating the City will begin the next fiscal year in a better fiscal position than originally projected. As a result, staff is projecting an increase of approximately $3.85 million in FY 2019-20 for PSVS Measure revenue. Revenue Exceeding Budget FY 2018-19 FY 2019-20 PSVS Measure $1,000,000 $3,850,000 FY 2018-19 Proposed Budget Amendments For the current fiscal year, staff is proposing the following budget amendments, based on the revised revenue projections: Increase PSVS Measure Cash Basis Reserve Fund Measure Spending Priority #10: Addressing the fiscal stability of the City Allocation Amount: $1 million Your Committee and the City Council have expressed significant interest in increasing the City's cash reserve fund. An accompanying memorandum from Finance Director Randy McKeegan provides additional context related to the City's current reserve levels and a multi-year plan to achieve the recommended 60 -day General Fund reserve level, as well as increase capital reserves and establish a CaIPERS rate stabilization plan. Reserve funds help mitigate the effects of unanticipated situations such as natural disasters and significant unforeseen events, as well allow the City to temporarily buffer against cuts to staffing levels, programs or services in response to economic downturns and State revenue takeaways. Your Committee recommended and the City Council previously approved placing $12 million of Measure revenues into a reserve fund. This allocation will allow the City to restructure how it pays certain retirement costs, which in turn will save taxpayers an estimated $8.7 million over seven years. Additionally, this one- time action will only be used for cash flow purposes and would still be available at the end of each year, as well as at the end of the seven-year period for other items that may arise. In harmony with the recommendations made by your Committee and the ongoing requests from the City Council to place further focus on enhancing the fiscal stability of the City, staff is recommending appropriating $1 million in additional PSVS Measure revenues to the PSVS Measure Reserve Fund. This action will reduce the amount that will be necessary to allocate in future years to meet the 60 -day reserve target, as outlined in the plan with the memorandum from Mr. McKeegan. This item is proposed to be funded with additional PSVS Measure revenues and will not affect any of the proposals previously put forth before your Committee or the City Council. FY 2019-20 Proposed Budget Amendments Based on the positive revenue trending information associated with the PSVS Measure, staff is proposing the following adjustments be made to the FY 2019-20 Proposed Budget utilizing PSVS Measure funds. All of these recommendations are in direct correlation with the 13 Measure -related priorities, as outlined below. Community Prosecution Program - $ 300,000 Measure Spending Priority #1: Increasing police staffing to improve response times, reduce crime, and increase neighborhoods police patrols Measure Spending Priority #2: Improving rapid response to assaults and robberies Measure Spending Priority #3: Maintaining/improving rapid response to gang violence Measure Spending Priority #4: Investigating and proactively preventing property crimes, burglaries and vehicle thefts Measure Spending Priority #5: Keeping public areas safe and clean Measure Spending Priority #6: Strengthening the capacity of the Special Enforcement Unit Measure Spending Priority #7: Expanding the School Resource Officer Program Allocation Amount: $300,000 Prior to the November 2018 election, the City facilitated a survey of 1,000 Bakersfield residents and participated in over 30 community meetings in an effort to better understand community priorities as it related to a potential sales tax measure. In response, it was made clear that public safety was the top priority. More specifically, the community was interested in enhancing resources for law enforcement to prevent and deter quality of life type of criminal activity. Due to changes in state laws, it has been more difficult for law enforcement and the district attorney's office to arrest and prosecute these types of crimes. However, more recent discussions between the Bakersfield Police Department, Kern County District Attorney's Office and Kern County Sheriff's Office have resulted in new concepts to enhance enforcement, prosecution and incarceration of individuals that commit certain quality of life type of crimes. The concept is still under development; however, staff is recommending $300,000 be budgeted within the Police Department operating budget to fund this program should it be implemented. This funding would potentially be utilized to supplement the resources for the district attorney's office prosecution efforts. This proposed allocation meets several of the community priorities established as part of the Bakersfield Public Safety and Vital Services Measure. This item is proposed to be funded with additional PSVS Measure revenues and will not affect any of the proposals previously put forth before your Committee or the City Council. Police Academy and Advanced Training Facility Measure Spending Priority #1: Increasing police staffing to improve response times, reduce crime, and increase neighborhoods police patrols Measure Spending Priority #2: Improving rapid response to assaults and robberies Measure Spending Priority #3: Maintaining/improving rapid response to gang violence Measure Spending Priority #4: Investigating and proactively preventing property crimes, burglaries and vehicle thefts Measure Spending Priority #5: Keeping public areas safe and clean Measure Spending Priority #6: Strengthening the capacity of the Special Enforcement Unit Measure Spending Priority #7: Expanding the School Resource Officer Program Allocation Amount: $250,000 As part of the first allocation of PSVS Measure Revenue, your Committee recommended and the City Council approved an initial allocation of $900,000 to renovate the existing City -owned building at 4646 California Ave for utilization as a police academy and advanced training facility. The ability for the department to host its own academies and advanced trainings will be paramount to ensuring the successful implementation of the plan to hire 100 additional sworn officers as part of the PSVS Measure. The first academy to begin to hire the 100 officers is scheduled to begin in August 2019, therefore staff has been working daily to ensure the facility is ready to open on this date. As the project has evolved there are two components that will require additional funding. The first component is the erection of an auxiliary building that will be utilized for tactical training. This building will be located on the existing property and is required to meet the Commission on Peace Officer Standards and Training standards for the facility. The second funding need is for additional technology equipment to support the needs of the staff at the facility. These needs include hardware and network equipment that will be utilized for training purposes. Cumulatively, the additional funding needed is $250,000. This item is proposed to be funded with additional PSVS Measure revenues and will not affect any of the proposals previously put forth before your Committee or the City Council. Increase PSVS Measure Cash Basis Reserve Fund Measure Spending Priority #10: Addressing the fiscal stability of the City Allocation Amount: $3.3 million As outlined earlier, an opportunity exists to continue to increase the City's cash reserve with the multi-year plan to reach a 60 -day reserve by FY 2024-25. This aligns with the recommendations of your Committee and the direction of the City Council. As such, staff is proposing to add an additional $3.3 million to the PSVS Measure reserves to mitigate for unforeseen circumstances. As required by the PSVS Measure, the amount allocated from PSVS Measure revenues will be accounted for separately from all other reserve allocations. Next Budget Steps These proposed budget amendments will be brought forth the City Council on June 28, 2019, at which time staff will be recommending they be incorporated into the FY 2018-19 and FY 2019-20 budgets, respectively. If approved, these amendments will be accounted for separately as required by the PSVS Measure. Reserve plan update I 2G,3813 {19 25, 38{3,0IX3 36,380.000 6,540,0oo RESERVE FUND PLAN 2018-19 to 2024-25 54, 586,000 53;080,000 51,610,000 50,2813.000 43,280p130 1.80,1300 280,600 - 27,5&o,000 "`�'•$8�880. $. 790,000 16, 890, 000 16.840, 406 10, 890, 000 10,89QQ4D 13,590,000 I 2019-14 2019-20 2020-21 20021-22 2022-23 2023-24 2024-25 -- InitialReca--rvePlan—— TcTalGeneralFundReserves ---a— FacilityReplacementReserwe Reserve plan update RESERVE FUNDS/UNFUNDED LIABILITIES BUDGET PLAN General Fund Reserves (inc. PSV5j Facility Replacement Reserve PERS Rate Stabilization (115Trust) TGT Fiscal Year 2': 19-2D ` 2020-21 2021-2 2022-23 2023-24 2�"4 24-25 10,000,000 6,900,0D0 7,000,000 1,400,000 1,400,000 1,500,0DD 2,0D0,000 2,000,0D0 2,000,000 5,0D0,0D0 5,000,000 5,000,000 12,000,000 8,900,000 9,000,000 6,400,000 6,400,000 6,500,000 *Note: Based on avaitabbty of funds atn-id-year. f insufficientfunds are avaRaUe the pian wiN need to be pushed back by one year, ending nsfead on 2025-26 CUMMULATIVE RESERVE BALANCES Casio Basis Reserve (Gen. Fund) Facility Replacement Reserve PERS Rate Stabilization ll 15 Trust) 20 19-2D 2020-21 2021-22 2022-23 2023-24 2024-25 36,380,000 43,280,000 50,280,000 51,6BO,000 53,080,000 54,580,000 6,590,000 8,590,000 10,590,000 10,590,ODO 10,590,OOD 10,590,000 FiscalYear Additional Cash Reserve Allocations Police academy and advanced training facility • $900,000 previously allocated • Facility improvements underway • Critical to hiring 100 officers in three years • Reduces expenses and logistical issues for advanced training • https://vou�/37*IcJ6KLi MEMORANDUM TO: Alan Tandy, City Manager FROM: Randy McKeegan, Finance Director / ;e?& DATE: June 19, 2019 RE: City Reserves and Unfunded Liabilities Members of the City Council requested additional research and the development of a plan on reserve levels along with funding a new pension related trust fund. That analysis and related recommendations are spelled out below. RECOMMENDATION Over the next three fiscal years, increase General Fund Reserves by a total of $5.7 million to reach the recommended level of two months of General Fund expenditures and increase the Facility Replacement Reserve by $2 million. The City's rainy day reserves will have a total balance of over $65.1 million when this plan is fully implemented. In addition, to address the unfunded pension liability, establish a separate 115 Trust and budget a $5 million annual contribution starting in fiscal year 2022-23. RESERVE FUNDS/UNFUNDED LIABILITIES BUDGET PLAN BACKGROUND Council made a number of inquiries related to both increasing City reserves and addressing unfunded liabilities for CaIPERS and OPEB at recent meetings in May. It was determined that looking at the necessity to address these items overall, and prioritizing each, may be beneficial and the best way to respond. S:\ACCOUNTING\RANDY\ADMIN\ADMIN ISSUES\MAY COUNCIL REFERAL - RESERVES AND LIABILTIES REV.DOCX Fiscal Year 2019-20* 2020-21 2021-22 2022-23 2023-24 2024-25 General Fund Reserves (inc. PSVS) 10,000,000 6,900,000 7,000,000 1,400,000 1,400,000 1,500,000 Facility Replacement Reserve 2,000,000 2,000,000 2,000,000 PERS Rate Stabilization (115 Trust) 5,000,000 5,000,000 5,000,000 TOTAL 12,000,000 8,900,000 9,000,000 6,400,000 6,400,000 6,500,000 * Note: Based on availability of funds at mid -year. If insufficient funds are available the plan will need to be pushed back by one year, ending instead on 2025-26 CUMMULATIVE RESERVE BALANCES 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Cash Basis Reserve (Gen. Fund) 36,380,000 43,280,000 50,280,000 51,680,000 53,080,000 54,580,000 Facility Replacement Reserve 6,590,000 8,590,000 10,590,000 10,590,000 10,590,000 10,590,000 PERS Rate Stabilization (115 Trust) 5,000,000 10,000,000 15,000,000 BACKGROUND Council made a number of inquiries related to both increasing City reserves and addressing unfunded liabilities for CaIPERS and OPEB at recent meetings in May. It was determined that looking at the necessity to address these items overall, and prioritizing each, may be beneficial and the best way to respond. S:\ACCOUNTING\RANDY\ADMIN\ADMIN ISSUES\MAY COUNCIL REFERAL - RESERVES AND LIABILTIES REV.DOCX City Reserves The City currently has a General Fund Cash Basis Reserve of $25.4 million. That amount includes a Council approved appropriation of $12 million of PSVS revenue in 2018-19 to supplement the historic General Fund reserve. That additional amount allows the CalPERS unfunded liability to be paid at the beginning of each fiscal year as opposed to making payments monthly resulting in annual interest savings of $1 million to $1.5 million over the next six years. The current plan to increase General Fund reserves is to allocate these interest savings on the pension liability payments, which would increase the reserves to $33 million by fiscal year 2024-25. The City has recently updated revenue estimates both for the current fiscal year and for 2019-20 that increases Sales Tax Revenue. This change allows increases in the budgeted allocation to the General Fund Cash Basis Reserve for both years ($1 million in 2018-19 & $3.3 million in 2019-20.) The Government Finance Officers Association (GFOA) recommends General Fund reserve levels equal to two months of expenditures and this plan puts the City near that recommendation based on the 2018-19 budget. The proper level of General Fund reserves is a moving target though. The estimated General Fund budget in two years, when the bulk of PSVS hiring is completed, would be approximately $327 million, which increases the minimum target reserve in the General Fund to $54.5 million. A study by the San Francisco Office of Controller found that the largest cities in California had all established goals or policies of maintaining a General Fund reserve of 10% or less of General Fund revenues or expenditures (depending on the organization). See Attachment A. The current goal of two months of expenditures (or 16.7%) exceeds the reserve levels sought by those comparable cities. The department is currently researching to find the most recent reserve levels for those identified in the study. The City also has a reserve fund that is held for emergency repairs and maintenance to City facilities. The balance of that facility reserve is at its lowest point since it was established in 2005, currently $2.6 million. With the improved Sales Tax Revenue outlook mentioned previously, the City was able to set aside an additional $1 million for this fund in the current year. The 2019-20 budget also proposes an increase of $1 million to this fund but additional reserves are needed. When it was established over a decade ago, the goal was a reserve level of $5 million. The value of City building and improvements has increased significantly since 2005, both due to inflation and additional assets, so it has been proposed that the facility reserve level should be at a level closer to $10 million. PERS and OPEB Liabilities CalPERS and OPEB liabilities continue to be a concern with unfunded liabilities sitting at $415 million and $78 million respectively based on the most recent actuarial reports. Required contributions to CalPERS for 2019-20 will be over $53 million and are expected to increase over 30% to $69 million by 2024-25. The City has established what is called a Section 115 Trust to fund the OPEB liability and has eliminated the benefit for employees hired after 2006. The OPEB program is therefore a "closed" system and the number of participants will only shrink over time. Analysis of the liability and investment performance has shown that, with the City continuing to make the required contributions, by 2036 the earnings on the trust should cover the anticipated cost of the plan going forward. Contributions in excess of the required amount do not shorten the estimated time the trust will become "self -funding" in a meaningful way. Actuarial analysis shows that an additional contribution of $5 million only reduces that timeframe by 1 year so excess funds are considered better -served addressing CalPERS liabilities. There are fewer options available to reduce the CalPERS liability. Steps have been taken locally with the voter approved Measure D in 2010 and at the State level with the passage of PEPRA in 2013. Additional contributions could be made to PERS, but there has been reluctance to consider that option due to past investment performance at CalPERS. A separate Section 115 trust could be established in what is called a Pension Rate Stabilization fund. Those funds would remain within the City's control and be managed by the City's own investment consultant. The deposits could then be held in the trust to either offset the pension liability or cover significant spikes in required contributions should the need arise. Reductions to the City's total pension expenses have also occurred with smaller shifts of the Employer Paid Member Contributions (EPMC) back to employees connected with past COLA increases. These varying and competing needs will require prioritization on the use of available funds moving forward. Increasing General Fund and Facility Reserves With the target reserve levels of $54.5 million, over the next three years the City will need to supplement the initial reserve plan by approximately $23 million ($17 million for General Fund reserves and $6 million for Facility reserves.). That amount would be in addition to the savings on interest that will be realized by funding the PERS liability payments at the beginning of each year. As noted previously, the target reserve level of $54.5 million (or 16.7% of budgeted General expenditures) is the level recommended by GFOA and exceeds the average reserves percentage held by comparable Cities in research by the San Francisco Office of Controller. RESERVE FUND PLAN 2018-19 to 2024-25 53,080,000 54580,000 51,680,000 50,280,000 43,280,000 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 a— —Initial Reserve Plan — —Total General Fund Reserves —@--Facility Replacement Reserve 2024-25 Establish Pension Section 115 Trust As discussed, addressing reserve levels will the first priority but after fiscal year 2022-23, a Section 115 trust could be established to deal with the City's pension liabilities. Reducing unfunded liabilities requires establishing some goal or benchmark the City would like to achieve. There is an unfunded liability balance nearing $500 million dollars with an overall funded ratio of 66%. As an example, if the City would like to get to a ratio of 70% for the CalPERS liability, that would require a contribution to the trust starting in 2022-23 of $5 million a year through 2027-28 based on the most recent actuarial reports. It should be noted that each year the liability reported by CalPERS changes based on new actuarial studies and these unfunded amounts are very fluid based on investment performance and plan population. Please contact me if you need any more information or have questions. Attachment Cc: Chris Huot, Assistant City Manager Nelson Smith, Finance Director ATTACHMENT A Table 5. Reserve Policies of Peer Jurisdictions FY 2009-10 Reserve Balance City Reserve Name Purpose Size WithdrawalRequirements Deposits $ millions % of target San General Reserve None specified None specified ($25 Majority vote of Board of None specified 25.0 0.9% of regular Francisco million historically) Supervisors General Fund (current Rainy Day Reserve Significant Maximum of 10% of Projected revenues for 5D% of excess revenues 24.6 0.9% of regular olic economic regular General upcoming year must be revenues if General Fund downturns Fund revenues less than current year or projected revenues revenues the highest of any other exceed current year fiscal year's revenues revenues by 51/o or plus 2% for each more intervening year Anaheim General Fund None specified 7-10% of General None specified N/A 28.2 11% of General Unrestricted Fund Fund expenditures Fund Balance expenditures Boston General Fund Extraordinary & 2.5% of preceding Written documentation None specified 27.5 2.8% of prior Reserve Unforeseen year's explaining why transfer year City Circumstances appropriations for all is necessary; approval Department City departments from Mayor & City appropriations (excluding schools) Council. Chicago Fresno Undesignated Fixed costs (e.g. 10% of General General Fund pension Fund operating Balance contributions) or expenditures extraordinary, nonrecurring events Skyway mid- and None specified None specked long-term reserve Parking meter mid- None specified None specified and long-term reserve Budget Stabilization None specified None specified Fund Actual revenues exceed N/A budgeted amounts & encumbrances are less than appropriations None specified None specified None specified None specified None specified None specified General Fund Natural disasters, 5% of General Fund Declaration of fiscal Add funds as Emergency Reserve significant declines appropriations emergency by Mayor, necessary to reach in GF revenues ratified by City Council or exceed 5% target 550.3 24.5% of (FY2008-09) General Fund operating expenditures 550.0 17.3% of total General Fund revenues 180.0 5.7% of total General Fund revenues 17.0 7.5% of General Fund appropriations L+J ti FY 2009-10 Reserve Balance City Reserve Name Purpose Size Withdrawal Deposits $ millions % of target If funds removed Requirements 2.8% of total Reserve Fund Honolulu Fiscal Stability Fund Economic & revenue None specified A trigger relating to Deposits subject to 26.8 1.9% of total downturns; unemployment, Council approval; General Fund emergency revenues, property value, possible sources are revenues situations expenditures, unfunded unbudgeted mandates, or natural unreserved fund disaster must be met balance & property restored in following sales Los Angeles Contingency Within fiscal year 2.2511/6 of total Majority vote by City If funds removed 122.5 2.8% of total Reserve Fund unanticipated General Fund Council total less than 1% of General Fund expenses or revenue revenues GF revenues, revenues shortfalls reserve must be fully restored in following FY; if funds removed total more than 1%, a funds shalt be Emergency Reserve Significant economic Minimum of 2.75% Mayor must determine replenished per 929.0 2.79% of total Fund downturn; natural of total General that no other viable FY until replenished General Fund disaster Fund revenues sources of funds are revenues available Oakland General Purpose Unusual, 7.5% of General A declaration of a fiscal City Administrator 9.8 2.3% of General Fund Reserve unanticipated and Purpose Fund emergency must be shall present Fund seemingly expenditures approved by a majority of strategy to restore expenditures insurmountable City Council reserve balance events of hardship Philadelphia General Fund None specified None specified None specified None specified 85.3 2.2% of total Balance General Fund revenues Portland Emergency Reserve Within fiscal year Minimum of 5% of Unanticipated event Must begin to 64.7 15.5% of Fund unanticipated General Fund would result in negative restore funds within General Fund expenditures or operating revenues ending GF balance; 24 months of operating revenue fluctuations Declaration of withdrawal revenues emergency by Council ordinance Countercyclical Slow revenue growth Reserve Fund during recession Minimum of 5% of Revenue growth, General Fund unemployment rate, operating revenues property tax delinquency rate, & business license revenue growth triggers T- 04 N FY 2009-10 Reserve Balance City Reserve Name Purpose Size WithdrawalRequirements Deposits $ millions % of target Sacramento Economic None specified No formal policy; in None specified None specified 10.5 2.8% of Uncertainty Reserve practice, maintain General Fund reserve equal to revenues 10% of GF San Diego Emergency Reserve Qualifying emergencies Appropriated Within fiscal year Reserve unexpected operational needs Unappropriated Reserve revenues Target: Emergency Declaration of None specified Reserve must equal emergency approved by 8% of GF Revenues two-thirds of City Council Phase-in: combined value must equal 8% of GF Revenues by the end of FY2011- 12. Approval by majority of City Council 75.4 6.1% of General Fund revenues San Jose General Fund Unexpected 3% of operating Approval by two-thirds None specified 30.7 3.1% of Contingency circumstances budget of City Council General Fund Reserve including GF expenditures shortfall Emergency Reserve Known but None specified Not specified None specified 3.4 0.5% of Fund unspecified General Fund expenses expenditures Economic Public emergency None specified Not specified Financed through 4.5 0.3% of Uncertainty Reserve that threatens lives, sale of surplus city General Fund Fund property or welfare properties expenditures of residents m 0 0 c a .i N N