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HomeMy WebLinkAboutSupplemental Questions from Robert Goldberg1 Gloria Harper From:Robert Goldberg <rgoldberg@live.com> Sent:Thursday, May 28, 2020 8:40 AM To:Thomas Moore; Schelly Sustarsic; Mike Varipapa; Sandra Massa-Lavitt; Joe Kalmick Cc:Jill Ingram; Gloria Harper; Steve Myrter; Kelly Telford; Phil Gonshak; Charles M. Kelly; Jeannette Andruss Subject:External Email : Questions and Comments for Today's Budget Workshop Attachments:Budget Questions.20.21.Pre WS.doc; West Comm Economics.xls Dear Council and Staff,    Please find attached "Part 1" of my questions and comments on the budget through page 115. I have also  attached one referenced spreadsheet regarding West Comm's budget. I hope to finish "Part 2"by noon today.   Thank you for your consideration and service,    Robert Goldberg        CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless you recognize the sender and know the content is safe. 1 Comments & Questions from Robert Goldberg, 5/28/20 [Part 1] Budget Message The omitted Budget Message usually states whether anticipated employee raises have been included in budget calculation of salaries and benefits. This is a very important assumption to know, and is at the Council’s discretion to agree with or direct otherwise. Our full-time salaries are pegged to the change in our local CPI from April-to-April, which came in this year at 0.7%. The employment contracts that Council approved last December provide a minimum of a 2% raise on 7/1/20 for the SB Mid-Management & Confidential Employees Asso., the OC Employees Asso (OCEA), and the SB Supervisors & Professionals Asso. (SBSPA). In February 2020, the Council similarly agreed to a minimum of a 2% raise for the SB Marine Safety Management Asso. (SBMSMA), The police contracts (PMA &POA) expire on 6/30/20 so any pay raise this coming July is subject to negotiations. While the individual contracts with our Executive Management employees have no expiration clauses, the Council has not yet committed to granting them any future pay raises. Police and Executive salaries easily represent over half of the full-time salary total of $11.5 million (see page 28) and CalPERS cost of $4.4 million. Therefore, the size of any July raise for these employees is not inconsequential when a proposed budget has a surplus of $0. Was a July pay raise of 2% for Police and Executive’s included in the budget figures? If so, what is the contribution of these raises to the total cost of Personnel Services of $22.0 million shown on page 28? Summary of Projected Fund Balances P.14-15 This new addition provides a useful overview. However, I misinterpreted two aspects of it that were quite material: 1) The column for Proposed Operating Expenditures for the General Fund (first line) does not include operational transfers to other funds such as the Tidelands and the St Lighting District. Without knowing this, in my first viewing of the chart, I compared this figure with Total Proposed Revenues leading me to think that we had an operating surplus of $1.4 million. 2) Also, in my first viewing, I assumed that Fund Balances referred to cash. This led me to wonder why we needed to raise water rates if the Water Cap Fund has almost $22 M? And why we’re not going to purchase any new vehicles if the 2 Vehicle Replacement Fund has over $1 M? Much later, I realized that for these funds, this chart was displaying total net asset values which include pipes, pumps, and vehicles. Recommendation: Display cash balances only for all funds Regarding the Vehicle Replacement Fund: What is the source of the $50,000 in proposed revenue? Revenue Detail P.16 Sales and BB Tax: The State released actual revenue figures for the Jan-March quarter last Thursday. These showed our “regular” Bradley-Burns 1% sales tax dropped 22.5% from the same quarter last year. With these new figures now available, do we have revisions for projected regular sales and BB tax revenue from HdL? Barrel Tax: The revenue estimate for FY 20-21 is the same as for FY 19-20. However, with the price of oil down 50% over the last year, our barrel tax rate, which is adjusted annually, will be lowered significantly on July 1st. Do we have an estimate for how much the barrel tax rate will drop July 1st? Inmate Fees from other Agencies: This is primarily revenue from the new contract with the US Marshals Service. The revenue from this contract was increasing in the first half of FY 19-20 to a contract high of $22,984 in December (last month that I requested via PRA 20-60) with an average daily census of 7 beds. At say, $22,000 per month, the contract would provide $264,000 in revenue per year. Only $200,000 is estimated for FY 20-21. Did our US Marshals bed census drop because of COVID? If not, are there other reasons to expect an average census of less than 7 in FY 20 -21? P.18 Liability Insurance Reimbursement: Is the revenue of $107,030 in FY 18-19 and $1,447,800 in FY 19-20 related to the pier fire? If so, why isn’t this being shown as Tidelands Fund revenue? 3 P.19 St Lighting District: Transfer In-Operations from the General Fund is budgeted at $70,100. However, the required GF subsidy presented by the Engineer’s Annual Levy Report to be adopted by Council on 5/26/20 is $10,000 less ($60,098). Why is an extra $10,000 being transferred from the GF? P.20 Insurance Reimbursement: This account line (034-000-30969) for the pier fire has been deleted. Last year’s budget gave a FY 18-19 Estimated of $5,955,500. How much reimbursement have we received for the pier fire? Where is this recorded in the budget? How much more do we expect to receive and when? General Fund - Fund Balance P.33 Classifications of Fund Balance: “Assigned for: Other” shows a proposed FY 20-21 year-end balance of $1,112,424. In past budgets, there was not “Other” category, but rather "Compensated Absences” of about the same amount. Is “Other” primarily compensated absences? Personnel Summary P.34 This table is a new and welcome addition to the budget as it provides perspe ctive and context with two years of historical staffing levels. Request: Please add classification (job) detail to the listing of part -time employees. City Manager: The table on page 34 shows a proposed increase in full-time Management Analysts from 1.00 to 2.00. The addition of this new positon appears to be an upgrade of an existing 0.73 part-time position. Which is total cost in salary and benefits for this upgrade? Police: The table on page 34 shows 4 Police Corporals for the Proposed FY 20 -21 Budget. However, the Position Allocation Plan (PAP) on page 231 shows the Proposed FY 20-21 to have a total of 5-- one assigned to EOC and four assigned to Field Services. If the PAP is correct, then the total number of sworn police officers would rise to 39. Which is correct? 4 P.35 Public Works: The table on page 35 shows 1.00 Associate Engineer and 1.00 Assistant Engineer for the Proposed FY 20-21 Budget. However, the Position Allocation Plan (PAP) on page 232 shows a Proposed FY 20-21 of 2.00 Associate Engineers and zero Assistant Which is correct? The table on page 35 shows 6.00 Sr. Maintenance Workers for the Proposed FY 20 -21 Budget. However, the Position Allocation Plan (PAP) on page 232 shows a total of only 5.0 for the Proposed FY 20-21. Which is correct? Part-Time Employees-- Public Works: The table on page 35 shows 6.75 for the Proposed FY 20-21 Budget. However, the Position Allocation Plan (PAP) on page 232 shows a Proposed FY 20-21 of only 6.05 even after including a 0.75 Intern position (not labelled as part-time) and the fractional portion of 4.46 Water Operator (0.46). Which total is correct, 6.75 or 6.05? If we employee part-time Water Operators, why isn’t “Water Operator (Part-time)” listed as a separate line in the PAP? City Manager Department P.41 Program: City Manager: In the “Explanation of Significant Accounts”, the listing for Contract Professional Svcs has been dropped. Can this please be restored with a listing of the anticipated contracts that total to $35,000? P. 44 Program: Information Systems: The “Explanation of Significant Accounts” for “Office and Technology Resources” lists six separate “upgrade,” “implementation,” “cleanup,” and “replacement” projects to be completed. This listing is exactly the same as it was in the FY 19-20 budget. Have none of these six projects been completed? P. 45 Program: Refuse: The proposed budget is $1,184,500 even though the actual for FY 18 - 19 was $1,236,387 and the estimated for FY 19 -20 is higher at $1,255,700. Why is Refuse being budgeted at a level that is $50-70,000 less than our experience over the last two years? 5 City Clerk P.51 Program: Elections: The “Explanation of Significant Accounts” for “Special Departmental” has a new listing of “MCA Direct annual services.” What are these services and their cost? Non-Departmental P.57 Expenditures By Program: For “Non-Departmental -019,” the Proposed FY 20-21 Budget amount for “Maintenance and Operations” of $576,300 is $75,000 higher than source amount on page 58 of $501,300. Is the higher amount on page 57 incorrect? P.58 Program: Non-Departmental: The proposed budget has $755,900 for “Medical Insurance.” This insurance cost is for our current and future retirees. The cost of medical insurance for current employees is budgeted in each operating department. Based on our most recent annual actuarial report, I believe the budgeted amount should be $619,103, or $136,833 lower. The higher budgeted figure results from the City’s decision to make a direct payment into our “OPEB” trust fund at CalPERS for what the actuaries call the "implicit subsidy" of our medical insurance rates for retirees by inclusion of younger and healthier employees in our group plans. Consequently, the medical insurance rates that we pay for current employees is a bit higher than it would have been otherwise, and the rates for retirees is a bit lower. The dollar value of the “bit” is the implicit subsidy. Under accounting rules that I think started just a few years ago, actuaries must compute this subsidy and show it as a “contribution” to the cost of our retiree health care. However, this “contribution” is not one that we have to pay directly, because we pay for this subsidy automatically through higher medical insurance rates for our current employees. Therefore, it is not actuarially necessary to pay for the subsidy twice by directly sending (contributing) the subsidy amount to our OPEB trust fund every year. This is what staff have done in recent years, and have budgeted to do again this year. I do not fault them given the subtlety and complexity of the implicit subsidy concept. No harm has been done as the net result has been that our percent “unfunded liability” for future health costs has dropped more rapidly than it would have otherwise. However, it is not necessary to continue effectively “over paying” our OPEB trust fund every year, especially if doing so results in a $0 surplus as presented this year. 6 Recommendation: Reduce the budgeted amount for “Medical Insurance” to $619,103. [Note: I emailed this recommendation to our Finance Director Wednesday morning for her review and comment.] Police Department P.71-72 Program: Parking Enforcement: The listing of Contract Professionals on page 72 includes Dixon Resources. Last July, the Council approved a $45,000 one -year contract with Dixon to provide “on-call” parking support services. Subsequently, we have been invoiced an average of just over $2500/month (through at least March). The contract expires on June 30, 2020. However, the amount in the proposed budget for Contract Professional on page 71 of $109,000 is the same as the estimated actual for FY 19-20. This implies that staff plans to present Dixon’s contract to Council for renewal in the near future, and assumes that Council will concur. By budgeting funds now for this contract, the Financial Impact section of that future staff report will likely state “adequate funding is available in the adopted budget.” Recommendation: As an alternative, do not include funding for Dixon in the proposed budget. This should allow reducing the amount for Contract Profession by at least $30,000 (12 X $2500). Given a budget with $0 surplus, doing so will allow the Council to presently consider other possible uses for this money. If in the future, the Council is persuaded to renew the contract, a budget amendment can be done if necessary. P.73 Program: West Comm: The proposed cost for West Comm is unchanged from FY 19 -20. My review of past West Comm budgets and current labor agreements indicates that we should anticipate a cost rise of 3% (see attached spreadsheet). This cost rise is driven by labor agreements that guarantee a 2% pay raise this July and rising health care and pension costs. Unfortunately, the adoption of the new budget by West Comm has been delayed by the virus. Recommendation: Increase the proposed budget by $26,000 to $889,000. Community Development Department P.90 Program: Planning: The listing of Contract Professionals on bottom of page 90 does not include OfficeTeam (temporary services) even though this Planning account has been regularly debited for a temp Administrative Assistant since June 2019. The running total from July 2019 through March (last available warrant) is over $14,000. 7 There are two reasons that lead me to believe that use of this temporary em ployee will continue in FY 20-21: 1) The Position Allocation Plan on page 231 indicates that Planning’s full-time Executive Assistant position is unfunded. 2) The Council approved an $80,000 one-year contract with OfficeTeam on 4/27/20. Why isn’t OfficeTeam included in the listing of Contract Professionals? The proposed budget for Contract Professional is $59,000 which is significantly less than the estimated for FY 19-20 ($80.800) and the actual for FY18-19 ($93,870). The $59,000 proposed budget seems to insufficient to cover costs of even two of the three listed consultative projects. The first, administration of our Community Block Grant program for LW bathrooms, is done by Civic Stone at an annual cost of $60,000. This contract runs through the end of FY 20-21. The second listed project is the update of our Housing Element. The deadline for certification by the State is October 2021. Unless this deadline is pushed back by the State, the bulk of the work on this very controversial issue will be done in FY 20-21. At the budget workshops last year, Ms. Beatley estimated that the full contract cost to update the Housing Element would be about $80,000. However, only a small portion of this was funded by in FY 19-20. A one-year contract with the consultant (JHD Planning) for $10,000 expired at the end of April. In summary, I would estimate that Planning Contract Professional would need $60,000 for Civic Stone, another $70,000 for JHD Planning, plus, say, $15,000 for Office Team. This totals $145,000, more than $85,000 over the proposed budget. Has staff been told by the State Housing Department that the Housing Element deadline has been postponed? If not, how is staff planning on paying for consultant work on the Housing Element, and the use of temporary administrative staff if the Contract Pro budget remains at $59,000? P.91 Program: Building and Code Enforcement: The listing of Contract Professionals on bottom of page 91 includes “code enforcement.” My understanding was that we have been doing all code enforcement in-house since about April 2019. Is this correct? If so, why is code enforcement still listed as a consultative service? The proposed budget for Contract Professional is $40,000, twice what typically is budgeted ($20,000). Why was the budget amount doubled? P.93 Program: Special Projects: What is the budgeted $60,000 in “Plan Archival” going to be spent on? 8 Public Works Department P.100 Program: Engineering: The listing of Contract Professionals on page 100 does not include OfficeTeam (temporary services) even though this Engineering account has been regularly debited for a temp Administrative Assistant since June 2019. The running total from July 2019 through March (last available warrant) is over $14,000. This represents almost half of the $30,000 estimated to have been spent in FY 19-20 on Contract Professionals. There are two reasons that lead me to believe that use of this temporary employee will continue in FY 20-21: 1) The Position Allocation Plan on page 232 indicates that Engineering has an unfilled Executive Assistant position. 2) The Council approved an $80,000 one-year contract with OfficeTeam on 4/27/20. Will Engineering be continuing to use a temporary Administrative Assistant in FY 20-21? If so, shouldn’t it be included in the listing of Contract Professionals? P.101 Program: Storm Drains: The proposed budget for Part-Time is $17,500 vs. an estimated $2000 for FY 19-20, and an actual of $2475 for FY 18-19. Of note is that my comparison of the proposed Position Allocation Plan on page 232 to the one from FY 19-20 does not show any proposed increase in fractional part-time positions (full-time equivalents). Please explain why $17,500 is being requested for Part-Time employees? Why is this increase not reflected in the Position Allocation Plan? P. 103-104 Program: Street Maintenance: The listing of Contract Professionals on page 104 is unchanged from last year, yet the proposed budget for Contract Professionals on page 103 is $909,500 vs. $786,000 in the Amended FY 19-20 Budget. While two large contracts were rebid last year (Main St pressure washing in December and tree -trimming in January), only one required a budget amendment ($26,000), and that amendment is included in the $786,000 for FY 19-20. The $786,000 in the amended FY 19-20 Budget also included two “one-time” projects. The first was our 2020 Pavement Management Plan. Nichols Engineering was given a contract of $21,300 to perform this work last September. I would expect their report to be presented to Council in June. The second project was revising our CEQA traffic impact guidelines. Iteris was awarded a $36,000 contract for this by Council on 4/13/20 (no budget amendment needed). That project should be nearing completion with the guidelines having been presented to the Planning Commission at its meeting on May 18th. 9 Subtracting those two “one-time” contracts, only about $730,000 would have otherwise been needed to be budgeted for FY 19-20 for ongoing contracts. The request for FY 20- 21 is $179,500 (25%) higher, than this amount. Please provide an itemized listing of each contract amount that was summed to generate the proposed $909,500. This listing should already be available given staff’s directive to follow “zero-based” budgeting principles. The proposed FY 20-21 budget for Street Sweeping is $180,000. This is based on the full cost of the new contract approved by Council in October 2019 for an amount not to exceed $174,416 annually. However, historically, 25% of street sweeping costs have been charged to the Waste Management Fund (005), and age 47 lists “street sweeping” under the list of contractors paid for by this Fund. The Waste Management Fund derives from a $10,000/month payment to the City from Republic Industries that must be used for recycling purposes. Why is the full amount of the Street Sweeping contract proposed to be funded here by the General Fund? P.106 Program: Building Maintenance The “Explanation of Significant Accounts” for Contract Pro Services was truncated to only one line ending in a comma. Please provide the full listing in future budget drafts. P.114 Fund: Water Capital Improvement FY 19-20’s budget included a “Fund Balance and Cash Analysis” at the bottom of the page. Given that much of the Fund Balance was due to capital investments (pipes, pumps), it was very informative to see the cash balances on the budget appropriation page. The new “Summary of Projected Fund Balances” on pages 14-15 shows the total of capital + cash. Thus, cash balance information has been dropped out of the budget. Please restore at least the “Remaining Cash Balance” analysis to this page. P.114 Fund: Vehicle Replacement Please restore at least the “Remaining Cash Balance” analysis to this page. [Further comments to follow] West Comm Budget Forecast Expenditures FY 19-20 West Comm Budget My Projected FY 20-21 Comments Reg Salaries $1,403,834 $1,431,911 2% Increase 7/20 by Contract Overtime $88,125 $89,888 2% Increase 7/20 by Contract Fringe Benefits $950,527 $1,007,559 PERS and Medical-- went up 6%+ in FY 19-20. Medical to rise by same $1200/employee per contract in FY 20-21. PERS normal rate and UAL to rise by about same amounts as in FY 19-20 also. Therefore, use +6% for FY 20-21 Temporary Services $19,207 $19,207 Assume no increase $2,461,693 $2,548,564 Supplies/Services $391,474 $391,474 Assume no increase CAD/800 mHz Replacement Fund Charge $171,000 $171,000 Should not change significantly. $171,000 is fixed contribution to capital reserves Total Expenditures $3,024,167 $3,111,038 Does not count Expenditure of Equipment Reserves Revenues FY 19-20 Projected FY 20- 21 Comments City of Los Al $694,623 $715,820 24.4% City of Seal Beach $862,586 $888,908 30.3% City of Cypress $1,289,608 $1,328,961 45.3% $2,846,817 $2,933,689 Investment Earnings $25,000 $25,000 Do not expect increase due to drop in interest rates State Reimbursements $21,849 $21,849 OC Parks $130,500 $130,500 Total Revenues $3,024,166 $3,111,038 Does not count Revenue from Equipment Reserves Seal Beach Increase 3.05% Revised 7/14/19 The total of these two sources dropped slightly in FY 19-20. Therefore, expect no increase in FY 20-21