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HomeMy WebLinkAboutCC AG PKT 2010-12-13 #J AGENDA STAFF REPORT DATE: December 13, 2010 TO: Honorable Mayor and City Council THRU: David N. Carmany, City Manager FROM: Jill R. Ingram, Assistant to the City Manager SUBJECT: PROPOSED FORMATION OF ASSOCIATION OF CALIFORNIA CITIES - ORANGE COUNTY SUMMARY OF REQUEST: Receive and file report. BACKGROUND: The League of California Cities (State League) provides legislative advocacy, professional development and education services to member cities. The State League is divided into sixteen (16) Regional Divisions. Orange County is designated as a Regional Division. The Orange County Division — League of California Cities (OC Division) is the only Regional Division with a full -time staff and a separate dues structure. OC Division staff members are considered to be employees of the State League. Division dues are paid to the State League which provides administrative support services (i.e. payroll, accounting, human resources) for the separately budgeted activities of the OC Division. For philosophical and /or economic reasons, four (4) Orange County cities have dropped their State League memberships and stopped paying State League dues. The Cities are: Anaheim, La Habra, Orange and Santa Ana. As a result, the State League does not allow these cities to formally participate in the activities of the Orange County Division or pay Division dues. For the OC Division, this meant a loss of approximately $139,000 in annual membership dues or about 25% of total membership dues. Several other Orange County cities have stated their intent to drop out of the State League in 2011 with a potential additional revenue loss of $117,000. The impact of the current and prospective withdrawals from the State League threatens the financial capability of the OC Division to continue to support a full -time staff and provide the broad range of Division membership and representation services, educational programs and collaborative opportunities that currently exist. Agenda Item J Page 2 In that regard, OC Division elected officials have proposed the formation of a new 501(c)(3) non - profit organization: the Association of California Cities — Orange County. The new Association would provide essentially the same services and programs of the current OC Division; however, it would be legally and financially separate from the State League. DISCUSSION: Proposed Association of California Cities — Orange County: • OC Division elected officials have proposed the formation of a new 501(c)(3) non - profit organization: the Association of California Cities — Orange County. The new Association would provide essentially the same services and programs of the current OC Division; however, it would be legally and financially separate from the State League. A one -page summary of the proposed Association is attached to this staff report as Attachment A. Articles of Incorporation: The Draft Articles of Incorporation establish the Association as a California Public Benefit Corporation organized and operated for charitable purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code. The stated purposes of the Association are to serve and represent its members by providing education, information, legislative and advocacy services. It is anticipated that legislative advocacy would constitute a minor part of the Association's activities and the Association would be prohibited from supporting or opposing political candidates. A copy of the proposed Articles of Incorporation is attached to this staff report as Attachment B. By -Laws: The Draft By -Laws essentially mirror the current By -Laws of the OC Division with minor amendments to delete references to the State League and the responsibilities of a Regional Division of the State League. The purposes and functions of the Association would be: 1. To advocate on behalf of its members the preservation and enhancement of local control. 2. To hold periodic meetings of city officials to foster and disseminate knowledge relating to municipal government by all appropriate means and to generate greater interest and more active civic consciousness among the members. 3. To hold periodic meetings of city officials for the discussion of municipal issues for the purposes of promoting governmental efficiency and reducing the cost of government. 4. To formulate policy and advocate the common policies of its members on local, regional, state and national issues of interest to its members. 5. To seek advisory votes from its members on specific policy matters. Page 3 Provisions related to Association Officers, Duties of Officers, Meetings, and Standing Committees are not changed. A copy of the draft By -Laws is attached to this staff report as Attachment C. The proposed formation of the Association of California Cities — Orange County would address the following issues: 1. Any Orange County city could continue to pay dues to, and fully participate in the policy development, legislative advocacy and educational programs of, the State League. 2. Any Orange County city that declines State League membership could choose to pay dues to and be a member of the new Association of California Cities — Orange County. That is not possible under current State League administrative policy. 3. If some or all of the current and prospective State League non - member OC Cities chose to join the new Association, the financial position of the new Association and its ability to continue to provide a broad range of services to its members and would be strengthened. 4. The current OC Division staff would be removed from the sometimes awkward position of being State League employees who are primarily accountable to a Regional Division and Board who sometimes find themselves in conflict with State League legislative priorities and positions. 5. The new Association could take a legislative position on behalf of Orange County cities that is in conflict with the State League, and communicate that position without violating State League By -Laws. Some of the arguments and concerns advanced against formation of a new Association include the following: 1. OC Division and OCCOG organizational alternatives (including formation of a separate non - profit organization of Orange County cities) were evaluated four years ago by the Orange County City Managers Association. It was recommended that the current Hybrid Division be retained. 2. The OC Division should focus its activities on regional /county /local issues and defer to the State League on matters of State legislation and /or statewide interest. 3. It should not be assumed that all or most of the current Orange County cities that are not State League members will opt to join and pay dues to the new Association. 4. There will still be a need for Orange County cities that belong to the State League to organize themselves and carry out the duties and responsibilities of a Regional Division. • On November 3, 2010, the Orange County City Managers' Association considered the merits of both the Orange County League Division and formation Page 4 of the new Association of California Cities — Orange County. A significant number of City Managers advocated that all Orange County cities should join the new Association to solidify a stronger voice on behalf of Orange County. Therefore, the City Managers' Association unanimously voted in favor of all Orange County cities agendizing this issue for City Council consideration. FINANCIAL IMPACT: There is no fiscal impact associated with consideration of this item. The 2010 annual membership dues for the State League of California Cities was $9,534.00, and the membership dues for the Orange County Division - League of California Cities was $9,024.33. It has been proposed that the dues structure for the new Association be the same as the 2010 dues structure for the OC Division. Additionally, it has also been proposed, that a 10% discount be offered to cities for purchase of a two - year membership in the new Association. RECOMMENDATION: Receive and file until further information is available. SUBMITTED BY: NOTED AND APPROVED: Jill R. Ingram David N. Carmany Assistant to the City Manager City Manager Attachments (6): A. Summary of Proposed Association B. Draft Articles of Incorporation C. Draft By -Laws D. Response from League of California Cities Regarding Proposed Association E. Comparing the AOCC -OC to the OC Division Structures Fact Sheet F. Sample of Value Added Services of AOCC -OC Association of California Cities Orange County What is it? A California non - profit association of Orange County cities formed to advocate on behalf of its members for the preservation and enhancement of local control. What does it do? Holds monthly dinner meetings to facilitate communication between its member cities, collaboration on projects of mutual benefit and timely educational programs of interest to its members. Provides other educational events and collaborative forums to address problems of a regional nature in a manner that preserves the highest degree of local control and flexibility. What does it cost? Member cities will pay the same amount in dues that they paid last year to be members of the Orange County Division, League of California Cities. Cities will also be offered a 10% discount on membership dues for purchasing a two year membership option. Can I join both AOCC -OC Yes. You may choose to be a member of AOCC -OC, and the League of CA the State League, or both. Dues will be paid • Cities? separately. Why should I join? The AOCC -OC will provide a broad range of benefits to elected officials and their member cities. In particular, the AOCC -OC will offer (1) important educational and collaborative opportunities from a uniquely Orange County perspective, (2) a collective voice for Orange County cities without the requirement of paying two sets of dues, (3) the ability to either support or oppose positions taken by the State League without the internal conflict that arises in the current structure and (4) a better opportunity to leverage partnerships and seek nonprofit funding not presently available. The AOCC- OC will provide top quality educational, collaborative and policy resources to members while focusing specifically on Orange County issues. Articles of Incorporation of the Association of California Cities a California Public Benefit Corporation ONE: The name of this corporation is the Association of California Cities. • TWO: This corporation is a nonprofit public benefit eoiporation And is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for charitable purposes. The specific purposes for which this corporation is organized are to serve and represent its members by providing education, information, legislative and advocacy services. TAE: The name and address in the State of California of this corporation's initial agent for service of process is Robert Ming, 5 Fairlane Road, Laguna Niguel, CA 92677. • FOUR: (a) This corporation is organized and operated exclusively for charitable purposes 'within the meaning of Section 501(c)(3) of the Internal Revenue Code. (b) Notwitbstamling any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (1) by a corporation exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code or (2) by a corporation contributions to which are deductible under Section 170(c)(2) of the Internal Revenue Code. (e) No substantial part of the activities of this corporation shall consist of carrying on propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate or intervene in any political campaign (including the publishing or distribution of statements) on behalf of, or in opposition to, any candidate for public office. FIVE: The names and addresses of the persons appointed to act as the initial directors of this corporation. are: SIX: The property of this corporation is irrevocably dedicated to charitable purposes and no part of the net income or assets of the organization shall ever inure to the benefit of any director, officer, or member thereof or to the benefit of any private person. On the dissolution or winding up of the corporation, its assets remaining after payment of, or provision for payment of, all debts and liabilities of this corporation, shall be distributed to a nonprofit fund, foundation, or corporation which is organized and operated exclusively for charitable purposes and which has established its tax-exempt Association of Califamia Cities Page 1 status under Section 501(c)(3) of the Internal Revenue Code, Date: Director ; Director Director , Director , Director - We, the above - mentioned initial directors of this corporation, hereby declare that we are the persons who executed the foregoing Articles of Incorporation, which instrument is our act and deed. Association. of California Cities Page 2 Bylaws of the ASSOCIATION OF CALIFORNIA CITIES — ORANGE COUNTY A California Public Benefit Corporation ARTICLE I Section A: Name The name of this organization shall be: "Association of California Cities — Orange County." ARTICLE II — Purpose Section A: Composition • The Association of California Cities — Orange County, shall be composed of each municipal corporation within the County of Orange which pays such dues assessment as may be determined by the Association. Section B: Purposes and Functions The purpose and functions of this Association shall be: 1. To advocate on behalf of its members the preservation and enhancement of local control. 2. To hold periodic meetings of city officials to foster and disseminate knowledge relating to municipal government by all appropriate means and to generate greater interest and more active civic consciousness among the members. 3. To hold periodic meetings of city officials for the discussion of municipal issues for the purposes of promoting governmental efficiency and reducing the cost of government. 4. To formulate policy and advocate the common policies of its members on local, regional, state and national issues of interest to its members. 5. To seek advisory votes from its members on specific policy matters, according to the process included in Article VI, Section C. ARTICLE III — Membership Section A: Eligibility Any incorporated city in Orange County is eligible for membership. Page 1 of 8 Section B: Representatives The membership of the Association shall be represented therein by the municipal officers of member cities. Active participation in the deliberations of the Association and a vote of any question shall be confined to member municipalities whose membership has not been suspended. Section C: Suspension Any municipality which is in arrears in payment of it dues assessment, as has been adopted by the Association, for a period of 90 days shall automatically be deemed suspended from membership, including all associated privileges including voting rights. It shall be the duty of the Association Executive Director to notify said city immediately. Section D: Reinstatement A member city that has been suspended for non - payment of dues assessment to the Association, or that relinquishes membership by choice for a period of more than 90 days, shall be reinstated to membership only after the city's total dues assessment has been paid to the Association for the current year of suspension in which non - membership occurred. Section E: Notices Notice will be deemed given to all member cities and council members three days after mailing of the notice by USPS (United Sates Postal Service), first - class, postage pre -paid, or upon facsimile to the clerk of each city, with electronic receipt confirmation received, or upon hand delivery to the clerk of each city, whichever method should be selected by the sender and/or, if multiple methods are selected, whichever should occur first. ARTICLE IV — Officers Section A: Board of Directors The affairs of the Association shall be conducted by a Board of Directors. The Board of Directors of the Association shall consist of the President, the First and Second Vice Presidents, the Chair of the Advocacy Committee, three large city representatives and five district representatives. The Immediate Past President and the Chair of the City Managers' Committee shall serve as non - voting ex officio members of the Board of Directors, Section B: Executive Committee An Executive Committee will be comprised of the President, First Vice President, Second Vice President, the Advocacy Committee Chair, and the immediate Past President, providing he/she is still in office. The Executive Committee includes the Immediate Past President, as a non voting ex officio member. Section C: Elections Page2of8 Election of the President, First Vice President and Second Vice President, and Advocacy Committee Chair shall be held in the month preceding the annual meeting. The selection of the three large city representatives and five Supervisorial district representatives shall take place at least one month before the election of officers at the General Meeting. The eight largest member cities shall select the three large city representatives, while the cities in each of the five Supervisorial districts shall select one representative per district to the Board of Directors. The three large city representatives shall be elected prior to the five Supervisorial district representatives. For the three large city and five district positions, no city shall have more than one representative elected to the Board of Directors. Section D: Terms and Vacancies The President, Vice Presidents, Chair of the Advocacy Committee, three large city representatives and five district representatives shall serve for a term of one (1) year and until their successors are elected. The term of office for all members of the Board of Directors shall commence on [the Second Thursday in September of each year]. In the event of a vacancy, the office shall be filled by the Association membership at the next regularly scheduled meeting for the unexpired portion of such term, if the term expires more than three months from the election of new officers. Section E: Nominations A nominating committee, comprised of one member from each County Supervisorial District, shall be appointed by the President and confirmed by the Executive Committee two meetings before the meeting at which the President, Vice Presidents, and Advocacy Committee Chair will be elected. At the meeting immediately before the election, this committee will present its report to the Association. At that time and at the election meeting, members present may place in nomination from the floor additional candidates for any office then under consideration by the Association. ARTICLE V — Duties of Officers Section A: President It shall be the duty of the President to preside at the meetings of the Association and the Board of Directors, and to perform such other duties as ordinarily pertain to the office of President. Section B: Vice Presidents The First and Second Vice Presidents shall assume, in order, the duties of the President during the absence of the President. Section C: Large City and District Representatives The large city and district representatives shall represent the membership of the Association and assume duties as assigned by the President. Page3of8 Section D: Chair of the Advocacy Committee It shall be the duty of the Chair of the Advocacy Committee to preside at the meetings of the Advocacy Committee. • Section E: The Board of Directors shall: 1. Meet when called by the President to plan and coordinate the business and proposed activities to be brought before the Association. 2. Prepare and present the annual budget to the membership for approval. 3. Establish and conduct a recruitment process for the position of Association Executive Director, and appoint or remove the Association Executive Director as it deems necessary or appropriate from time to time. 4. Solicit and nominate individuals to represent the Association on various bodies as defined in Article IX, Section A of these Bylaws. 5. Appoint the standing committees as defined in Article IX, Section A, of these Bylaws. 6. Appoint temporary and on -going task forces and committees as necessary. 7. Have the authority to act on behalf of the Association on matters of concern, including legislative and policy matters subject to approval of the Association at its next regular meeting. Section F: Executive Committee The Executive Committee shall be responsible for working with the Association Executive Director on setting the Board of Directors monthly meeting agenda items, establishing the monthly General Membership Agenda and Speaker, and confirming the nominations of the President. ARTICLE VI — Meetings Section A: Regular Regular meetings of the Association shall be held monthly, on the second (2nd) Thursday of each month, whenever possible, and at such place as the Board of Directors may direct. Section B: Special Special meetings of the Association may be held at any time upon call of the President or upon petition of 25 percent of the member cities in good standing. No such special meeting may be legally held, however, unless written notice thereof is given to the member municipalities at least 24 hours in advance of such special meeting. Such notice shall specify the time, place and purpose of such special meeting, and no other business shall be transacted except that for which said meeting is called. Section C: Advisory Votes Page 4of8 From time to time the Association may issue advisory votes on select policy matters to city representatives on various boards and commissions. Such policy matters shall be agendized for a vote of the Association at any regular or special meeting provided that 10 days notice is given to member cities. Two - thirds (2/3) of member cities must support an Association advisory vote for it to be transmitted to city representatives. The meeting agenda shall make provision for affected city representatives to address the Association on the advisory vote policy matter. Section D: Quorum A majority of the member cities shall constitute a quorum for the transaction of business at any meeting of the Association. Section E: Voting 1. A majority of the member cities present may act on any issue properly coming before any meeting of the Association, except that a Association Advisory Vote shall require a two - thirds (2/3) vote of the total number of member cities. 2. Each member city shall have one vote. The vote shall be cast by the Mayor of each member city, or his/her Council Member designee, confirmed in writing and delivered to the Association prior to the vote. 3. When taking positions on legislative matters and/or adopting the State and Federal Legislative Platforms, a weighted voting system may be used at the request of any member city prior to the vote. The weighted voting system shall require that a majority of member cities present at the meeting representing a majority of their total population will be required to act on the issue before the Association. 4. There shall be no secret ballots. Section F: Minutes The reading of the minutes of the prior meeting of the membership shall be acted upon and the prior reading therefore may be waived by a majority vote of the member cities present. Section G: Procedure The conduct of meetings shall be governed by Robert's Rules of Order where the question at issue is not determined by these Bylaws. ARTICLE VII — Finances Section Ai Retention of Financial Professional The Executive Director, with the advice and consent of the Board of Directors, shall secure appropriate financial professionals to oversee and maintain bookkeeping, financial reporting and auditing functions for the Association. Section T3: Audit Page 5 of 8 Each year the Board of Directors and Association Executive Director shall engage an independent auditor to compile and/or review financial records of the preceding fiscal year and report the findings to the Board of Directors. Section D: Budgeting Annual dues shall be approved and the annual budget shall be adopted by the Board of Directors and the Association no later than August preceding the fiscal year. Section E: Dues Annual dues assessments shall be due and payable by January 1 of each year. Section F: Fiscal Year The fiscal year of the Association shall be from January 1 to December 31 of each year. ARTICLE VIII — Standing Committees Section A: Budget Committee The Board of Directors, or its designees, shall serve as the Budget Committee and shall prepare and present the annual budget according to Article VII, Section D, of these Bylaws. Section B: Advocacy Committee The policies governing the responsibilities and procedures of the Advocacy Committee are contained in the separate document entitled "Advocacy Committee Procedures" and attached to the Bylaws as Appendix A. Section C: City Managers' Committee The City Managers' Committee will advise the Association Board of Directors on matters pertaining to finance, budgeting, audit, and other matters pertaining to the Association, and may serve as a staff resource to all committees and task forces appointed by the Association. The City Managers' Committee shall consist of the members appointed by the President of the Orange County City Managers' Association. ARTICLE IX — Appointments Section A: Procedure 1. All appointments of individuals or committees to represent or serve the Association on a sustaining basis shall be nominated by the President, confirmed by the Executive Committee and approved by the Association. 2. All appointees shall be elected officials, except as otherwise provided by law. Page 6 of 8 • 3. A majority of the cities present (if a quorum was achieved) is necessary to appoint representatives to boards, commissions, or agencies. If there are three or more nominees for a position and none receives a majority vote of the number of members present, then all but the two nominees with the greatest number of votes shall be removed and the balloting repeated. If neither receives the required majority vote after two additional ballots, the meeting shall be continued to a subsequent time for further consideration. This rule limiting the number of ballots to a total of three (3) may be suspended upon a two-thirds (2/3) vote of eligible cities present. 4. Each recommended appointment shall be announced at the next regular meeting of the Association for approval. If disapproved, an appointment may be substituted by direction of the Association. 5. Any appointment may be revoked by the foregoing procedure or by direction of the Association. 6. Temporary task forces may be appointed by the President and confirmed by the Board of Directors without Association approval. Section B: Reporting A current list of all appointed individuals and committee members shall be maintained by the Association Executive Director. When appropriate, the President shall periodically call upon appointed individuals and committees to make direct reports to the Association. Section C: Attendance 1. The Association Executive Director shall maintain accurate attendance records for all appointed individuals serving on committees. 2. Appointments to any position shall be considered vacated when the appointee fails to attend three (3) consecutive meetings of the committee to which they are appointed or fails to attend a majority of the regular meetings scheduled within their term. 3. Appointees by the Association shall attend a minimum of four (4) Association General Meetings per year. 4. Special exceptions to the above-described requirements may be granted by a majority vote of the Board of Directors and must be promptly reported to the membership. 5. The President shall report at each Association meeting any vacated positions. Section D: Responsibilities of City Representatives All city representatives appointed by the Association are responsible for exercising the duties of their positions with diligence, integrity and the highest regard for the public trust and the joint interest of the citizens of the cities within Orange County. Each appointee is fully accountable to the Association for actions taken as a city representative. From time to time the Association may issue advisory votes on selected policy matters to city representatives appointed by the Association. In cases where city representatives fail to follow the Association advisory vote, a reconsideration of their appointment shall automatically be conducted at the next Association meeting and the subject city representative shall be given the Page 7 of 8 opportunity to explain and detail his or her position and vote on the policy matter. The city representative may be removed by a majority vote of the total number of member cities present, if a quorum was achieved, except as otherwise provided by law. ARTICLE X — Amendments Section A: Written Notice Proposed amendments to these Bylaws must first be submitted in writing to the members of the Association for consideration and study at least thirty (30) days prior to the date of the meeting at which the proposed Bylaw amendments are to be acted upon. Section B: Authority These Bylaws may be amended at a meeting where: 1. two- thirds (2/3) of all member cities are present, and then 2. upon affirmative action of a majority of all member cities, whether present or not. Certification of Approval It is hereby certified that these Bylaws for the Association of California Cities - Orange County, were duly adopted by unanimous written consent by its Board of Directors on [September 2010]. • Page 8 of 8 n T t A 1400 K Street, Suite 400 • Sacramento, California 95814 .L f%.. Phone: 996.658,8200 Faye 916.658.8240 OF CALIFORNIA www.cacities.org TO; L. Allen Songstadk Robert Ming Doug Chotkevys Bob Dunek Lacy Kelly FROM: Chris McKenzie, Executive Director DATE: November 9, 2010 SUBJECT: Response to Questions About the State League, Orange County Division • and Proposed Association of California Cities --- Orange County This memo answers the questions you raised with Jim Ridenour, League President, and me on October 8 about the relationship that could possibly be established between the state League /Orange County Division and the proposed new Association of Cities — Orange County. These responses represent my best efforts . to answer the questions without having discussed them with the League board of directors which has final discretion over these matters. In my judgment, the board will be reluctant to take any steps that would potentially weaken the state League at a time when it has just achieved perhaps its most significant local control victory since its founding in 1898—the passage of Proposition 22 by a 61% - 39% margin. 1 think it is important to remember that while the divisions and the state League have very intertwined and complimentary purposes, the divisions exist to build a stronger, more • representative, and more effective state League --not the other way around. The purpose of the new association seems more about building a stronger county -based organization to deal with county and some statewide issues — sometimes even in competition with the state League. This will inevitably be viewed by some as a threat to enhancing the state League's effectiveness in the years to come. Our members, the governor and the state legislature expect the state League to be the place where consensus on city policy is built. Having separate organizations with different positions undermines that goal. With that in mind, here are the answers to the questions we discussed. We are preparing s similar communication to all cities in the county. 1. May the New Association Serve as the Orange County Division? No, it may not since the Division is legally part of the state League and operates under the bylaws of the state League. The officers and directors of the new association, however, may serve concurrently as the officers and directors ofthe Orange County Division if they come from cities that are members of both the state League and the new association. The officers would at in two separate fiduciary capacities, however, and would have to hold legally separate meetings. The meetings could be held consecutively in the same location, with one meeting being adjourned before the next is called to order, but only members of the state League could participate in the Division meetings. 2. Can the State League Contract With the New Association to Provide the Same Services It Provides to the Orange County Division?' Yes, in theory the state League board could agree to provide such services under contrast for a fee. It currently has such a contract to provide staff services to the Institute for Local Government (ILG), a separate non -profit 501 (c) (3) eligible research arm of the League and CSAC. Whether the state League board would agree to such a contract would be a matter completely within the sole discretion ofthe state League board. Unlike the ILG, the new association would potentially have policy goals that are at odds with the state League (Le., this is one of the purposes of the new association to allow for the adoption of policy positions at odds with the state League). 3. Can the State League Contract With the New Association to Provide Services to the Orange County Division? Yes, the state League could enter into such a contract, but it would be a matter completely within the discretion ofthe state League board. The services provided to the state League/Division, however, could only be for the exclusive benefit of cities in Orange County that are members of the state League. The state League board would likely consider that the new association would potentially have policy goals that are at odds with the state League (i.e., this is one of the purposes of the new association—to allow for the adoption of policy positions at odds with the state League). 4. Is it Possible for Cities to De Division Members Only? No. Under the state League bylaws, membership in the Division requires membership in the state League. Cities that are not members of the state League and the Division could not participate as voting members in Division programs and activities, such as voting on Division positions and resolutions on matters, serving as a Division officer, serving on a state League or Division policy committee, etc. With the approval ofthe state League board, however, cities could make payments to the Division as "sponsors" or "supporters" comparable to private corporate sponsors and could receive limited non voting benefits such as attendance at Division events and meetings. Whether the state League board would be willing to consider such a status would be entirely within its discretion. 1 anticipate it would have serious concerns about creating a precedent in other areas of the state. Since 1996 the League has administered payroll for the Division. While the Division board of directors makes all financial decisions, in 2005 the stateLeague also began to provide accounting services for which it is reimbursed. Since 2006 the state League has provided legal services, human resources services, officers' and directors' liability insurance, and general administrative support without cost to the Division and the cities of the county. All employees of tbe Division are state League employees, but the cost of their services is home by the cnembers of the Orange County Division of the state League. 2 j 5. Is it Possible for the New Association to Become a Chapter or Affiliate of the State League? Unlike some other organizations, the state League does not have chapters under its bylaws. To do so would require an amendment to the bylaws; this could not be effective until January 1, 2012. The League's affiliate status is typically reserved for statewide associations serving city officials, such as the California Redevelopment Association, but the new association could request affiliate status. 6. What Other Factors Should Be Considered About the New Associations? The organizers and cities of Orange County should consider a number of factors in moving forward with the new organization, including: • Compliance Oversight, If there is no contract with the state League to provide accounting .and other oversight, what safeguards will exist to ensure compliance with all state and federal laws and best accounting practices? • Liability. If the association sustains a financial or legal loss, will city members be responsible for paying any of the cost associated with that loss? What insurance coverages will be secured? • Purpose of Association. Lithe association can't lobby, what advocacy purpose does it serve? • Audit and Accounting. Will the association follow generally accepted accounting principles for nonprofit associations and have an annual audit? • Staffing. Will the new association be able to attract and manage competent staff and offer a competitive compensation package? • Continuity. Is it possible to sustain the association beyond its first year or two of existence? • Duplication of Services. Will the new association duplicate any services provided by the Division or the state League? • Are Their Other Options? The new association is being considered due to concern about the loss of cities in the membership of the state League/Division and a desire to adopt positions at odds with the state League. Are their other options, such as reducing dues or increasing dues Olt the remaining cities that would allow maintenance of services at the Division until cities return to membership? • Polley Influence. Will the new association give Orange County cities a stronger or weaker voice in state policy matters? • Impact on the State League. Will the formation of the new association discourage membership in the state League by Orange County cities,_ weakening the impact of the state League's efforts to "restore and protect local control for cities, the mission of the state League. 1 trust this addresses the issues we discussed on October 8. Please let me know if you have any further questions. c. League Executive Committee 3 • Questions Answered About AOCC.00 Compliance Oversight. If there is no contract with the state League to provide accounting and other oversight, what safeguards will exist to ensure compliance with all state and federal laws and best accounting practices? The AOCC -OC will contract with a Certified Public Accountant that specializes in 501(c)3 nonprofits. This is a common practice among nonprofits, and should not cost the organization much more than it pays now, given the relatively small operating budget. The AOCC -OC will also conduct audits in compliance with IRS tax-exempt requirements. This is a new expense that the AOCC -OC expects to bear, but it is not cost prohibitive. In addition, under the Division structure, the League does not permit access to full financial reports to anyone but internal "management." The Board merely receives income and expense schedules. Under AOCC -OC, as is common and best practice for all 501(03 organizations, the Board will have receive full Profit &Loss, Balance Sheet, and Income and Expense Reports, for review and approval from a Certified Public Accountant. • Liability. If the association sustains a financial or legal loss, will city members be responsible for paying any of the cost associated with that loss? What insurance coverages wilt be secured? The association will be a separate nonprofit corporation that will provide liability protection for its members and will follow industry standard corporate formalities which prevent courts from looking through the corporation structure and applying liability to its members. Best Practices for nonprofits includes the securing of Liability and Directors and Officers Insurance. The AOCC -OC, like all reputable nonprofits, will secure these insurance policies to protect its Board, staff and members. This is a new expense that AOCC -OC expects to bear, but it is not cost prohibitive. • • purpose of Association. If the association can't lobby, what advocacy purpose does it serve? 501(c)3 nonprofits are permitted to engage in advocacy activities at up to 20% of their budget and resources. The current organization does not approach that level of time and resource commitment. Since the AOCC -OC services are designed to replicate services previously offered under the Division structure, the AOCC -OC will not be in danger of extended beyond that limited amount. If it desires to become more active, the AOCC -OC will poll its members to investigate forming a PAC or other options. Questions Answered About AOCC -OC Page 1 • Audit and Accounting. Will the association follow generally accepted accounting principles for nonprofit associations and have an annual audit? Ali nonprofits, particularly 501 category nonprofits, are required to follow GAAP (Generally Accepted Accounting Principles). Certified Public Accountants that specialize in 501 category nonprofits ensure that GAAP is followed. At this time, an audit is required once every two years. The AOCC -OC will comply with this best practice. • Staffing. Will the new association be able to attract and manage competent staff and offer a competitive compensation package? The Board of the Division has made it clear to Division staff that should they be able to reach critical mass to move to the AOCC -OC structure, they would like the current Division staff to move over to the new organization with a competitive compensation package. • Continuity. Is it possible to sustain the association beyond its first year or two of existence? The AOCC - OC is more sustainable than. the Division structure for three reasons. 1- The current Division structure has been proven unsustainable due to the requirement for cities to pay two sets of dues. For those cities that have dropped membership for this reason and are only interested in local services, the AOCC- OC structure is more sustainable than the current Division structure which requires payment of both sets of dues. 2 - The local organization has, in the last 3.5 years, provided alnost of "Value Added Services." The AOCC - OC will continue to provide these and new value added services, and will remain "member- centric," polling its member base to determine what services are needed and wanted. This will further increase sustainability. 3- Lastly, the new 501(c)3 structure allows the AOCC -OC to pursue grants and tax - deductible donations, further increasing financial sustainability. • Duplication of Services. Will the new association duplicate any services provided by the Division or the state League? No. The Division does not duplicate services of the League now, but compliments them. The AOCC -OC will continue to provide the same and expanded local services that add value to Orange County cities. See the attached "Value Added Performance of the Division," for information on value added services that do not duplicate state League benefits. • Questions Answered About AOCC-OC Page 2 • Are Their Other Options? The new association is being considered due to concern about the Loss of cities in the membership of the state League /Division and a desire to adopt positions at odds with the state League. Are there other options, such as reducing dues or increasing dues on the remaining cities that would allow maintenance of services at the Division until cities return to membership? The Division Board has explored allowing some cities to pay less dues. The Board sees this as unfair to the full dues paying members and believes it sets a precedent that will ultimately undermine the sustainability of the organization. Regarding dues increases, Orange County cities have sent the clear message that they cannot and will not support a dues increase. The best option is to open the organizations funding base options, which is part of the benefit of moving to AOCC -OC. As mentioned previously, the Board expects new grants and sponsorships that become possible once the organizational structure is changed to a traditional 501(o)3. • Policv Influence. Will the new association give Orange County cities a stronger or weaker voice in state policy matters? On state policy matters, the AOCC -OC will give Orange County cities a stronger voice. On matters where the AOCC -OC and the State League agree, the AOCC - OC will add its name to the list of organizations supporting the State League, thereby increasing the voice of Orange County cities on state policy matters. Membership in the new association does not prevent members from also being members in the State League so many members will continue to be counted in State League number when determining State League influence. On matters where the AOCC -OC and the State League disagree, Orange County cities will have the ability to offer different approaches and ideas to state policy matters that may shape the discussion in ways that are more aligned with Orange County city interests. This option will no longer be available if the State League becomes a more traditional 501 nonprofit. On local matters, the Division has had a strong voice and impact on Orange County issues and the Board expects this impact to be enhanced by moving to the new structure. The AOCC - OC will be viewed as speaking for Orange County cities because it is less influenced by positions taken by the State League, and because it is expected that the AOCC - OC will be able to bring back cities that have dropped the State League. This more unified voice will help the AOCC -OC have greater influence with the county and other local partnering agencies and nonprofits in Orange County. • Impact on the State Leanne. Will the formation of the new association discourage membership in the state League by Orange County cities, weakening the impact of the state League 's efforts to "restore and protect local control for cities," the mission of the state League. Questions Answered About AOCC -OC Page 3 No. The OC Division has lost 1!3 of its members. These members have been lost to the League as well, and represent the largest cluster of dropped members of any Division in the state League. The AOCC -OC will have the same mission as the League - "To Restore and Protect Local Control," and when the two organizations align, the League potentially gets more Orange County cities to back up its voice under the AOCC -OC structure. • Cost to Operate Independently. Will it cost the AOCC -OC substantially more to maintain an independent 501(c)3 organization? No. While the AOCC -OC will incur some new costs necessary to operate in a. professional and fiduciary manner, there are also a number of costs savings that will reduce expense in some areas. The new structure will also provide the AOCC -OC with greater transparency on expenses from functions currently handled by the State League and the ability to collaborate with Orange County partners to reduce those costs. Therefore, the new expenses will not be significant in the overall budget, and can be offset by the new funding ° opportunities created by the separate, 501(c)3 status. Questions Answered About AO CC -OC Page 4 • Comparing the AOCC-OC to the OC Division Structures FACT SHEET AOC OC Division FINANCIAL STATEMENTS FINANCIAL STATEMENTS Board and City Managers may receive and Board and City Managers may not receive review financial statements, including full and review financial statements, which are Profit & Loss, Balance Sheet, and Income considered for "Internal/Management Use and Expense Reports from a Certified Only." They can receive Income and Public Accountant. Expense Schedules only. DUAL REPORTING DUAL REPORTING Executive Director is responsible to one Executive Director is responsible to two entity, the local OC Board of Directors regularly opposing "masters." This and its member cities, strengthening infringes on the Executive's ability to Orange County's voice and influence. succeed on. behalf of OC members, minimizing the full impact that can be achieved and setting the Executive • Director up to fail when there is disagreement between the two "masters." FUNDING AVAILABILITY FUNDING AVAILABILITY An independent 501 (c) 3 can attract The current status of the League (IRS broader financial resources that are not Section 115) prevents tax - deductible currently available to the OC Division. donations. LEGISLATIVE & POLICY POSITIONS LEGISLATIVE & POLICY POSITIONS Can take legislative positions opposite the Currently, the OC Division is not League. If OC cities agree with the permitted to take positions opposite of the League, AOCC -OC can offer additional League.. It is against League policy. If the support to the League. League moves to a 501 nonprofit . designation, it will Iiterally become against nonprofit law for the OC Division to take positions opposing the League. BALLOT MEASURE ADVOCACY BALLOT MEASURE ADVOCACY May dedicate private funding, under a No mechanism for the Division to engage PAC, to ballot measure advocacy, if OC in ballot measure advocacy, unless the cities so desire. League provides funding. The League did not provide Ci1iPAC funding to the Division to advocate for Prop 22 this year, tying the hands of Division staff in participating. AOCC- OC/Division Pact Sheet, Page FLEXIBILITY FLEXIBILITY Offers maximum flexibility for cities by A city must belong to both the League and allowing cities to belong to the AOCC- the Division, per League policy. For this OC, the League, or both. reason, 11 cities have discontinued Division membership, LEAGUE POLICY COMMITTEES LEAGUE POLICY COMMITTEES Only League member cities can sit on The OC Division President makes League policy committees. Appointments cannot Policy Committee appointments. be made by a separate entity. [However the idea of having the AOCC -OC Board mirror the Division Board would resolve this problem. It has been confirmed that this is a viable option with the League. A VOICE IN SACRA la 0 A VOICE IN SACRAMENTO Allows OC to reach out beyond its borders The Division does not have a strong voice for support with like minded business and in Sacramento unless it is in alignment municipal groups previously unavailable with the League. to OC under the Division structure. This would give OC a stronger voice in Sacramento. STAFF SECURITY STAFF SECURITY An independent structure, if supported by OC Division staff does not enjoy the job OC cities, allows the organization to security that state League staff enjoy, pursue expanded private funding that whose salaries and benefits are secured by would create increased job security for private industry income from other income staff. streams of the League. AOCC- OC/Division Fact Sheet, Page 2 Sample of Value Added Services of AOCC -OC, based on the value added performance of the OC Division. The same types of services, and expanded services, will be offered under the AOCC -OC] 1- Model Landscape Irrigation Water Ordinance (saved cities $35,000 to $50,000 minimum) 2- Secured reallocation of COPS funding - two years - a bottoms line impact of $25,000+ to 22 Orange County cities. 3- Stopped local agency infraction on Fullerton's local land use control decision on their redevelopment area, which could have been precedent setting. 4- Rallied support letters for the purchase of the OC Fair Grounds 5- Rallied support letters for Los Alamitos air field 6- Issued support letter for the Huntington Beach Desalination Plant and testified. 7- In the absence of the state League addressing pension reform, secured significant pension policy reform in the state League's guiding principles. 8- Adopted 8 Guiding Principles on Pension Reform to assist Orange County city managers and elected officials when working with their labor groups. 9- Minimized regulatory burden by representing cities on the 10 -Year Plan to End Homelessness workgroup, and secured two city manager and two city elected official seats on the 10 -Year Plan Board of Directors. 10- Provided FREE half-day workshops for city staffs on topics like the new CalGreen Building Standards, that will go into effect on Tanuary 1. 11- Provide FREE customized annual orientation on all County and regional agencies, as well as general training to Orange County elected officials. 12- Worked with select city managers on city manager salary issues - fielding much backlash toward Division leaders, 13- Engage city managers in design of programming for elected officials including Medical Marijuana, Pension Reform, Sustainable Building (Going Orange), Day Laborers, Elected Official Orientation —this year alone. 14- Secured seat for city manager on. the Waste Management Board 15- Significant assistance in resolving OCCOG issues 16- Secured a $30,000 donatioato a Best Practices Database that will save city stafftime and resources directly benefiting city managers and their staffs. [To laxuxch early in 2011 under new structure) 17- City Profiles publication at no cost to Orange County cities, a positive piece for cities delivered to 3 million readers of the OC Register. 18- Coordinating input on Fire Maps (OCFA) and Performance Based Management Irrigation Contracts (MWDOC) 19- Resource to Senate Local Government Committee Transparency Hearing —' The Public's Right to Know." 20- Continued and regular efforts to protect against local attempts to impact your city's local control authority. 21- Held three city focused conferences, meet and greets, video "visits" with key state and local governmental leader. 22- Orange County elected officials have resonance in the state because they are well organized, and have an enormous impact on elected officials statewide, showing aptitude to influence policy makers throughout the state. This will continue to work in broad benefit to Orange County cities — only if there is an Orange County association to represent OC cities.