Loading...
HomeMy WebLinkAboutNOVEMBER 10,1992 I I 01100'>' 0 Ii 10 Cf J 34:0361 c.c:: CITY COUNCIL PROCEEDINGS ARE TAPE RECORDED AND ON FILE IN THE OFFICE OF THE CITY CLERK ROLL CALL 1. BUDGET INFORMATION (Financial Report) 0330'/0 2. LONG-TERM FINANCING OPTIONS (Rod Gunn & Assoc.) (CONTINUED) 3. LOJESKl (Rehab. 49 E.Htg.Dr.) O~'I()_ 010 ,JSP ~ MINUTES CITY COUNCIL OF THE CITY OF ARCADIA ADJOURNED REGULAR MEETING (WORK SESSION) NOVEMBER 10, 1992 The City Council met in an Adjourned Regular Meeting (Work Session) on Tuesday, November 10, 1992 at 5: 30 p. m. in the Conference Room of the City Hall Council Chambers. PRESENT: Councilmen Ciraulo, Harbicht, Loj eski, Margett and Fasching None ABSENT: ORAL COMMUNICATIONS None WORK SESSION Consideration of the Financial Report prepared by the Finance Department to: 1 Inform the Council of the impact the recession and State balancing measures have and will have on the City's finances; and, 2 - To recomend actiqns-the'Council may wish to consider whch can impact current year finances and/or start the process of preparation for next fiscal year; and, 3- Begin a process to develop a financial strategy for the long-term financial heatlh of the City. The financial discussion included such topics as: Problems facing cities nationwide; State Budget balancing process and its impact on the City; Financial Trends: a - Revenues vs. expenditures. b - Appropriations. c- Personnel Costs. d - Revenues. e - Top 10 Revenue Sources; Future Budget Challenges; and Actions the City might Consider. The Finance Department staff offered a slide presentation identical to the material contained in the Financial Report. Considerable discussion ensued and Council determined to wait until January for a financial update and recommendations from the Finance Department, and hold off any significant moves within the City's budget until then. A TRANSCRIPT of the discussion is available. The presentation by Rod Gunn and Associates regarding long-term financing options was CONTINUED to the November 24, 1992 Council Work Session. ITEMS FROM COUNCIL MEMBERS Staff reported that the rehabilitation of 49 E. Huntington Drive, the Ercolani project, was slowly getting on the right track. Mr. Ercolani originally started the work on the building without permits. He then stopped the project and obtained the permits. Mr. Ercolani submitted plans that did not meet with handicapped requirements... he did not really want to put in the handicapped 1 11/10/92 LOJESKI (llus) FASCHING (Temple City Downton Revitaliza- ,ion) ADJOURNMENT ATTEST: 34:0362 access because of the expense, according to staff. Evenutally he received approval for internal improvements by producing a plan that met handicapped requirements. Staff, as required by State law, was then able to make a finding that Mr. Ercolani's project was a hardship case and Mr. Ercolani did not have to comply with construction of a handicapped ramp to access an area _o~f the parking lot at the back of the building. Mr. Ercolani will install a two-way intercom buzzer system at the rear of the building to summon an employee in the store to show the handicapped person to the front door. Staff added also that Mr. Ercolanti plans to add an awning to the rear entrance as well as large planters and a trellis to break up the expanse of the back wall. Councilman Lojeski reported the bus which had been parked against the wall behind the Towne Center Building has been moved onto the owner's parking lot. The bus is still an eyesore. Also the alley-way at this same area behind the Towne Center Building is overgrown with weeds that should be cleaned out. Staff will look into this situation. Mayor Fasching reported that Temple City is developing a downtown revitalization program very similar to the program presented to Arcadia by Michael Freedman. The Mayor distributed copies of a newspap~r article describing Temple City's program. At 8:08 p. m. the City Council ADJOURNED to TUESDAY, NOVEMBER 17, 1992 at 6:30 p. m., in the Confernce Room of the City Hall Council Chambers. G ~..uJ ~~ Ju . Alford, C Cler~ 2 ll/lO/92 I I , - .' " T RAN S C RIP T (Insofar as decipherable) RELATING TO ARCADIA CITY COUNCIL WORK SESSION NOVEMBER 10, 1992 AGENDA ITEM NO. 1 PRESENTATION OF BUDGET INFORMATION BY JIM DALE, FINANCE DIRECTOR "FINANCIAL REPORT" l CITY COUNCIL WORK SESSION - NOVEMBER 10, 1992 MAYOR FASCHING CITY MANAGER DUCKWORTH COUNCILMAN MARGETT DUCKWORTH MARGETT DUCKWORTH FASCHING DUCKWORTH MARGETT FASCHING DUCKWORTH FASCHING 1'11 turn the meeting over to Mr. Jim Dale, our Finance Director J for presentation of our budget. Maybe, before we do that, let me offer a few comments of introduction, I think, that kind of tie this whole thing together. At your October 10 corporate planning session where we, as a group, convened with Mr. Bill Lewis, the Council identified five priorities that you wanted us to focus on and provide immediate emphasis on for this fiscal year between the time of that (inaudible) meeting and July 1 of next year. And this kind of becomes a little bit of a repetition of the introduction that we used last week, because one of those priorities was economic development, which the Council saw as, sub a, being development work on Nordstrom's so we get the Nordstrom's thing completed, and sub b, the development of a strategy including design considerations that might assist in the downtown revitalization program, and so we heard a presentation on that, all except for Councilman Harbicht who was not able to be with us but has the wonderful experience of the whole evening on video tape.. . the video tape for that evening which addresses the Council's economic development priority. A second priority that the Council wanted us to address was the completion of the fire station construction over on Fire Station No. 2. A third item of work that the Council wanted us to proceed with was the bringing to construction and completion as soon as possible the Library expansion. A fourth item had to do with the department head corporate planning session similar to the October lO Council effort. And last but not least, the Council identified the need to do some long-term financial planning, including looking at the budget and what the implications on the budget of the State actions over the past year will be. And that would include, as well as State actions, what some of the recession kinds of economic impacts to the budget have been and what we think they will be in the future. Jim Dale, the Finance Director, has been working for quite a number of weeks now to develop the presentation that he's going to make tonight, and I think it addresses the questions that we need to look at and starts to lay a foundation for some efforts that we as a group can undertake in advance of next year's budget consideration which will provide a foundation for that consideration. So with that, this is the presentation and Jim is going to go through it. Don, before you get started on that, will you back up to the one just prior to your second-to-the-last statement there about staff corporate meetings or something.... Yes. I think it was Mayor Fasching that suggested, and in my notes, agreement from the group that this kind of corporate planning session would be valuable for the department heads as well. And so we've scheduled that. Is this what we're hearing tonight? No, that's a totally separate effort, a totally separate priority. You're referring to a similar meeting like we had for the department heads. Right. Oh, the one that we had with Lewis. Oh, O.K., fine. We thought it would be well that they reviewed everything that we did at that meeting, and be aware of what we were doing and what we were talking about. And so basically the Council's got five top priorities identified and we're picking them off one at a time and beginning work on those. You listed here the Fire Station and the Library. What did you have as No.4? 1 DUCKWORTH FASCHING DUCKWORTH FASCHING DUCKWORTH FASCHING DUCKWORTH MARGETT DUCKWORTH FASCHING DUCKWORTH MARGETT FASCHING FINANCE DIRECTOR DALE . I don't have them in any particular order. Fire Station, Library, economic development, which had a sub a of Nordstrom's and a sub b of downtown. O.K., redevelopment you're saying. Well, economic development is the word I use. Downtown revitalization in there? Yes. Downtown development strategy including design considerations, which is downtown revitalization, which is the program that we heard last week. And what did you have after the Library? The department head corporate planning session. And then last but not least, No.1, in fact, on my list taken from that day, was the developmen of some long-term financial plans including a look at the budget and wha the implications of the economy as well as State actions are for us in th future. O.K., going back to that staff's corporate planning, is that scheduled? Yes, for some time in January. ..January 7th and 8th. Is that with Lewis? Yes. Is that on a weekend or a weekday? O.K. Jim. O.K. What we're going to do tonight, just to start it off, the purpose of what we're trying to accomplish tonight is get you informed on what the recession has done to us, and you'll see that it's had a big impact on the City of Arcadia just like it has everybody else. And also what the State has done to us in their budget balancing acts. In addition to that we've made some recommendations that you might want to consider to address some of the problems that we see coming up in future years. And then finally what we want to do is begin a process to develop some financial strategy for long-term financial growth. So that's essentially what we want to do, and what we want to do is keep it open so that any questions that you have, just feel free to drop in on it, because what we're trying to do here...in fact, let me go on with this a little bit and give you some idea what specifically we're going to talk about. In your newsletter last week you got a copy of a memo that I've included in this packet about the State budget and what their actions meant to the City of Arcadia. And although that's happened a couple of months ago, nothing's really changed at all. In fact, even back in September we made a comment that unfortunately even at that early stage there was discussion that the State would take additional property tax revenues in future years. And now we see in the reports in the newspaper that the State is now contemplating maybe a $5,000,000,000 shortfall in this fiscal year. So this memo really is about what the situation is at the present time. What we're going to do tonight is talk briefly about some of the problems that are facing cities nationwide. We're going to talk a little bit about the State budget and how it impacts us. But more than that, we're going to talk about financial trends, and I think you're going to find them interesting and kind of enlightening. Then we're going to talk about some of the future challenges that we have in the coming years, and then actions that we think maybe you might consider taking. I've included in this packet a number of articles from magazines or newspapers, and these are a couple of weeks old but we could go to any day and pick these things out. And what these articles are generally saying is that cities nationwide are suffering some real tough times right now because of the economy, and California is certainly experiencing this. And one of the articles here is out of the Western City and the president of the League made some comments about the good, the bad, and the ugly, and I'll just cite a couple of things and let you read this later. But he indicates, "The bad was easy 2 to identify. The economy of California was in the toilet, and its impact on the lives of millions of our cities was profound. Jobs left the state faster than a speeding bullet." And he goes on to say, "No matter where our cities turned, people were demanding more services while our tax base shrunk to a new low." And this is just typical kind of rhetoric that you see in the paper. One of the articles that's in here talks about "California's listless economy won't recover before 1995," and we've heard that from a number of economists now, "putting the new State budget already in the red and creating the possibility of a $5 billion shortfall next year." And that's before we even start in the budget. So that kind of gives you an indication of some of the things we're facing down the line. MARGETT Everything, Jim, that you're referring to now, we have in this packet, right? DALE That's correct. It's just articles. And I read in the paper this morning San Bernardino County is dealing with the problem.. .you just read it every day. So I just put a sampling of those articles in here. FASCHING The pages that were in the newsletter are the same pages that are in here? DALE The pages in the newsletter was just my memo. FASCHING That's in this packet? DALE That's correct. One of the things...I pulled out some items from a study that was done by the United States Conference of Mayors, just to give you an indication, and they surveyed some 200 large cities across the United States. And I just picked out a few of them.. .you can see this on page 7. As far as workers go, 73% of the cities surveyed have had to reduce city employees since 1990; 42% of the cities surveyed reported having to freeze or reduce the salaries of city workers. Then on the revenue side they said 75% of the cities surveyed requested increased user fees to deal with the budgeting shortfalls; 56% surveyed reported that revenues had dropped since the start of the recession. And then the future.,. and remember this report here happens to be about six months old, it was done back in May...I think things are probably worse now, in California even worse. They're saying 54% of the cities surveyed feel they need to cut city forces between then, May, and the end of the fiscal year; 45% believe they need to cut city services further this year; and 49% believe they will need to request tax fee increases before the year is out. Really what we're saying is, just across the country it is really impacting cities to a great extent. And that just gives you an indication of what they're facing. As far as what the State has done to cities and how it's impacted the City of Arcadia, on our property taxes they have taken 9% of our property taxes, that's how the bill finally came out. Nine percent of the property taxes equates to about 1.6% of our revenue to the General Fund. It's not a big number when you consider percentage of the General Fund, but it's $375,000 we didn't have to worry about before. The other thing is that it's a percentage, that means next year 9% is going to be maybe $405,000, the following year it's a half a million, and it will grow as our property taxes will grow. So it eventually will become an even larger number. They also took $54,000 in cigarette taxes. We anticipated that, so when we did the budget we did take the cigarette tax out. We didn't know about the property tax, so that was a new number for us. On cigarette taxes they took the balance of our cigarette tax this year. Last year, if you recall, they took half of it last year. So we have lost a revenue source there that was in the neighborhood of about $115,000 to $120,000. DUCKWORTH What's that overall percentage, Jim, of the property taxes of the General Fund? DALE The percentage is 20% of our revenue in the General Fund is property taxes. DUCKWORTH And what percentage did we lose? DALE Nine percent of that, which is 1.6% of the General Fund. As far as the Redevelopment Agency, this supposedly was one-time money. I'm not sure I really agree with that, although I think there's some interesting challenges to the State for taking that kind of money. But at any rate, 3 it was a one- time loss for fiscal year '92 -93 to the tune of about $337,000. So for this last city, total revenue loss and the Redevelopment Agency is about $766,000. That gives you an idea what they did as far as this year on the budget. And the thing that probably concerns me, at one time during the budget process they were talking about taking AB8 money, which would have meant $1.7 million, and they were seriously talking about this. So I think, in theory, next year when they start talking about the budget, that's going to be a number that they could take. And I think that they will be talking about some number between the $375,000 and the $1.7 million. ..we'll have to wait and see. FASCHING Could you maybe expound a little bit on the tax increment and where that comes from and how it's reduced, and just how does that work? DALE O.K. Our tax increment, of course, at one point when we developed our Redevelopment Agency, the taxes at that point were frozen. FASCHING So they're frozen at that level higher now? DALE No. What it really meant.. .it was frozen, then from that point on an increase in taxes and tax increment. What they did here is just merely took a percentage...I think it was 16-17% of our 1990-91 tax increment money. So whatever we had in 1990-91, I don't remember right off the top of my head...it was $1.5 million or whatever it was...they just took 17% of that one time. They said when they did it it was one time. The problem with this, there's a whole bunch of. ... FASCHING When you say they took it, how did they take it for '90-91? DALE Well, they're going to take it this year, but that's how they calculated it. They calculated it based on '90-91 tax increment revenues. And what they will do, they will just merely reduce our taxes. FASCHING Reduce our net back this year by that amount of money. DALE Right. The problem with tax increment money, some Redevelopment Agencies...it doesn't happen to us right now. ..they can be fully bonded so that this money could impact their ability to pay their bonds. But the law, they way it was written up, is that if the Redevelopment Agency couldn't pay it then it would be a debt of the city, so they've got you. FASCHING So basically next year, in '92-93, that tax increment money will still have this $337,000 in it. DALE No, because it's only one time. FASCHING But I thought they were taking it out of '90-91. DALE Well, they're taking it this year, but all they're doing is calculating it based on '90-91 tax increment figure. FASCHING O.K., but the next year we will be back to where we were before. DALE That's correct, in theory. FASCHING In theory, then, if they wanted to do it allover again they'd take another 9% or that. ..so they figure they could keep hitting, maybe annually, on a basis to keep doing that to the cities. DALE I think it's possible, yes. But on the first figure, the $375,000 that the General Fund is being hit, that is ongoing. FASCHING Oh, that's permanent. That was Proposition 13 money.... DALE That's correct. AB8 is what they finally called it. DUCKWORTH Can you clarify, Jim, what does that mean, that we lost $337,000 in tax increment...what's the impact tomorrow? 4 DALE DUCKWORTH DALE COUNCILMAN HARBICHT DALE COUNCILMAN LOJESKI DALE LOJESKI HARBICHT DALE LOJESKI DUCKWORTH Well, what we've indicated in some ways is $375,000 is a big hit on the City even though it's l.6%. We said in the current fiscal year,. .when we do our estimates early on we estimate what our expenditures will be and what our revenues will be, we do a pretty fair job. But oftentimes what happens, we'll see revenues come in a little better than what we originally estimated and we will see some expenditure savings for a number of reasons.. . maybe a position was vacant for a period of time. So what we think in the current year. ..and we're going to ask that we come back to you in, say, January and give you an update on our budget position or the fiscal position of the City, we may be able to see some either revenues that we didn't anticipate or expenditure savings that may offset that $375,000 in the current fiscal year. And how about the $337,000 from Redevelopment.. .what does that mean tomorrow? The $337,000, the way we see that, it wasn't a real significant thing to the Redevelopment Agency other than the fact that it limits their bonding ability. So if they wanted to go out and bond tomorrow, it would limit how much they could go out and get bonds for. It would limit the projects that we're doing by $337,000, or it would delay the Redevelopment Agency paying back the City the money that they now owe us. So those are the impacts of that money right there. Those are pretty significant impacts. They are, you're right. I guess the fact that it's a one-time tax loss, maybe we look at it differently than the property tax in the General Fund.. .that's not only an ongoing but it's going to increase each year. And you will see in a minute when we look at some of the trends, probably our best revenue is property taxes, the best revenue growth of any of the revenues that we have. It seems to me, though, Jim. ..you deal with the State of California...I don't know them too often to, say, subject somebody to this type of a hit and then say, "Well, next year we're not going to do it at all." I think once they've done it, they.. .everybody's kind of adjusted to this and so next year maybe it's not going to be that amount, we'll up it another percent or half a percent or something like that. I think we have to make the assumption that it's going to be there. I would agree. And I think it's a very easy place for the State to take it. You're talking about Redevelopment, Dennis? I tell you what, I don't think on the Redevelopment, that cannot grow significantly. And the reason I say that is because it's just going to cause such problems throughout the Redevelopment Agency because it's going to impact their bonding ability, it's going to impact their ability to pay on the bonds they already have outstanding. So I think the majority of the money they get in the future is going to come back to the General Fund, even though, you're quite right, that could still go on for some period of time. They could freeze that amount and just say, "Hey, we've done it once to you and you've survived, let's continue just to do it." If I could put on my legal hat for a minute, there's a significant legal issue about the constitutionality of that effort on the State's part. It may well be that if they keep it as a one-time kind of a thing and don't expand it that the cities are going to let well enough alone as a collective group and not take that constitutional issue on. But the Redevelopment Agency powers are set up in the State Constitution, and that means that an act of the Legislature probably can't change it. But there seems to be some kind of a truce around that issue; but if it gets too much bigger, there's an issue in the community that Mike will probably want to brief us on that some city will take it on because it will hurt them too 5 much. And about the time you default on the bonds is when you decide you hurt too much. Of course, we're not in that position. MARGETT It's really a strangulation, because Wilson is getting cut with the other end of his sword. He expects the cities to be the leading edge to pull him out of this recession that he's in and then curtails those areas of economic capacity to be able to do it. ..bonding, redevelopment. So that's a real political war-horse thing to mount. DUCKWORTH When David Dreier was here he talked about what's happening in the State, and he said it's the recession and we're losing jobs. And, clearly, redevelopment is the one real tool that we really have at the grass roots level to create more jobs. And for that reason, Wilson may not continue to cut it.. .he may, he may not. It is a complex issue. FASCHING I want to say this was an outstanding presentation. [AFTER THE PRELIMINARY STAFF REPORT AND DISCUSSION, STAFF OFFERED A SLID PRESENTATION IDENTICAL TO THE MATERIAL CONTAINED IN THE FINANCIAL REPOR PREPARED BY THE FINANCE DEPARTMENT.] LOJESKI Can I ask a couple of questions? Bill, there's always talk in the City that when certain entities in the City do construction or do things from a building standpoint they don't pay fees, inspection fees and things like that...specifically being Santa Anita Racetrack. Is that true? PLANNING DIRECTOR Sometimes they start work before they get their permits, but they WOOLARD eventually get their permits and pay for the. ... LOJESKI They pay for the inspection fees and all that sort of thing. WOOLARD That's all included in the permit fees. MARGETT Does the School District pay? WOOLARD No. We don't inspect them, though, either. LOJESKI Now, with the Hospital and their addition that they're going to be doing, do we get into any inspections with that? WOOLARD Well, honestly, I don't think so. State. I think that's also handled by the LOJESKI O.K. The other question is in regards to business licenses. Has there ever been any questions or any research done on why, let's say, a horse trainer, a horse owner, or a jockey who is actually doing business.. ,or a jockey's agent who is doing business in the City of Arcadia doesn't pay a business license tax? Because I don't think they do, do they? MAYOR PRO TEM CIRAULO As an independent contractor? As a businessman. HARBICHT It doesn't matter what they are...they're running a business. DALE I don't believe they pay...I'm sure they don't pay.... LOJESKI I don't think they do. HARBICHT Didn't we go over this a couple of years ago when you brought the same thing up or something similar. ... LOJESKI Yeah, and it was kind of shuffled off to Buffalo or something.. .it was like "Don't touch that one," or something. HARBICHT I mean, the fact is that if a guy who's cleaning pools here in town and cleaning pools in San Marino, he has a business license in both cities. If a jockey's agent is doing business here in town and Hollywood Park and 6 everywhere else, there's no reason why he should escape the business license. LOJESKI Well, it would be interesting, I think, to find out maybe from the neighboring cities, Inglewood particularly, do they impose that type of a situation to the owners, the trainers, the agents, the jockeys, all of those people who are independent contractors. MARGETT Well, I think the owners should certainly be tagged, that's for sure. LOJESKI That's all I had. HARBICHT One of your recommendations here, Recommendation No.1, is to conduct a mid-year review of the City's financial position. I can see where waiting a couple of months is probably going to increase the accuracy of the projections. Does what it costs us to continue business as usual for the next couple of months, is it worth it? Are we going to get enough increase in accuracy to make it worth it? The reason I ask the question is that you're projecting a million dollars out of balance right now. DALE In the next fiscal year, right. FASCHING More than...a million eight. HARBICHT Well, actually, you have here that the estimated revenue is $22,800,000 and the estimated expenses are $23,800,000. DALE You mean in the current year? HARBICHT In the current year. That puts us a million dollars out of balance. ~nd then your projection for next year is another million eight. DALE Well, if you'll look at, say, page 10, we are really imbalanced. We are imbalanced before the $375,000. If you go back to the budget, we have a balanced budget, but what makes that up is that one-time PERS thing. TREASURER PARKER Excuse me a second...I think that the expenditures may include that million-dollar transfer that was being made to the Equipment Replacement. And we don't consider that an actual expenditure, we consider that a transfer of the fund balance. So it may be included on this sheet.... DALE This is the budget right here. Total estimated revenues this year is $23,876,550. Appropriations is $23,832,513. HARBICHT Well, do we have a typo here on page 11 where it says $22,836,550? DALE We do, because on the revenue side it's $23,876,550. HARBICHT O.K., but that budget figure was made before we had the State hit. DALE Right. HARBICHT And I assume that there's some impact from Foulger Ford, an anticipated impact of that. DALE I think that when we did our estimates on revenue we anticipated Foulger Ford, so that's really taken into account. The only thing is, we are out $375,000 today because of what the State did. Other than that, that is the extent of it. MARGETT This year we're down $375,000, that's what you're saying. DALE If you just look at it from the standpoint.. .that's what the State took and we had a balanced budget up until then. And when we look at our revenues at the end of last month for the four months, really, it looks like we're pretty much on track, though. What we wanted to do was come back and try to refine that, say are we really on track? Are we really going to miss that revenue (inaudible). CIRAULO Well, I think we need to know that. 7 DALE Yes, absolutely. We're suggesting in January, if you wanted us to come back earlier we can--there's no reason why we can't. CIRAULO Well, better to pick up all the revenue you're talking about through the holiday season, through the end of the year. FASCHING Bob, are you thinking that maybe we should consider some of these. . . someth- ing in Phase I, and get going if we're going to do something and do it now rather than wait another two months? HARBICHT Well... . DUCKWORTH Phase I, we're recommending that even between now and then we undertake some actions to bring packages for your consideration. wouldn't be locked into approving them, of course. would You FASCHING Well, what are you going to do, bring back some recommendations? DUCKWORTH Well, we're going to bring back recommendations, sure. FASCHING When? DUCKWORTH Between now and January. What this says, following recommendations for immediate Council. ..it says "approval," but my understanding of that word is to bring it back for your consideration, my recommendation for your approval. FASCHING Well, one thing that comes to mind, rather than waiting until January and knowing we've got a fiscal situation here and we have been hit, is that I looked at this transient occupancy tax to where we are. . . every other city here has a 10% and we have 8%. So maybe, toss this around between us here, and see how we feel about that and what the ramifications are to consideration of an increase in this tax, because it's certainly something that seems it would be feasible to do if we have to start thinking about long-range effects here rather than waiting until January. DUCKWORTH That was our intent in these recommendations.... HARBICHT Transient occupancy tax is always the easiest tax for any city to impose because it's not imposing it on your own residents. But in these.. ,I'm referring now to the memo that came in our newsletter, I went through these possible options and I put T's by all the taxes and I put S's by the spend less...I've got mostly T's. I think we need to. ..a budget is revenues and expenditures, and frankly, my first interest would be to look at the savings part of the thing. Or we could cut expendi tures. . . it's government traditionally, just raise taxes if you're out of balance. It's what the State is doing.... The thing is, one significant potential savings is to renegotiate those contracts before January when the 3% and 4% increases kick in. And I frankly think that--I've said this before-owe were overly generous in the contracts that we signed and the increases that we handed out, and as the economy has turned down I think it's changed the thing quite a bit from a time when those decisions were essentially made. And while we see cities with higher increases are cutting back, or no increases in salary at all, or in the case of a lot of school districts, decreases in salary and stuff. CIRAULO They would have to agree to renegotiate, though, and I can't imagine them wanting to do that. HARBICHT Well, I guess my question is, how do we bring them to the bargaining table if in fact we wanted to. HARGETT (Inaudible) provides for that, didn't you say that? FASCHING I read something here that they wouldn't have to do it. MILLER They wouldn't have to. The employee units that have negotiated contracts have just had a contract. They'd say they don't want to talk about, we have an existing contract, and that's basically it. You could implore them to sit down, and even if they did sit down and meet and confer they still 8 wouldn't be bound to make any changes. And since we're into the contracts now, we couldn't impose this unilaterally with regard to those bargaining units that have agreements. So I just wanted to. . ,it does mention on page 45, it's alluded to there. HARBICHT I understand we can't impose it unilaterally. At the same time, there are other things that we can. ... I mean, contracts are reopened. ..like, if we say I "Well, we're going to have to cut back 10% on personnel," we can't. , . forget the number, "We're going to have to cut back personnel if we can't renegotiate these things." Then they have to decide whether they want some of their people to be furloughed or whether they want to come back... . CIRAULO Well, I'm not sure we necessarily have to cut back. a given. I mean, that's not HARBICHT I'm talking about it as a way of getting them to come to the bargaining table. CIRAULO Can't we explore the other possibilities first before we take measures like that. I think that's what we should do is take the easiest things first and see where we come out in terms of dollars before we approach things like that. HARBICHT What are the easiest things? CIRAULO A freeze; the potential budget options on page 46, Phase I; that's what we're talking about. Don will come back to us with recommendations, and then let's see what that totals up to. FASCHING I wouldn't want to be the one to tell anybody in the City we're going to cut down on Police and Fire personnel.... HARBICHT All right, let's forget.... FASCHING I know that, but let me continue that...in getting them back to the table to talk about their current contracts. If perhaps we could find a reason that would be satisfactory to them on the long range that would be inviting to them rather than. . . and I think the City Manager mentioned to me one day, he was looking at some options on long range to avoid negotiations every three years.. to kind of establish a level for our Fire and Police personnel. They might be interested in that and it might accomplish two things at one time. ..something to offer them for giving something to the City. DUCKWORTH I think I mentioned it to all of you, but if I haven't maybe a clarifica- tion. In my mind what the labor and management relationship issue is is how does the employer try to be fair to the employee. What the employee wants is fairness, what the employer, I think, certainly the City of Arcadia, wants is fairness. The question is how do you define that, what does it mean. And I think that traditionally what's happened with labor- management relations is you define it on the basis of who has the bigger club, or who yells the loudest or screams the longest or has the toughest attorney, and I think that's inherently a poor public policy. I'd like to see if we can explore a way to get around that. One of the implications of this presentation tonight, with 80% of your budget being personnel, we need to develop a sound labor-management relation policy which addresses our cost issues, which is fair to the employee and also fair to the organization. And so the question is how do we do that? The corollary of this presentation tonight is a presentation from the personnel folks that's in process as we speak to try to define fairness in some way so that we can get a handle on. . . were we overly generous last year or not? I don't know. I honestly don't know, and I don't even have a gut feel for it. Are we paying about right, are we paying too much, are we paying too little? And then the question is how, then, can we be fair to all of our employees in a rational, reasonable, kind of a way, and we just need some more time to get that aspect of the thing together and process on it. But it's a complex jump to go from zero to having a full survey on all these positions throughout the City to help us assess what's fair. 9 FASCHING Well, the one thing is that coming out of this meeting or into what I've heard tonight and looked at our graphs and charts and current situation and future, I really don't see a real bleak picture here at all for the City of Arcadia to my way of looking at it. I think that we have on the horizon some things that will really benefit us insofar as, say, the reopening of Hinshaw's, when that takes place, the development of the Foulger Ford property when it takes place, the development of the empty properties we have now in the redevelopment area, the addition of new stores and Nordstrom's to the mall, revitalization of our downtown areas...I think we have more pluses coming up in favor of this City than most cities have as far as looking to new and projected revenue in the future. I agree it doesn't help in the next 12 months or two years, possibly, but after a two-year period I think that we're going to be off on the road to some really good things for the City as far as income revenue is concerned. So I think that maybe it behooves us to not jump until January to decide where to go or what to do on anything until we se our six-month picture. HARBICHT I guess, in response to that, true. This City is not in danger of goin out of business, there are things on the horizon and some of the thing you outlined definitely are going to be part of Arcadia's future and help to insure Arcadia's prosperous future. The only reason for not waiting until January would be if the Council felt that we should be looking at renegotiating those contracts. If we wait until January, it's a done deal. And so, aside from how would we go about bringing them to the bargaining table, which is a detail, the question really that I would like to know is, does the Council feel that we should look to renegotiating those contracts or should we let them stand the way they are with the increases that are built in to them that take place in January? FASCHING This would include the Public Works... HARBICHT Everybody. FASCHING ...and the scheduled raise for the general employees. CIRAULO I for one don't think we should. I don't think that the increases were overly generous, I think they were just fair at the time we granted them. That was my sense of it. And I'm not in favor of renegotiating those contracts at this time. HARGETT Well, I don't agree. I agree with Bob. I think that they should be looked at. You know, we're looking at this year and everybody's saying, well, we're fine, we're only down $800,000 and everything is going to be blue skies and green lights, everything's lovely. But we've got to look a little bit further than just this year. I'm looking at next year and I don'C think that there's anything that we have said here that could not be implemented now to save us that hit for next year. And I think that fairness is...all important to me. And I think that Don Duckworth hit on it. And I think that if we are to ask for renegotiation with our contracts, I think that if we are going to ask for the reduction or no increase in those salaries that we're talking about, the 3 to 5%, then I think that we as a Council have to be willing to give something, and it mighc be time off, it might be something else that may be not impacting the wallet of the City. If we're talking about 3% or 5%, then whatever that equates to in hours off, I would be willing to consider that. But if we're going to ask City employees to give something, then I think that we also have to be, in our process of negotiations, be able to give something. I think that we ought to be able to start saving as much as we possibly can, because I think.. .next year is what I'm concerned about more than this year. FASCHING Well, next year, is that in anticipation of a possible hit by the State again? HARGETT Well, yeah, do you think they're going to.... FASCHING I don't know that. 10 MARGETT FASCHING MARGETT FASCHING CIRAULO MARGETT HARBICHT MARGETT FASCHING MARGETT McINTYRE DALE MARGETT MARGETT MARGETT FASCHING MARGETT FASCHING CIRAULO McINTYRE FASCHING HARBICHT FASCHING HARBICHT FASCHING DALE FASCHING Well, we don't know it, but by the same token you know that they're in shabby condition.. .where are they going to come and get it? Where are they going to do it? But to negotiate to give time off for. ..and not increase in the salary as called for.. . that reduces our efficiency to operate the City. By 3%. I don't know what the percentage is, but anytime we start reducing our work force. . . . I think the impact is far greater than you might imagine. Well, I disagree. hours. . .40 times 4 number of hours in I think that 3%, whatever that equates, 3%. ..how many is 160...200 hours approximately.. .would that be the a month that somebody worked, 200 hours? You're talking about a $300,000 to $400,000 savings. Right. Well, I'm talking aside from savings, though, Bob. In what, the 3%? 3%. How many hours does an employee work in a month? 2,080 hours a year. 171 in a month, I think. Well, what is that, is that 470? 62 hours a year. Well, that's what, one hour.... A little more than one a week. Is that one hour...did you say one week? That's a half a day a week. Big deal. You mean let somebody work 4 1/2 days a week instead of 5? Well. . . or let him work two weeks and take one day off. it...Friday off...I think that would be a great way. They'd love Police and Fire is in January for 3%, correct? O.K., and that takes them until next July, correct? Which is when their contract expires. It takes them to the end of their contract, I believe, isn't that right, Alex? No, they have another year beyond this year. Yeah, right, so it takes them to next July, correct? They' get 3% in January, 3% next July, 5% next January. O.K., so you've got actually 8% in one year coming up after July, And this year is going to be similar, because there was an increase in July and another one in January. Yeah, O.K. Now, Public Works, that contract just went into effect. When does their next increase come up? Next year will be their second year of their three-year contract. But they're not on the same July.... II DALE Yes, they are. They get 4% next July. FASCHING What do they get in January? DALE 3%. The whole City gets 3% in January. Every group gets 3% in January. FASCHING My feeling is that I wouldn't be in favor of...I don't think we have a serious enough situation that we can't overcome in some other areas. I think we should let this... bringing back to the table to assess our situation prior to their July increases rather than their January increases would be my feeling. CIRAULO Not only that, if I understand correctly, I believe that we've been very prudent.. .let's take the Police, for instance. I could be wrong about this, perhaps Dave can correct me. We don't have all the sworn officers that we're allocated to have, is that correct, Dave? HINIG That's correct. CIRAULO So we've been very prudent in not running that figure clear up to the ma that we're allowed to have. So at this point we shouldn't be penalized any further because of that is my feeling. FASCHING Now you're talking a hiring freeze. CIRAULO Well, that's a whole different story. That I could be in favor of. HARBICHT Are you in the process of hiring now? HINIG We're in the process of trying to hire. Our crime rate has gone up proportionately and we feel that we're a little shallow in our staffing. CIRAULO Our sworn officers are what, 75 or 77 or something like that? HINIG Although our strength is 77, we're currently at 75. DUCKWORTH Which has been. ..1 need to provide credit where credit is due. The Chief is thinking like a manager and keeping things held together in a responsible fashion, and yet obviously recognizes a need that he would like to fill them but he is trying to be a participant here with us as we go into the future. He's been a responsible manager and all of our department heads have been responsible managers. FASCHING Where do you stand in the Fire Department, Jerry? GARDNER In fire suppression we're finally up to full strength. We just filled two Fire Technician vacancies this past month, but we ran those vacant since January, so we had those two vacancies for almost ten months. So there's definitely a savings that already occurred there. And we are currently running two Dispatcher vacancies that we've had since January 1st to accumulate some savings there. We are interviewing one Dispatcher right now, we're right on the verge of hiring this person, but that still leaves us with a total of three vacancies in the department. FASCHING So they're reflected in all our budget reviews. FASCHING And all these were budgeted? GARDNER Oh, yes. DALE They would show up when we came back to you. FASCHING But they're already budgeted, so what we're looking at tonight is a balanced budget, they're already including these spots they're talking about. DUCKWORTH They're budgeted but the money hasn't been spent. HARBICHT But that's not uncommon, that happens.... 12 MARGETT But if you create a surplus between now and say in June, you can start next year with a surplus. As a matter of fact, I have to say and I'll take full responsibility for it, that PERS money I thought was money. . .not a refund as much as it was surplus that we had earned when I first viewed it. That's why when we came in with that I thought, well, we saved that much, maybe we can save that much next year. I misinterpreted when we were reviewing the budget last time. But I really think--and, of course, we're not reaching any conclusions tonight- -but I feel that we're fine this year, I'm not saying that. But we ought to be able to make all the austere moves that we possibly can this year so next year we can start and know where we are. I think that six months would benefit next year appreciably, because I think we're going to be hurting next year. HARBICHT How do you feel, Dennis? LOJ ESKI I can't understand why the Council was so generous when they gave those kinds of increases. I would use that at a secondary level. I would not recommend upsetting the apple cart at this time. HARBICHT Don't move on it now? FASCHING I think we could move in July if we have to if State come out with their budget, I forget? approve the budget? things get.. .when does the When are they supposed to DALE When we do our budget the State has never, to my knowledge, ever had their budget done, so they're always late in June, so this year.... FASCHING But we should be able to have a good feel for economic trends by next July if we have to bring people back to the table and we're forced with a situation where we have to discuss salary increases. But I think it's premature at this time. HARBICHT I think another thing in our favor is we've always budgeted very conservatively. As you notice, when we go out for bids on various things, we have a budgeted amount and then we have the bids, and almost invariably the budgeted amount is more than the bids. So we have kind of a built-in surplus every year that when we get to the end of the year we haven't spent all the money we budgeted to spend, which I think is a good policy.. .I'd hate to try to get it down to a gnat's eyelash and then find out that we estimated wrong and we're way over. But we see that time and again whenever we're going out for street improvements or whatever, we generally come in with our expenditures less than we budget. MARGETT That's on and City. true, bid items, Bob, when we're (inaudible) capital work and so so forth. But we're talking about general obligation money to the I don't know that we're that far off. ... DUCKWORTH I would guess you always have a surplus as far as.... PARKER If I may.. .in the past years we kind of looked at that. And like last year, we expended 98.3% of the General Fund, so we saved about 1.7%, which was about $300,000. And yet on the revenues, even though we did have some fluctuations on some of them, we were about 103% of what we budgeted. So we have in the past experienced anywhere from $500,000 to $1,000,000 spread--we've been narrowing it because we've been getting real tight on the budget. But we would still estimate that we might be within 1% or 1 1/2%. MARGETT You're talking about $300,000. PARKER About, yeah. we have never But, gone yes, we have over budget, experienced that every year in the past, of course. HARBICHT Well, what I'm hearing here is (inaudible) the Council is that we want to in January get this update from the Finance Department that they recommend and hold off on any significant moves until then. So be it. I guess that I would express my opinion as one Councilman that I would sure like to see us look at these "5" items over here rather than the "T" items. It's just too easy to, "Well, we' 11 increase this tax 1% and that tax 2%," and that's. 13 the way it seems to always happen. To me, a.tax increase is a last resort kind of a thing, that we should hopefully look for increased revenues through some of the things that are happening in the community where we can automatically get tax increases, like Nordstrom's and that kind of thing. And also if that isn't going to do it, I'd like to look at ways to reduce expenditures. And, sadly, you'll see in this chart here, 80% of the expenditures are personnel. And I mentioned to Don today when we were chatting about some other things that one of the things that I think that we should do, and I know we've done in the past, but look at subcontracting out some City services to private industry as a way of cutting our costs, and of course that only works if you reduce personnel at the same time. But I feel that's a very viable way of reducing costs, because getting an extra person just isn't that person's salary, it's all the overhead that goes along with that. So I'd like to see us looking at that. Another thing I'd like to see us doing is kind of taking a lot of the little small costs. And when I say "us" I don't mean this Council, but the staff as a whole, and maybe even to the extent of having some sor of a reward system for someone who comes up with a suggestion for savin money, and if that suggestion is implemented and the real savings are $1,000, they get $100 of it or something. I don't know what the details of the plan are, but there's nothing like that kind of incentive to get people to say, "Hey, maybe we should be Xeroxing on both sides of the paper," or something. ..1 don't know what it is, but there are potentials for saving in every organization. So maybe the staff could be thinking of some possible kind of a program that we could implement that might ferret out some of those things. MARGETT I would agree. I think you're absolutely right, and I think that probably the whole approach to budgeting, which we're going to be getting into...I guess that staff is almost getting into, aren't they, Don? Are you getting into budgeting pretty quick for next year, moving in that direction? DUCKWORTH We're starting the CIP. ..a week ago.... DALE We'll go out in December with the actual work papers for the.... MARGETT Oh, ready to start your next...I would think that probably some sort of an innovative approach to budgeting, whatever that may be, and you're the captain of the ship there, I think needs to be implemented, I really do. And I would like to see that. I think that we have to escape from this conventional, same old way of doing our budget, and I think that we have to be able to realize that we're business people. I think that every staff member has to realize that he's a business person and not a bureaucrat, that he doesn't have to take the label of a bureaucrat, that he is a business person, and really get into running those departments in an efficacious way so that we can save the taxpayer these dollars. And it might be there...it may not be in the wages.. . maybe it's just there in the operation of the day-to-day running of the City, I don't know. FASCHING Well, I think also that we have to, when we look at projected revenues and projections of this City that we don't get so involved with cutting and cutting that we lose sight of the fact that we have to also spend to create and make this a desirable City that business will want to come to in revitalizing our downtown areas and find ways to do those things at the same time, because that's what makes the City vital. MARGETT Well, yeah, I'm not arguing those points. I'm talking about the administration of the City, not necessarily the projects that need to be done to get this City to the point that we can rejuvenate the tax base. I think we're talking about two different issues. One is spending money to keep the City Hall running and open. Projects are something else. FASCHING Well, I think the study sessions we have had in rejuvenating the tax base of this City is to bring it up to a level where it's going to produce those revenues for us. I feel strongly and always have that we've neglected it for all these years, and you look around us and some of the things they've done to project revenues and bring in revenues, and this is where our redevelopment property is vital to us. 14 MARGETT You're right, I'm not arguing with you. I think maybe what I'm saying is the moves that Jim has brought here to us is the conserving of dollars to operate the City. I think there's a differentiation, unless I'm not looking at this thing correctly. But when we talked in terms of projects for the City, Water Department projects or downtown refurbishing projects, those funds are there and are available for that. I think we've got two things to think about, and maybe we should be thinking hard and firm about expediting some of these projects, Mr. Mayor, that will revitalize. FASCHING I guess I do look at things a little bit like this. ..when I looked at the transient occupancy tax that could generate, if we were just in line with the other cities at 10% rather than 8%, generating $300,00 in additional revenue, that's $300,000 we can spend on projects to further improve the City as a whole. MARGETT Well, that goes.. .but that's General Fund operation. FASCHING That's what I'm talking about. MARGETT But General Fund operation is not a project. FASCHING No, but that money comes in that we can utilize. MARGETT Yeah, for operation of the City, not for taking care of projects, am I right? FASCHING Can any of that money be used? DALE Well, you can use it for anything, it's unrestricted, but just right now all the TOT comes in the General Fund for operations. FASCHING See, we need that revenue to upgrade all these things that we haven't done for so many years. MARGETT Well, most of the upgrading, I thought, was coming out of Redevelopment and Gas Tax and that kind of. ... DALE The Capital Outlay Fund, right. MARGETT You're right, that's what I'm saying. FASCHING Money is money, one pocket to the other. MARGETT Well, yeah, but we've got money. I mean, if somebody came in here and Kinnahan comes running in here and has got a hotshot deal tomorrow morning and it would take $4,000,000 or $5,000,000 to put the deal together, I would say in spite of what the shortfall would be or what we're projecting as doom and gloom in our budget, I think that we'd hop on that right quick. FASCHING If it made money. MARGETT Absolutely. FASCHING Yeah, just like the Nordstrom's. That's a long-range payback with a lot of bucks. MARGETT That's true, but it isn't here yet. The stores aren't leased yet. The sales tax isn't here yet. DUCKWORTH One of the things that I would plan on doing would be coming back to the Council with your approval or concurrence here tonight with a comprehensive survey on the TOT and also the transfer tax so that we can look at the tax and give Council a little bit more substantial. .,. FASCHING There's no reason we should be behind these other cities in those two areas. I agree with you, Bob, it doesn't mean when we have some tight times that we run out and raise taxes, but maybe we hadn't looked at these things and we've been forced now to find out what our position is. I didn't know where we were on transfer occupancy tax, we're 8% and everybody else is 10%. I didn't know the City of Los Angeles and other cities have 15 raised that transfer tax up to double the amount they've been getting. I never heard those things before, nobody has ever brought them up. HARBICHT Well, we just raised the transient occupancy tax about three years ago. FASCHING Well, I wasn't here three years ago. HARBICHT Well, I'm not saying that these things haven't been done. FASCHING Well, I know they have been done, but here, now, today, we're still on the bottom of the pole. There's no reason we should be at the bottom of the ladder on those things. DUCKWORTH Everybody else has been increasing them as a way to deal with the State budget crisis and the recession, so that's the reason why. HARBICHT Yeah, it could be a lot of those changes took place a month ago, too. DUCKWORTH At the same time, as the department head management team goes through thei corporate planning session, we may be able to identify areas to eithe look at contract for services or look at ways to economize, and as those come up I'd like to be free to bring those to Council without waiting for any... . CIRAULO I think that's what we're asking for as part of the recommendation. That was all part of the Phase I recommendations, aren't they? Could you do this and then get back to us? MARGETT Don, I like that word "corporate" approach. I hope it means the same thing to you as it does to me. Would you define it so that I know that for sure we're heading into corporate approach. DUCKWORTH Well, a corporate approach looks at recognizing. our fiduciary and business responsibilities. It's a business, government is a business every bit as much as the private sector. We have a responsibility to watch the dollar, both on the income side and the expense side, and I assume the Council expects us to do that. MARGETT Good for you, that's great. DALE Could I just mention something, Bob. I wouldn't want you to think that we've got these figures in here incorrectly because the balanced budget is i~portant this year. If you go to page 11, what we really did on that thing was on the revenue side, you see we've got the $22,836,550. We should have noted it, but we took the $1,040,000 out of that, so if you add that back in there, you're back up to $23,876,000, and that really reflects the budget that was adopted, and so that's why I'm saying it's a balanced budget. HARBICHT I know the budget's balanced, but we're no longer working with the budget. DALE O.K., but we had talked at one time, when I looked at that I thought maybe that was a typo but it's really not. We just took that $1,040,000 out of there. HARBICHT That's why I'm concerned about it, because right now our estimated revenues are $1,000,000 short of our estimated expenses. DALE Because of that one-time money, right. DUCKWORTH One of the things as we talk about new approaches to government that I wanted to raise here with the Council...we've talked and I think Cindy has called each of you about the general membership meeting of the San Gabriel Valley Association of Cities and the Independent Cities Association which will be November 19. The program that night is the reinventing government program with Ted Gabler, that some of you folks have heard about and talked about. Ted, I guess, in some circles has come to be known as the father of entrepreneurial government. The book on the best-seller list is "Reinventing Government." If Ted is the same old guy that June and I reme~ber, he will say lots of things that will provide stimulation and an 16 enjoyable evening, as well as valuable thoughts for us as we go through our budget in January and then in the coming year. So it should be a great program, and I'd like to invite all of us to go that can go. It will be at Almansor Court in Alhambra, so it's close, and it would be an opportunity for all of us to.... LOJESKI Didn't Ted formerly work for the City of Visalia, Don? MARGETT What's the subject for conversation going to be? DUCKWORTH Reinventing government, I'm sure. He's given up the tiddlywink speech a long time ago. This one he's making money with. MARGETT Would it be appropriate for some staff people to be there? DUCKWORTH Absolutely, and we'll make that invitation, O.K.? FASCHING O.K., are we through with the budget, then? Thanks, Jim, Jerry, and Don. Beautiful presentation, and I know I sure understand a lot of things better now than I did prior. Do you want to tell us about Rod Gunn and Associates? 17