CITY COUNCIL: Special Meeting on Fiscal Years 2010/11 – 2012/13 Triennial Budget

NOTICE OF SPECIAL CITY COUNCIL MEETING
Special Meeting
Wednesday, June 16, 2010 – 5:00 p.m.

Council Chambers
East side of Monte Verde Street between
Ocean and Seventh Avenues

Live video streaming available at:
www.ci.carmel.ca.us

Broadcast date
Sunday, June 21, 2010
8:00 a.m., KMST Channel 26

I. Call to Order

II. Roll Call

III. Pledge of Allegiance

IV. Orders of Council
A. Study session and public hearing to review/adopt Fiscal Years 2010/11 – 2012/13 Triennial Budget.

V. Adjournment

The City of Carmel-by-the-Sea does not discriminate against persons with disabilities. Carmel-by-the-Sea City Hall is an accessible facility. The City of Carmel-by-the-Sea telecommunications device for the Deaf/Speech
Impaired (T.D.D.) number is 1-800-735-2929.

Any writings or documents provided to a majority of the City Council regarding any item on this agenda will be made available for public inspection at Carmel-by-the-Sea City Hall, on the east side of Monte Verde Street, between Ocean and 7th Avenues, during normal business hours.

Please note: Copies of the material for this meeting are available at City Hall and posted on the City’s Website, www.ci.carmel.ca.us.

CITY OF CARMEL-BY-THE-SEA
STAFF REPORT
TO: MAYOR McCLOUD AND COUNCIL MEMBERS
FROM: RICH GUILLEN, CITY ADMINISTRATOR
DATE: JUNE 14, 2010
SUBJECT: PROPOSED F.Y. 2010/2011 ANNUAL BUDGET AMENDMENTS

COUNCIL POLICY DIRECTION
The Council at its June 2nd Budget Workshop directed staff to review and revise the budget as follows:

1. Verify the funding amounts in the reserve accounts.

2. Reduce the proposed draw on the reserve accounts to less than 10% of the total discretionary reserves or somewhere in the range of $400,000 to $600,000.

3. Shift the “Road Impact Fees” from funding Public Works staff to the Capital Improvement Program for street improvements.

4. Include funding for a beach cleaning machine (rake) via a lease or rental option.

5. Develop a plan to ensure 100% cost recovery on City fees.

6. Review Street funded projects.

Optional:
7. Consider the reduction of the City’s workforce.

RESERVE ACCOUNTS
The draft Budget (page G-4, Attachment A) lists the Reserve accounts and the “projected” balances. Attached is a summary explaining the reason for each Reserve account (see Attachment B). The figures on this summary aren’t audited and are the staff’s best judgment on what the balances will be at the end of the current fiscal year and what the balances will be at the end of the following fiscal year or June 30, 2011. Included in this list is the estimated interest on some of the reserve funds as well as the proposed reserve fund transfers to and from the General Fund in the amount of $854,968 which is about $44,000 more than the earlier budget message.

RESTRICTED RESERVES
The Council has two reserves with specific restrictions and three others that are restricted by the Municipal Code and, unless the Code is amended, remain that way. For the purposes of this discussion, reserve funds that were designated by a resolution are considered unrestricted since they can easily be revised by adopting the F.Y. 2010/2011 Budget resolution.

Below is list of both restricted funds and unrestricted or discretionary funds available:

Total Reserve Balances: $9,777,353

Restricted:
OPEB $1,088,500
Wrkrs Comp $ 786,170
Debt Service $ 593,500
Parking In‐Lieu $ 700,000
Benefit Liability $ 471,000
$3,639,170

Unrestricted or Discretionary $6,138,183

The highest drawdown on reserves discussed by the Council was at a 10% level of the discretionary reserve balances. Ten percent (10%) equates to a $613,818 drawdown. Further discussion resulted in looking at a drawdown of reserves in the $400,000 to $600,000 range.

PROPOSED AMENDMENTS TO THE DRAFT BUDGET
FOLLOWING ARE THREE OPTIONS FOR A DRAWDOWN OF RESERVES:

Option 1 Reserve Drawdown
The Council direction at the June 2nd Budget Workshop was not to use the $150,000 of Road Impact Fees (Tab 9, page RD-1) to offset Public Works maintenance staff expenditures. This would require that we add $150,000 to the reserve deficit of $854,968 shown in the draft budget. This increases the deficit to $1,004,968.

This option applies expenditure reductions that have no impact to the current staffing levels. This drawdown includes a shared service, outsourcing, and a reduction by other agencies.

Budget Deficit $(854,968)
Road Impact Fees $(150,000)
$(1,004,968)

Traffic Officer $50,000
Public Meetings $61,000
SCC Grant $30,000
Sunset Refin $27,000
Forest Theater $38,300
$206,300

Total $(798,668)

The traffic officer cost is split 50/50 through a shared services agreement with the City of Pacific Grove. The public meetings SB90/State mandated costs reimbursement application was completed and will be received in the next fiscal year. The SCC Board has agreed to reduce the proposed $680,000 enabling grant to $650,000. The refinancing
of the revenue bonds for the Sunset Center was presented at the June 8th Council meeting.

Staff is assuming for now that the refinance will yield a $27,000 per year savings. The City’s financial advisor was directed by the Council to review other financing alternatives, but for purposes of preparing the amended draft budget, staff will use this figure. Finally, staff is recommending that the Forest Theater Renovation design work be deferred in order to scale back the project to improve the ADA infrastructure and the
restrooms. Thus, Forest Theater cost is removed for the time being from this year’s Capital Improvement Budget.

Option 2 Reserve Drawdown
This option applies reductions to vacant staff positions in addition to the reductions applied in Option 1.

Budget Deficit $(854,968)
Road Impact Fees $(150,000)
$(1,004,968)

Traffic Officer $50,000
Public Mtngs $61,000
SCC Grant $30,000
Sunset Refin $27,000
Forest Theater $38,300
Finance Spec. $30,000
Paid Call FF $15,000
Police Off (6 mos) $50,000
PD Shared Services $50,000
$351,300

Total $(653,668)

The finance specialist and police officer positions were recently vacated. The draft Budget included these two positions. Staff is recommending replacing the finance specialist position with a part-time person. The police officer position will be frozen for six months and we will reevaluate filling the position at mid-year. With the hiring of the three additional fire fighters, the cost for paid call fire fighters can be lowered without any detriment to public safety.

Staff has been meeting weekly with the City of Pacific Grove to review whether there is an opportunity to share additional Police Department services. The discussions are very preliminary and will require more vetting. However, conservatively speaking there will be an opportunity to reduce expenditures through a public safety shared services agreement.

Option 3 Reserve Drawdown (alternate)
It was suggested as an alternate option that some consideration be given to reducing the City’s workforce and reaching a goal of drawing down at the most $400,000 from reserves. Subtracting $400,000 from the $653,668 shown above in Option 2 equates to reducing the staff costs an additional $253,668.

To obtain this additional reserve drawdown goal, the workforce will need to be reduced by another 5 to 6 full time equivalent (FTE) employees. If the Council decides to select this alternative, staff will need 45-60 days to develop an employee reduction plan, to meet and confer with the labor groups regarding the proposed layoffs, and finally seek Council action to implement the layoffs.

STREET PROJECTS
All the above three options allow for the use of the Road Impact Fee on street projects. If this is the direction of the Council, the Capital Improvement Program will be amended to include street overlays in the amount of $150,000.

The TAMC staff was contacted to determine what funding is programmed for Carmel-by-the-Sea. The programmed projects are identified on the attached spreadsheet (Attachment C). The $250,000 set aside for Junipero reconstruction is restricted for this project and can’t be reprogrammed. The estimate for construction as shown in the budget is $300,000. The bid documents have been prepared and the project is currently planned for bid award in August 2010 by the Council with construction to start in September 2010. Depending on the bid submittals, the project will need additional funding over the $250,000 to complete or in the case of the draft Budget, an additional $50,000. There is no City match required for this project. The remaining unrestricted TAMC funded projects, i.e., Junipero-Ocean & 8th ($41,760), Junipero repave and streetscape ($171,000), and San Carlos repaving ($50,000) can be reprogrammed for another project. Such a request will require approval by the TAMC Board of Directors.

BEACH RAKE
One suggestion was to share the use of the beach rake with the City of Monterey. This isn’t feasible since there is no safe and easy way to transport the rake from the City of Monterey to Carmel Beach.

Another suggestion is to rent the beach rake. Staff is investigating whether this is feasible. This suggestion is very attractive since it won’t be expensive and will give the Carmel community as well as the staff time to evaluate the effectiveness of using the rake to remove charcoal and other detrimental objects. More information on the rental aspect will be forthcoming.

COST RECOVERY PLAN
The City fees are reviewed annually by staff. This review typically evaluates existing fees and, on occasion, introduces new fees. If the direction from the Council is to evaluate the entire universe of City services for cost recovery, this will take more time beyond the June 30, 2010 deadline to adopt the annual Budget. One alternative is to hire a professional firm that is familiar with developing a plan of this nature.

Another alternative would be to ask staff to prepare a plan, but this will depend on how extensive a plan we have in mind and the staff priorities established by the City Council. Staff recommends that a report be submitted to the Council within 60 days on how to best accomplish this task.

City of Carmel-by-the-Sea
Reserve Balances
FY 2010-11 Projected Balances
Estimated FY 10/11 Transfers Estimated
7/1/10 Interest/ (To) From 6/30/11
Reserve Name Purpose Balance & Oth Income Gen Fund Balance
Capital Capital improvements & outlays $ 2,758,219 $ (510,818) $ 2,247,401

General Fund
For general fund shortfalls. Policy C94-01 requires at least 5% of annual
revenues be held in reserve. $ 2,065,324 $ (300,000) $ 1,765,324

OPEB To fund portion of Other Post Employment Benefits Liability (GASB 45) $ 1,088,500 $ 21,770 $ 1,110,270

Workers Compensation For self-funded workers comp claims, as requred by Muni Code 3.08.050 $ 786,170 $ (80,000) $ 706,170

Debt Reduction Reserve To fund Sunset Center bond debt reductions, per Reso 2008-8 $ 720,500 $ 14,410 $ 734,910

Debt Service
To comply with reserve requirements of the the Sunset Center 2001
Certificates of Participation Trust Agreement with Union Bank $ 593,500 $7,500 $ (7,500) $ 593,500

Parking In-Lieu To develop off-street parking in or near business district $ 700,000 $ 11,200 $ 711,200

Benefit Liability Employee vacation and sick leave, as required by Muni Code 3.08.030 $ 471,000 $ (56,650) $ 414,350

Hostelry
For transient occupancy tax shortfalls. Policy C94-01 requires at least
10% of annual TOT revenues be held in reserve. $ 290,140 $ 100,000
$390,140

Natural Disaster
For unanticipated expenses during an emergency event and recovery
periods $ 250,000 $ 250,000

Forest Theater For Forest Theater improvements $ 54,000 $ 6,250 $ 60,250

Total $ 9,777,353 $ 61,130 $ (854,968) $ 8,983,515

Note: Shaded lines indicate reserves based on municipal code, City policy, or trust agreement provisions.

Attachment “B”
CITY OF CARMEL‐BY‐THE‐SEA
RESERVE BALANCES EXPLANATION

CAPITAL
Fund created to pay for a capital outlay or capital improvement. The Capital Reserve Fund is a very important aspect of a multi‐year financial plan, particularly to ensure the ability to fund future City infrastructure construction projects.

GENERAL FUND
Fund established by Policy No.C94‐01 which states:
“General Fund and Hostelry Fund reserves shall be maintained at no less than ten percent (10%) of their annual projected revenues.”

OPEB (Other Post Employment Benefits)
Retirees are provided post‐employment medical benefits if they meet the eligibility requirements. GASB (General Accounting Standards Board) 45 requires governmental agencies to account for the costs of postemployment benefits on an accrual basis rather than on a pay as you go accounting.

WORKERS’ COMPENSATION RESERVE FUND
Fund established by Municipal Code Sec. 3.08.050 as follows:
There shall be maintained by the City a fund known as the “Workers’ Compensation Reserve Fund” which fund shall be maintained at a minimum level of $250,000. The fund shall not be used without prior approval by the City Council.

DEBT REDUCTION RESERVE
Fund established by Resolution 2008‐8 as required for the Sunset Theater revenue bond financing:
Approve establishing a Reserve for Debt Reduction‐Sunset Center Certificates of Participation and transfer $674,500 from the General Fund to the new reserve.

DEBT SERVICE
Fund established to comply with the reserve requirement for the Sunset Center 2001 Certificates of Participation Trust agreement with Union Bank.
This fund reserve remains in place until the debt service is fully paid. Debt service ends on October 1, 2031.

PARKING IN‐LIEU
Fund established by Municipal Code Sec. 17.38.030 as follows:
Funds collected by the City from such payments shall be deposited in a specific fund and used by the City to acquire and/or develop off‐street parking. Such parking shall be available to the public and shall be in
or near the business district of the City.

BENEFIT LIABILITY
Fund established by Municipal Code Sec. 3.08.030 as follows:
There shall be retained in the City treasury a special fund known as the “Benefit Liability Fund”, as provided for in the Government Code of the State of California.

HOSTELRY
Fund established by Policy No.C94‐01 which states:
“General Fund and Hostelry Fund reserves shall be maintained at no less than ten percent (10%) of their annual projected revenues.”

NATURAL DISASTER
Fund established by Resolution No. 95‐58 which states:
“Establish a revised target level for the Emergency Response Fund of $250,000.”

FOREST THEATER
Fund established in F.Y. 2006/2007 as part of the budget adoption to pay for Forest Theater capital improvements.

Attachment "C"
TAMC GRANTS FOR CARMEL‐BY‐THE‐SEA
RSTP Programmed Projects

Project Budget Funding Type
Install Bike Racks $ 13,000 Other ‐ restricted

Junipero Ave. (Ocean & 8th) $ 41,760 Fair Share (1)

Junipero Ave. (Ocean & 8th) $ 250,000 Other ‐ restricted

Junipero, Ocean‐8th, repave, streetscape $ 171,000 STIP Buyout (2)

San Carlos repaving $ 50,000 STIP Buyout (2)

TOTAL $ 525,760

(1) Regional Transportation funding distributed equitably by population and street miles to TAMC member agencies

(2) State Transportation Improvement Program [STIP] funding specifically designated for Carmel‐by‐the‐Sea

MINUTES
SPECIAL CITY COUNCIL MEETING
CITY OF CARMEL-BY-THE-SEA
June 16, 2010

I. CALL TO ORDER
The special meeting of the City Council of the City of Carmel-by-the-Sea, California, was held on the above date at the stated hour of 5:02 p.m. Mayor McCloud called the meeting to order.

II. ROLL CALL
PRESENT: Council Members Burnett; Hazdovac; Sharp; Talmage & McCloud
STAFF PRESENT: Rich Guillen, City Administrator
Heidi Burch, City Clerk
George Rawson, Public Safety Director

III. PLEDGE OF ALLEGIANCE
Members of the audience joined the Mayor and Council Members in the Pledge of Allegiance.

IV. ORDERS OF COUNCIL
A. Study session and public hearing to review/adopt Fiscal Years 2010/11 – 2012/13 Triennial Budget.

City Administrator Guillen presented the staff report.

Mayor McCloud opened the meeting to public comment at 5:24 p.m.

Nancy Budd, Executive Director of the Center for Photographic Art at the Sunset Center, requested funding for a student photography program.

Jim Price, Chair of the Sunset Center Board of Directors, offered to personally sponsor the photography program.

Jim Emery, Monte Miller, Michael Lynch, Barbara Livingston, Carolyn Hardy, and Allison Shelling each presented their budget concerns and suggestions.

Mayor McCloud closed the meeting to public comment at 5:44 p.m.

City Administrator Guillen and Public Safety Director Rawson answered questions from the public.

Council took an eight-minute recess at 6:37 p.m. for technical reasons.

Mayor McCloud re-opened the meeting to public comment at 6:45 p.m.

Angie Irvine spoke about the beach rake.

Mayor McCloud closed the meeting to public comment at 6:46 p.m.

Council Member TALMAGE moved to adopt the Fiscal Years 2010/11 – 2012/13
Triennial Budget with the following amendments: add $150,000 back into the Public Works budget; keep vacant the open Police Officer position for one year; add $15,000 for the trial rental of a beach rake; put back $13,500 from the refinancing of Sunset Center; and put $525,670 from TAMC into the capital program, seconded by Mayor McCloud and carried by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT, HAZDOVAC; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
ABSTAIN: COUNCIL MEMBERS: NONE

Mayor McCloud opened the meeting to public comment at 7:17 p.m.

Monte Miller addressed staff salary reductions.

Barbara Livingston addressed taxing Internet sales.

Mayor McCloud closed the meeting to public comment at 7:21 p.m.

A. Consideration of a Resolution approving the Memorandum of Understanding regarding the Maintenance of Effort requirements related to Proposition 172 funding Council Member TALMAGE moved to adopt the Resolution approving the Memorandum of Understanding regarding the Maintenance of Effort requirements related to Prop 172 funding, seconded by Council Member BURNETT, and carried by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT, HAZDOVAC; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
ABSTAIN: COUNCIL MEMBERS: NONE

Council Member HAZDOVAC moved to adopt the Memorandum of Understanding
Regarding the Maintenance of Effort Requirements related to Proposition 172 Funding between the City of Carmel-by-the-Sea Legislative Body and the Directors of the Designated Safety Service Departments, seconded by Council Member SHARP, and carried by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT, HAZDOVAC; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
ABSTAIN: COUNCIL MEMBERS: NONE

Council Member HAZDOVAC moved to adopt the Investment Policy and Guidelines
C 89-27, seconded by Council Member BURNETT and carried by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT, HAZDOVAC; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
ABSTAIN: COUNCIL MEMBERS: NONE

B. Consideration of a Resolution adopting the Fiscal Years 2010/2011 through 2012/2013 Triennial Budget.

Council Member TALMAGE moved to amend the Resolution adopting the 2010/2011
through 2012/2013 Triennial Budget to reflect Council adoption of Fiscal Year 2010-2011 of the 2010-2013 Triennial Budget, seconded by Council Member BURNETT and carried by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT, HAZDOVAC; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
ABSTAIN: COUNCIL MEMBERS: NONE

V. ADJOURNMENT
Mayor McCloud declared the meeting adjourned at 7:34 p.m.

Respectfully submitted, ATTEST:

_____________________________ ____________________________
Heidi Burch, City Clerk SUE McCLOUD, MAYOR

MINUTES
SPECIAL CITY COUNCIL MEETING
CITY OF CARMEL-BY-THE-SEA
June 2, 2010

I. CALL TO ORDER
The special meeting of the City Council of the City of Carmel-by-the-Sea, California, was held on the above date at the stated hour of 5:04 p.m. Mayor McCloud called the meeting to order.

II. ROLL CALL
PRESENT: Council Members Burnett; Hazdovac; Sharp; Talmage & McCloud
STAFF PRESENT: Rich Guillen, City Administrator
Heidi Burch, City Clerk
George Rawson, Public Safety Director

III. PLEDGE OF ALLEGIANCE
Members of the audience joined the Mayor and Council Members in the Pledge of Allegiance.

IV. ORDERS OF COUNCIL
A. Study session and public hearing to review/adopt Fiscal Years 2010/11 – 2012/13 Triennial Budget.

Mayor McCloud asked the audience if any of the answers to budget questions needed clarification.

Adam Moniz requested clarification of the answer to Question #100 regarding the selfsufficiency of the Sunset Cultural Center.

Alison Shelling requested clarification of the answer to Question #80 regarding Police Department salaries.

Mayor McCloud opened the public appearances section for comment at 5:34 p.m.

Monte Miller, Carolyn Hardy, Barbara Livingston, Alison Shelling, Angela Irvine, Bob Irvine, Michael LePage, Carrie Theis, president of the Carmel Innkeepers’ Association, Adam Moniz and Monta Potter, CEO of the Carmel Chamber of Commerce offered their budget suggestions and/or concerns.

Mayor McCloud closed the public appearances section for comment at 5:59 p.m.

Council directed staff to provide additional information on how much revenue the City could capture if fees were assessed to cover the cost of provided services, options on staff reductions, and details about paid parking.

V. ADJOURNMENT
Mayor McCloud declared the meeting adjourned at 7:24 p.m.

Respectfully submitted, ATTEST:

_____________________________ ____________________________
Heidi Burch, City Clerk SUE McCLOUD, MAYOR