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20120612 Special City Council Meeting - Minutes MINUTES OF THE SPECIAL CITY COUNCIL MEETING OF THE CITY OF VERNON HELD TUESDAY, JUNE 12, 2012, IN THE COUNCIL CHAMBER OF THE CITY HALL LOCATED AT 4305 SANTA FE AVENUE, VERNON, CALIFORNIA MEMBERS PRESENT : Davis, McCormick, Maisano, Ybarra MEMBERS ABSENT : None The meeting was called to order at 9 : 00 a.m. by Mayor Pro-Tem Davis . Councilman Maisano led the flag salute . The City Clerk announced that a second Public Comment section will be added to the agenda after the discussion item. Legal Counsel Dana Reed advised that the public is free to speak at either Public Comment, both if they chose to . The City Clerk announced that this was the time allotted for public comment . Mayor Pro-Tem Davis inquired whether anyone in the audience wished to address the City Council . There were no comments . DISCUSSION ITEM 1 . Review of Preliminary Proposed General Fund and Other Enterprise Fund Budgets for Fiscal Year 2012-2013 . City Administrator Mark Whitworth stated that the proposed budget encompasses the same delivery of service while understanding the deficit . The City aims to rely less on Light & Power and explore other methods of revenue . Whitworth advised that the proposed budget takes into account the proposed Utility User Tax, the 11 . 5% transfer from Light & Power, and a $3 . 2 million surplus which is discretionary money that will be used as reserves or as part of the community benefit fund. Whitworth explained that $5 million was planned for surrounding communities, but that $3 million was the most that would be available . An oversight committee, which has yet to be formed, will be responsible for the disbursement of funds . Whitworth reported that City Council' s account, Account No . 1001, had been reduced to $451, 000 due to an 18% salary reduction and a reduction in medical benefits . Whitworth reported that Account No . 1002 for City Administration includes two new positions but that they do not have to be filled immediately. He also reported on the search firm process for the position of City Attorney which will allow for more things to be handled in house thereby reducing legal fees . City Clerk, Willard Yamaguchi reported a reduction in costs of approximately $23, 000 for Account No . 1003 . Yamaguchi reported that the department previously had three additional full-time personnel, in addition to a full-time City Clerk. He explained his dual role as Risk Manager. Yamaguchi reported on Account no . 1024 for City Attorney. He advised that the budget has been increased in anticipation of Special City Council Meeting Minutes June 12, 2012 the hiring of a full-time City Attorney. During fiscal year 2011-2012, $2 . 9 million was budgeted in legal fees . For fiscal year 2012-2012, $1 . 9 million have been budgeted for unanticipated legal costs . Yamaguchi reported that the department previously had a additional full-time attorney and additional staff. He advised that he was conducting the duties as City Attorney along with Special Counsel Dana Reed, and that much of the day to day work load have been handled in house . Yamaguchi reported on Account No . 1025 for Risk Management . He explained that the department has been functioning with one less employee for over a year due to a department transfer, and that the position has now been filled by a part-time employee . He advised that the department has been getting by with less . Yamaguchi reported on costs unique to Risk Management including liability insurance premiums, workers compensation, and assessment fees due to the City' s past involvement in an insurance pool . Finance Director Rory Burnett reported on Account No . 1004 for the Finance Department, which included a $15 million increase in revenues in the proposed utility user tax. He reported a $282, 000 decrease in expenses and a $200, 000 decrease in consulting fees due to the termination of the NBS Government Finance Group agreement . Burnett reported on Account No . 1015 for the Treasury Department and advised that he is proposing a merger of the two departments . Burnett reported on HDL Software, LLC, a tax consultant that has historically generated the City additional revenues in its audit process . He advised that revenues are anticipated to increase $1 . 8 million but that the calculations take into account the electric rate increases . Director of Business Services and Personnel Martha Valenzuela reported on Account Nos . 1016 and 1018 . She reported a net decrease in salary for both departments due to her anticipated retirement in December. She advised that drug testing and pre- employment exams are the Personnel Department' s biggest expense . Assistant to the City Administrator, Alex Kung, reported on the Oversight Board to the Successor Agency of the Redevelopment Agency, Account No . 1022 . He advised that the expenditures reflect the needs of the Oversight Board to keep the Successor Agency operating. The budget has been submitted to the County' s Department of Finance . Kung explained that this budget does not affect the City. Money for the expenses is provided by the County, and that any additional revenue is used to pay bond debt . In response to Mayor Pro-Tem Davis, Kung explained that the legal fees included Kane, Ballmer & Berkman, which assists in conducting the Oversight Board meetings, and Orrick, Herrington, & Sutcliff, LLP which handle any bond issues . Kung clarified that all expenses are paid with money issued by the County specifically for these fees . Whitworth reported on the addition of Account No . 1026 for Human Resources . He anticipates that through the search firm process the position of Human Resource Director will be filled within the month. Page 2 of 6 Special City Council Meeting Minutes June 12, 2012 Interim Police Chief, Daniel Calleros, reported on Account No . 1021, Police Department . He reported revenue increases from franchise tow fees and reimbursement for salaries from the auto theft team. Calleros reported an increase in salaries overall due to necessary overtime for court appearances and a slight increase in medical benefits . Calleros reported on the loss of four employees and that he does not intend to replace them, instead there have been changes in the deployment strategy. He explained that benefits have increased due to the workers compensation history, and that maintenance expenses have also increased due to increased fuel costs . The Police Department uses forfeiture funds to conduct unbudgeted maintenance repairs . Fire Chief Mark Whitworth reported on a slight increase in the proposed budget for the Fire Department, Account No . 1033 . He reported an increase in overtime, and a decrease in revenue . The Department does not participate in any strike teams . Assistant Fire Chief, Andrew Guth further clarified that staffing requires 23 personnel per day, and that workers compensation injuries have affected overtime used to meet this need. Guth reported on the aging vehicle fleet and needed repairs . Whitworth advised that at the current level of staffing will maintain a Class 1 rating. He stated that if the City Council chooses to deviate from this classification, he will work with Council to make the necessary changes . In response to Mayor Pro-Tem Davis, Whitworth advised that to efficiently operate at this level that there needs to be multiple engineers, and that there has been increased training on all levels . Guth reported on Account No . 1036 for Civil Defense . He reported on the increased costs due to the transfer to the Downey dispatch center. Whitworth explained that the dispatch center took the burden off of the Police Department, where the costs were previously captured. Director of Community Services and Water Kevin Wilson reported on Account No . 1040 . He reported a one-third work force reduction since 2004, and that the overall budget for Community Services has remained flat . Employees have been shifted to meet priorities . Wilson reported that changes in the different sections were due to the transfer of employees . Wilson explained that the increase in Account No . 1041 for Building Regulations and Planning was due to the hiring of a consultant to assist in the zoning ordinance and general plan update . Wilson reported on Account No . 1043 for Public Works . He reported that the general fund capital improvement plan originally had a proposed budget of $5 million but has been reduced down to $3 million. Wilson anticipates that $2 . 8 million will be covered by grants . Wilson advised that Account No . 1046, City Garage, was reduced down from $778, 000 to $719, 000 . He reported that the Warehouse budget had been increased due to the result of a transfer. He advised that the City Housing budget had increased slightly due to Housing Commission stipends and increased taxes . Page 3 of 6 Special City Council Meeting Minutes June 12, 2012 Wilson reported an increase in Account No . 1049 for City Building, from $992, 000 to $1 . 56 million due to an employee reclassification, increased utility costs, and anticipated increases in professional service contract costs due to the new living wages clause . Wilson reported on Account No . 1084 for the Water Department . He advised that the department serves three-quarters of the City. There is an anticipated 13 . 5% increase in the budget due to increased salaries caused by department transfers . Supplies and services are expected to increase from $4 . 8 million to $5 . 3 million. Wilson explained that water sold to the City is expected to increase 100 . Wilson also anticipates an increase for water treatment in order to reduce the effects of magnesium in the water, as well as capital projects in order to rehabilitate Well 16 . In order to cover said costs, Wilson may propose a water rate increase, which would go through the normal public hearing process . Leonard Grossberg, Interim Director of Health and Environmental Control reported on Account No . 1060 . Grossberg reported on proposed employee reclassifications in order to avoid job flight . He advised that Account No . 1061 for Solid Waste was increased by $20, 000 due to the Sustainable Development and Energy Efficiency Commission budget, but anticipates all other service contracts to remain flat . Whitworth reported no changes to Account No . 6060 for Fire Hazmat . He explained that the revenues come from a business license tax, and that the funds are limited to certain spending. Kung reported on the $0 . 02 increase in the warehouse parcel tax for Account No . 9095 . He advised that revenues would increase from $8 . 8 million to $9 . 5 million. City Administrator Mark Whitworth made a brief presentation on City budgets cuts including personnel, employee benefits, encouraged early retirement, and termination of contracts . Overall a reduction of $11 . 5 million. Whitworth reported that the City is in the process of conducting a feasibility study for County services for both Police and Fire . Whitworth reported on the sale of city assets and the investment in the Tehachapi project as a potential capital venture or response to the renewable portfolio standards . The City has also implemented transitional market rents for City owed housing. The City is looking at alternative revenue sources including providing services to neighboring cities . Mayor Pro-Tem Davis opened the second Public Comment section and inquired whether anyone in the audience wished to address the City Council . John Norton of All American Asphalts appreciated Yamaguchi' s comments about working with less . Norton reported on the need to attract new businesses . In response to Norton' s comment on Civil Defense costs, Whitworth explained that the costs were for the dispatch center. Page 4 of 6 Special City Council Meeting Minutes June 12, 2012 Norton expressed his concerns over the 18% retirement costs, and group insurance costs that were equivalent to 170 of salary costs . Norton also noted inconsistencies in benefit costs . In response, Whitworth explained that employee benefits have been limited to stipends . Yamaguchi further explained factors that contribute to fluctuations in benefit costs . Norton inquired on whether some of the street improvement projects can be delayed. He also inquired on the timeline for the budget approval . In response, Whitworth reported that the proposed budget was submitted to the City Council on May 29th as required, and needs to be approved before July 1, 2012 . Special Counsel Dana Reed stated that this was the time for public comment and not dialog. He advised that a public workshop would be held on June 13, 2012, and that an open dialog can be had there . Rob Moeck of Douglas Steel Supply advised that the City cannot continue to get consultants, if the employees are not experts in their field. He suggested that employees need to be replaced. Moeck advised that there needs to be a shared burden. He stated that the employee benefits far exceed those of the private sector, and that the legal fees were excessive . Moeck questioned whether the City will be able to attract new business as vacancies are high and inquired what the City was doing to attract new businesses . The utility user tax was designed to increase revenue, but wondered what would happen if the top utility users left Vernon. Doug of Superior Lithographic reported on his history in Vernon. He was an advocate of the City in Sacramento during AB46, and felt the City should remain. He stated that his opinion has changed and that the City has not made sacrifices, and that it needs to change how it is being run. Juliet Goff of Cal Plastics recognizes the great services from all the departments but there are some luxuries the City cannot afford. Goff stated that the City faces a $12 million deficit, had an $11 . 5 million deficit from the previous year' s cost cuts, and received $8 million due to rate increases . She asks that the City look at fair numbers and consider additional reductions . Goff understands that the renewable portfolio standards, the dissolution of the Redevelopment Agency, and the Senator De Leon Plan are out of the City' s control, but opined that the natural gas deal was a major concern. She stated that if the City overtaxes one part of the community, that may cause businesses to relocate and there will create a downward spiral . Don Pennell of the Ligature reported that he focused on the Police and Fire Department in his review of the budget with the Chamber of Commerce . The departments account for 500 of the work force . In his review of the budget, not much had changed, and there were no reductions . He commended the reduction in head count for the Police Department, but observed that the budget had increased. Based on unit cost per employee, Pennell calculated a 54% in employee benefits . He encouraged the City to further review these costs . Peter Corselli U. S . Growers Cold Storage expressed his confusion Page 5 of 6 Special City Council Meeting Minutes June 12, 2012 over the approval of the proposed budget which includes a tax that had not been voted on. He recommended that the City review a budget that does not take into account the additional taxes . Corselli advised that many of the department heads alluded to costs that were discretionary and opined that such costs should not be included at all . Marisa Olguin, President of the Chamber of Commerce, reiterated that the Chamber wants to work with the City to resolve the budget deficit and make sure the business model is sustainable . She reported that several business representatives took time to review the budget . Olguin reported on the delay of public records, and her desire to expedite the process . Olguin suggested that the increase of costs for other services, and opined that some departments need more cuts than others . She encouraged the hiring of personnel as needed. She is an advocate of additional taxation but that the solution needs to be more equitable . Olguin reported that less than 50 companies represent 850 of the utility revenues and that over taxation may push companies to leave Vernon. Olguin encouraged the Council members to attend the utility user tax workshop scheduled for June 13, 2012 . In response to comments made by Norton, Burnett advised that CalPERS has a mandated 28% contribution and that employees contribute 8% which is the maximum allowed. Calleros also clarified that there have been no increase in salaries, and that payroll accounts for all employee benefits . The City Clerk announced that there were no further items on the agenda. At 11 : 38 a.m. , it was moved by McCormick and seconded by Ybarra, that the meeting be adjourned. Motion carried. William J. Davis Mayor Pro-Tem ATTEST : Willard G. Yamaguchi City Clerk Page 6 of 6