| Time | Speaker | Text |
|---|---|---|
| 00:00:00.03 | Heidi Scoble | Stream. |
| 00:00:06.71 | Heidi Scoble | Audio's up, so now we'll go to our video stream. |
| 00:00:14.38 | Heidi Scoble | And it does look like we have a member of our public. And I will admit our member of the public Good morning, Mayor Hoffman and Councilmembers. This meeting is being held pursuant to Section 3 of Executive Order N-29-20, issued by Governor Newsom on March 17, 2020, and all members are joining this meeting telephonically through Zoom and is broadcast live on the City's website. |
| 00:00:37.05 | Jill Hoffman | Thank you, Madam Clerk. Welcome to our special meeting for April 24, 2020. Madam Clerk, could you please call the roll? |
| 00:00:45.88 | Heidi Scoble | Council member Sobieski. Here. Council member. Councilor. |
| 00:00:50.59 | Ian Sobieski | here. |
| 00:00:51.52 | Heidi Scoble | Lasting Council member Cleveland Knowles. |
| 00:00:54.27 | Ian Sobieski | care. |
| 00:00:55.08 | Heidi Scoble | Vice Mayor Kellman. Sure. Mayor Hoffman. Presence. All members are president and we have a quorum. |
| 00:01:02.42 | Jill Hoffman | Thank you very much. We will be this morning. We will be in closed session from 8 a.m. To 9 a.m. And the item we will be discussing in closed session is public employment pursuant to CGC section 54957 title city manager. Do we have any public comment on the closed session item? I see no hands raised. Madam Clerk, can you please confirm? Madam Mayor, you are correct. There are no hands raised at this time. |
| 00:01:37.48 | Heidi Scoble | Thank you. |
| 00:01:38.06 | Jill Hoffman | Very good, then I will close. public comment and we will adjourn to closed session. Thank you very much. We'll be back at nine o'clock to start our discussions with Charlie Francis. and our budget methodology for 2021. So. Thank you very much. for joining. |
| 00:02:04.16 | Heidi Scoble | will let all the in. And then. Good to go. So Madam Mayor, you're ready to start the meeting. |
| 00:02:15.50 | Jill Hoffman | Very good, thank you. Um, Good morning and welcome to our special City Council meeting That includes fiscal year 21-22 budget workshop, which is going to be a very exciting day for us. Um, We already called the roll from our closed session. We don't need to do that again. May I have a motion for an approval of our agenda today for our special budget workshop. So moved. |
| 00:02:41.22 | Unknown | I'm at... |
| 00:02:42.42 | Jill Hoffman | I think. Thank you very much. Madam Clerk, could you please call a roll? |
| 00:02:47.30 | Heidi Scoble | Councilmember Sobieski. |
| 00:02:48.65 | Jill Hoffman | best. |
| 00:02:49.79 | Heidi Scoble | Council member Blaustein. |
| 00:02:51.78 | Jill Hoffman | Yes. |
| 00:02:52.12 | Heidi Scoble | Thank you. Councilmember Cleveland Knowles. Thank you. |
| 00:02:54.37 | Jill Hoffman | Yes. |
| 00:02:54.67 | Heidi Scoble | Thank you. Vice Mayor Kellman. Yes. Mayor Hoffman. |
| 00:02:58.11 | Jill Hoffman | Thank you. |
| 00:02:58.13 | Heidi Scoble | Thank you. |
| 00:02:58.26 | Jill Hoffman | us. Motion passes. with unanimous vote. Item one on our agenda this morning is one business item. It is 1A, our budget workshop. I would like to introduce our very able interim assistant city manager slash administrative services director Charlie Francis, who will be leading us in this journey today. |
| 00:03:22.82 | Charlie Francis | Thank you, Mayor. Thank you, members of the City Council. Um, I'm preparing my screen now. Welcome to the fiscal year 21-22 budget workshop. |
| 00:03:36.06 | Charlie Francis | Let's see. |
| 00:03:39.25 | Unknown | Is this a new feature? You're in the screen. Isn't that cool? This is great. |
| 00:03:42.88 | Charlie Francis | Okay. Yeah. So last city council meeting, we talked about revising the budget calendar. This is the revised budget calendar. So you can see we're on step two right now, which is the city council budget workshop. In fact, I'm gonna be talking a little bit about our budget preparation software. which will include department head budget preparation starting Monday and going through May 14th. We will have, at the city council's regularly scheduled City Council meetings will have a budget status review beginning April 27th, May 11th. And then, The city manager will be reviewing the department head's budget preparations between May 17th and May 21st, another council status review on May 25th. The city manager proposed budget will be ready and be prepared on May 28th then. And the city council will have two budget hearings, number one and number two, June 8th and June 22nd respectively. And finally, you know, we're our target is to formally adopt the budget on June 22nd. So this was the revised calendar we talked about at our last city council meeting. Does any questions for the council? |
| 00:05:04.74 | Charlie Francis | That's great. Okay. So the agenda for today is we have a four scenarios that we discussed at the last city council meeting. or for policy issues and that was the types of scenarios to examine the level and use of reserves the use of american rescue plan funds and other resource generation policies and the format i thought we could use today would be for me to introduce each issue i would then i have a short presentation prepared on this powerpoint then we would go into a council discussion on each issue and then look for consensus direction to staff on the issue if any are needed. So, |
| 00:05:44.67 | Jill Hoffman | So. Sorry, I'm going to jump in just real quick. Can we talk? Can you just mention a little bit about what we're not going to do today? So we're not going to talk about specific projects. Thank you. |
| 00:05:57.60 | Charlie Francis | We won't be going into the overall revenues or the department's budgets. We will not be talking about the capital improvement plan or the capital budget for the current fiscal year. This is purely kind of a strategy session for the city council to give staff direction on how to prepare the fiscal year 2021-2022 budget. |
| 00:06:23.16 | John DeRay | Thank you. |
| 00:06:26.74 | Charlie Francis | I'm not sure. Any other questions from council members on the agenda? |
| 00:06:31.99 | Jill Hoffman | Yeah, thank you, my apologies for jumping in there. I just want to make it clear to everybody who's online from the public. what our goals are today. Thank you. |
| 00:06:39.34 | Charlie Francis | Great. Okay, thank you, Mayor. Thank you, Council. Well, let's just jump right into the first policy issue to be addressed and that's scenarios. Right now the, we're proposed, staff has proposed that we prepare three scenarios and I'm going to go into the reason for that. real quick here. Um, the First scenario is continue with the COVID staffing and the level of service. Second one is the gradually return to the pre-COVID staffing and level of service. And the full is a full return to pre-COVID staffing and level of service. And to prepare us for that. First thing I've done is pre-populated all of the census data for each one of those scenarios in our labor costing software. And the labor costing software is very robust. It does wonderful reporting. And we'll be able to make adjustments to the scenarios. As we as we go forward in the budgeting process, these panels that you see over here on the left allow adjustments to be made, for example, you might want to examine a scenario where we re implement the furlough. or we want to say, oh, labor negotiations are coming up. We want to propose a 1% cost of living allowance increase. Or we know that as a result of our discussion later on in this, our pension costs might change and we can plug that in there and it'll automatically readjust all of our labor costs. then the output from the labor costs are going into our new budget preparation software. And the budget preparation software has been set up where we have a template for each one of the departments. We'll have a template for revenues and a template for a capital improvement plan. And each department head will be asked to prepare their budget giving each one of those three scenarios. So in other words, we'll have a scenario for our personnel costs, and then the departments will have scenarios for their operating costs as well, and then the two will be blended together, We'll be using our OpenGov Transparency Portal. to report out on how to So, on how the progress of all of those going, you can see here's our current year budget and then we'll have our post COVID budget, our gradual return budget, and then a pre COVID budget so that we can examine all of those in one platform. THE END OF You'll notice I was able to cut off one of the agenda items today because we put out that tutorial in yesterday's currents on how to use the OpenGov platform. We can also examine the budget through each one of its milestone stages of the base budget, department head preparation, city manager recommendation, and as the council goes through their approval process the final amended and adopted budget so I And kind of coming into there is this is that all of this has been prepared, the software, the methodology, the scenarios, to provide for us a platform for continuous budgeting. In other words, Today we're talking about developing a budget strategy that Oh, I haven't been advancing my slides. I'm sorry. This is the budget preparation software. And this is the OpenGovs scenario planning site, and this would be the OpenGov milestone budgeting site. Thank you. And so, We want to develop a budget strategy that Plans for uncertainty. We want to have not just scenarios, but an implementation plan for each scenario. So that as we're monitoring and measuring and monitoring the economy, we can be nimble and flexible and adjust to changes in the economy rather than waiting for a quarterly Treasurer's report and making adjustments at the midyear. basically scenarios measure risks set up contingency and reserve envelopes lack in future savings and reverse impacts of one-off measures and then have a budget execution strategy that allows us to quickly adjust to what we're seeing as changes in the economy and the level of service that you city council members want to provide our city residents So in summary, Um, policy will continue COVID staffing and level of service, a gradual return and a full return to pre-COVID staffing will be the three scenarios the staff is recommending that we prepare. Thank you. So this point, I turn it over for discussion amongst the city council members. And questions? |
| 00:11:42.67 | Ian Sobieski | May I have a question? |
| 00:11:44.27 | Charlie Francis | Okay. |
| 00:11:44.66 | Jill Hoffman | Thank you. |
| 00:11:45.34 | Charlie Francis | Or go ahead. |
| 00:11:45.81 | Jill Hoffman | Thank you. |
| 00:11:46.74 | Ian Sobieski | So this is great. Thank you, Charlie. Is it possible? to mix and match. scenarios. So for example, if in some areas we wanted to immediately get a full return to pre-COVID staffing and level of service, but either because of budget reasons or for practical reasons in other areas. We might not. We might want to do the gradual return. Does this planning tool allow us to mix and match a little bit in terms of services and departments. |
| 00:12:28.40 | Charlie Francis | Yes, it will. And the whole design of all this is to then say not If we want to gradually return, but all of a sudden things are, we monitor the economy and it's looking good. We're looking at prospects. done. We're also going to be looking later on in this presentation, how reserves can be used to augment, how the use of the American Rescue Plan can be used to augment. And then I have some pretty innovative ideas at the end of this presentation on where there are expenses that can be reduced, which would allow us to return to pre-COVID levels of service as well. So I think we can better answer that question when we get to the end of all four sections. And I've allotted time at the end of all four sections to talk about that. |
| 00:13:12.04 | Ian Sobieski | Thank you. Yeah. |
| 00:13:16.31 | Ian Sobieski | Okay, but the software would allow us to So this is just a hypothetical situation, but say libraries are immediately allowed to return to full capacity under health order. |
| 00:13:26.32 | Unknown | under health care. |
| 00:13:27.94 | Ian Sobieski | Thank you. but some of our rec park programs aren't. We can't have large gatherings. |
| 00:13:31.70 | Unknown | That's good. |
| 00:13:34.59 | Ian Sobieski | we could do different scenarios for different departments if we need it. |
| 00:13:40.26 | Charlie Francis | Yes, we can. |
| 00:13:41.22 | Ian Sobieski | Thank you. All right, thanks. |
| 00:13:43.29 | Melissa Blaustein | maybe who's involved in the scenario production |
| 00:13:43.55 | Ian Sobieski | Yeah. |
| 00:13:47.19 | Melissa Blaustein | I'm sorry, Ian. Who exactly is involved in the creation of the different scenarios? Is it yourself and the department heads? Is it the department heads and their staff. Who's involved in each of the scenarios? |
| 00:14:02.03 | Charlie Francis | Yeah, it's a total collaborative effort. So on Monday, instructions go out to the departments. Many departments use their staff to help develop the scenarios. The staffing levels are done centrally by the finance department and HR department. And then... And then there's a series of discussions that occur between departments, finance, and the city manager, so that at the end of the day, it's a full collaborative discussion. |
| 00:14:34.68 | Jill Hoffman | So Vice Mayor has her hand up. |
| 00:14:36.94 | Janelle Kellman | Yeah, great. Thank you. And Charlie, thank you for this and getting us rolling. On one of the prior slides, you talked about the... the budgeting timeframe. And historically, we really treated budgeting as an event, But I think as the pandemic has shown us, and even historically 2008 showed us, we have to remain agile. As we move forward, would it be possible to address budgeting at least twice a year, if not quarterly? that looks forward to four more quarters. So a rolling four-quarter budget might allow us to be more nimble. Could we deploy something like that? |
| 00:15:07.04 | Charlie Francis | Oh, absolutely, Vice Mayor. In fact, I was proposing, I mean, if you retain my services through the year, to provide you updates on a monthly basis. You should know on a monthly basis where you stand. through the use of our transparency portals, you should know on a dynamic basis, either daily, weekly, semi-monthly or monthly, where we stand And, Staff will be regularly reporting out through the currents as well as we monitor the economy. We measure the economy, monitor the economy, monitor our budget execution, and then continually Roll out. recommendations on how we can improve the levels of service to our residents. That's the whole concept of moving to this continuous budgeting format where you notice this loop here is as we go through, not only will we be measuring like you suggested, Vice Mayor, four quarter rolling, but it should recalibrate right in here. You can't see it because my head's in the way, our five year financial plan. |
| 00:16:22.39 | Unknown | Thank you. |
| 00:16:23.08 | Charlie Francis | And when it recalibrates the five-year financial plan, you'll see that there's an alignment, maybe a recalibration of our finance five-year plan is inconsistent with the strategic plan vision missions and goals so you'll be able to have a data-driven and evidence-based discussions on are the actions that we're taking today What impact will that have on our strategic plan? And then not to change your decision, but to have you make an informed decision. |
| 00:16:56.43 | Janelle Kellman | That's great. Thank you. And I know we've talked about standardizing some of the policy. So you sent us all our reserve policy and at some point we should you know, visit that as well. I WANT TO TALK ABOUT THE What can we do or do we have a standard A POLICY AROUND RECONCILIATION. so that we know that when we're looking at the numbers, it is up to date. Um, Is that something that you are gonna be proposing to us? so that when we look at the monthly, we know that we've, and I think inheriting that is sort of not just reconciliation, but when we've potentially called bonds or other monies, when we have the opportunity. Do we have a policy? Would you recommend that we, You thinking about that? |
| 00:17:41.62 | Charlie Francis | Bye. We have a whole book of financial policies, at least I did when I was there. And that includes reconciliations. The ultimate goal of the finance activities is to reconcile all of your balance sheet on a monthly basis. That way, when the audit comes around, you're prepared. You just say, here's all of our monthly reconciliations, including the last month. Uh, and so, um, Yeah, we have that policy. I'll be reintroducing those policies back through this budget preparation process and they'll be in place for the next fiscal year. Well. So that was a long way of saying, yes, Vice Mayor, we will do that. |
| 00:18:24.89 | Janelle Kellman | Thank you. |
| 00:18:25.56 | Melissa Blaustein | I guess I just wanted to follow up on the Vice Mayor's question. I get the ambition of having instantaneous visibility onto our finances. But I think your question is one that's very germane, which is, will there be a process for the policy choices on a more nimble basis, a quarterly sort of decision point How does city council factor into that, this nimble process that we're trying to move towards? |
| 00:18:53.36 | Charlie Francis | Yeah. I mean, the I love these types of questions, so thank you all. We want, staff wants to be continually monitoring economy and budget execution in order to bring forth to the city council policy recommendations as they are needed. So we can put in that policy a quarterly report to the city council. That is timely. It happens at the end of the quarter, not after one or two months after the end of the quarter. and how it has been structured in the past is that was a function of the finance committee. In other words, on a regular basis, the finance committee would meet with staff. We would talk about monitoring the economy and monitoring the budget and then say, well, here are some things that need to be brought forth to the full city council. So that was kind of like the ultimate and best use of the finance committee. |
| 00:19:53.65 | Charlie Francis | Did I answer your question, Council Member? Yes, thank you. |
| 00:19:58.14 | Janelle Kellman | I guess one more follow up on Councilmember Cleveland Knowles had an excellent question around how agile we can be to deploy resources when we when we need to, if the library opens or whatnot. and maybe this is just for a future conversation, but in some instances, we have money in the funds for particular use cases, but we haven't spent them. Is there something in the budgeting process will help us understand kind of where that I don't want to call it a bottleneck, but why we haven't executed if we have money in certain funds for some much needed, I'm thinking of some certain capital improvement I'm looking at. I WANT TO TALK ABOUT THIS. the stair fund, the sewer fund, and I know we'll get into funds another time, but is there a way to help us understand why some monies aren't being spent when we have them. |
| 00:20:51.87 | Charlie Francis | Absolutely. You know, so back in 2009, when we were coming out of the 2008 recession, Sausalito looked at its special revenue funds, all the money that had been accumulated and set aside for capital projects. And rather than... put a hold on capital projects. We had what I called then the Sausalito Economic Stimulus Program. And it worked. We unleashed many capital projects within the city, street projects, sewer projects, that did have an economic impact on our community. Absolutely, Vice Mayor Kalman, we will be looking at the reserve levels. That was a great question that you just asked because it's the next section. |
| 00:21:37.82 | Unknown | Thank you. |
| 00:21:37.84 | Charlie Francis | . You must have seen my PowerPoint. |
| 00:21:41.95 | Jill Hoffman | Yeah, I was going to just say, I think that's on the agenda. So. Okay, any other questions on this section? On the volunteers. |
| 00:21:49.38 | Ian Sobieski | Yeah. I have one more question. It comes from both the Vice Mayor and Councilmember Sobieski's questions about flexibility and nimbleness, which are great attributes. Could you just talk about the tension between that and kind of establishing our two-year and six-year kind of strategic plans and comprehensive plans. and our capital plan and the tension between kind of following that so that those projects get implemented in a consistent way. And this idea of revisiting things kind of continuously. And so I see definitely the advantage, but I also don't want to flash staff back and forth from one thing to another. So could you just talk about how we can do both our long-term planning, but remain nimble. |
| 00:22:45.45 | Charlie Francis | Yeah, there's two issues that are kind of tied into the use of the American Rescue Plan money and that, but continuous budgeting has two components to it. There's a stabilization and an immediacy of use component, and then there's the strategic use. So as we're looking through our reserves, as we're looking through some of our resource generation policies today, as we're looking at our the use of the American Rescue Plan funds, all of those will be put into the the category of How do we continue this COVID staffing and level of service while meeting our long term strategic goals? So that's all going to be wrapped up in the complete discussion today. So yes, there's tension there, but I think that there's a use of the funds. So there's some funds that can be used strategically so that there can be a continuation of the projects that are necessary to invest in our infrastructure and our economy. And then there's use of funds that... that if they're dependent on our elastic revenues then we either draw down our reserves to continue those within the policy or you know we drop back to the covet staffing and level of services |
| 00:24:06.47 | Unknown | Thank you. |
| 00:24:08.18 | Charlie Francis | I love this, Council. This is the kind of discussion that needs to be held in order to everyone kind of embrace the fiscal management strategy that staff is presenting today. So thank you. |
| 00:24:24.76 | Jill Hoffman | Thank you. And yes, we like robust discussion and we're very good at it. This is Toledo. So, okay, any other questions on this section? If not, we'll let Charlie move on to the next section. Let me just say, we will take public comment at the very end of our budget discussion today at the end of our schedule so. one period of public discussion on the full presentation that we're getting today. So go ahead, Charlie. |
| 00:24:51.71 | Charlie Francis | Great, thank you. So the next section is this risk-based analysis of reserves. And basically when, you know, well, reserves are an essential cornerstone of a city's finances and its ability to provide services. Historically, and many, many cities struggle with this, is the question is how much is too much reserves and when do we use reserves? And back in, there was a kind of a, I don't want to call it revolutionary, but it was like a seminal idea that emerged back in 2009 through 2012 of using, looking at your reserves from a risk analysis. And what that allows you to do is to look at each city's individual fiscal situation, economic situation, their infrastructure, all of the risk factors that are involved. And then just make policy decisions about Uh, each one of those factors and what I've identified for City of Sausalito is that The primary risk factors that we face are revenue source stability, and that's because of a dependency on elastic revenues. We have infrastructure risk. And then finally, we have vulnerability to extreme events like earthquakes and wildfires that provide for public safety concerns. And then there's a number of secondary risks, our lawsuits, our pensions, our OPEB, our debt. So, and going through and analyzing that, Again, through the budget process, We will be. looking at different methodologies. So up here in the upper right, is I want to measure our channels of elastic revenues from recessionary to full economies. So what this channel over here was telling me back in 2013 was that During each Uh, Economic. recessionary economy that our elastic revenues fell by about $400,000 annually. That is comprised of sales tax, parking, and transient occupancy tax. So that channel for each one of those taxes kind of starts telling me that that the amount of time that elapsed between a recessionary economy and a full economy was about two years. So in other words, What I'm trying to say is that If we had reserves, that equals that, channel of activity and we're entering into a recession. rather than cutting back services, that's the time to dip into reserves. And then when the economy comes back, Rather than improving services, that's the time to build back up those reserves to the methodology. So I would take that two years. Back then, I augmented that by 1.5 and to give us a channel of like 1.2 million for sales tax reserves. So we will recalculate that. We'll go back and look at all of our elastic revenues, our more stable revenues and reestablish what the correct reserve level should be and for all of our elastic revenues, and then when to use them. Triggers in the economy that would set or economic actions that would trigger us to do that. we would further look at major incidents like earthquakes, wildfires, land sites and floods. What's the consequence, the dollar consequence of that incident? And then the probability of that incident occurring. Now, I know we're getting into a lot of probability theory here. It's the new. It's the new way of measuring and managing to uncertainty. Uh, and then we would also look at our secondary risk factors, our workers comp or general liability. In other words, you don't want to be surprised at the end of the year, uh, of that. Gee, we had all of these workers compensation incidents. We kind of plan for those and have actually, um, triggers and event to, um, to when to use them and when to not. Perfect. |
| 00:29:16.40 | Melissa Blaustein | Thank you. |
| 00:29:16.84 | Charlie Francis | Thank you. |
| 00:29:16.97 | Melissa Blaustein | I think that's... |
| 00:29:18.04 | Charlie Francis | Thank you. |
| 00:29:18.07 | Melissa Blaustein | Sure. Question just about that. So do you factor in debt markets as a viable method in your reserve strategy? Or do we need to have cash reserves for all of these contingencies? Thank you. |
| 00:29:31.81 | Charlie Francis | Oh, so access to like, Um, debt market. So, From a general law, for California city's perspective, you can't incur that without a vote of the people, except there is the ability to do what's called taxable. I mean, tax and revenue anticipation notes. So there is the possibility to access short-term credit markets, but the The problem with that is it has to be less than one year in borrowing, and it's usually less than one fiscal year. So if you access the market and you can't pay it back within the next nine months, you just did something that required legally a vote of the people. So just to be clear, |
| 00:30:16.96 | Melissa Blaustein | we can't outside of that narrow window we can't use that even for these two-year recessionary cycles or other kinds of reserves. I was not. |
| 00:30:27.47 | Charlie Francis | That's correct. But what we can do is There are other strategies for investing the money in more than just a half a percent interest rate that we're getting at late. |
| 00:30:40.64 | Melissa Blaustein | And just generally, I don't know if the sales tax history there is meant just to be a pretty picture, but I'm trying to figure out what that box boxes at the top there with the little yellow. squares and the for white. thing well yeah it's um it's not relevant let's just move on but i didn't know that that was there for a reason |
| 00:30:58.34 | Charlie Francis | the yellow boxes are the So what that's doing is it's measuring It's measuring sales tax coming from three sources and it's on the very bottom. There's spikes we get twice a year, then we get monthly allocations and then there's quarterly allocations. And so the box at the top is saying, here's how much we got during that fiscal year, the yellow box and then the white is the channel of the highs and the lows for each one of those. Thank you. |
| 00:31:31.97 | Melissa Blaustein | or, you know, |
| 00:31:32.43 | Charlie Francis | Thank you. Yeah, I mean, it's just a nice graphical presentation. There was robust analysis underneath it. |
| 00:31:42.45 | Charlie Francis | So on this report, then, the final output of this, again, I don't like to say things like final because we should be monitoring all of this all the time. And technology today allows us to do that. Um, We will look at our targeted reserves and we'll bucket those targeted reserves in two categories, budgetary uncertainty and emergency type reserves. And then, we're going to compare those to our actual reserves. Our actual reserves are what's required under GASB. So, you know, GASB Financial Reporting. as very little practical use for management reporting. You know, 5%. Well, what does that mean? You know, 5% of, you know, a $20 million expenditure budget is less than one month. And so it really doesn't tell you when to use it and what it's for. It's just some kind of goofy gas fee requirement. But the, when you're targeting your reserves for risk. Now you have a plan on when and how to use the money. And then when we're through, we're going to identify whether we have a surplus or a gap in our reserves based on our target. We do analysis. If we have a surplus, we can go back and measure it. If we have a gap, we can go back. Is this truly the uncertainty that we want to reserve for? In other words, it's kind of circular until we finally consensually agree that this is the target Look at our... Actual and then see what our surplus is And then from there, based on whether it's a surplus or a gap, what's our recommended action plan? So recommended action plan if we had a surplus, as I kind of did. That kind of... calculated without city council approval. It was just my preliminary draft back in 2013. is that we had a surplus and then there was a recommendation plan of how to use that money strategically rather than tactically. So, um, Thank you. That concludes the level and use of reserves. We're going to build this level and use of reserves into each scenario. So a scenario could be that, say we do a risk analysis and we find out we have a surplus. And then there's a council desire to bring the library back to full level of service, but not. another department. Well, then we can say, well, Maybe we'll apply that surplus to that and we'll use the another part of the surplus for investment in infrastructure. Those are the kinds of policy issues that we'll be bringing forward through this process. |
| 00:34:36.87 | Jill Hoffman | Thanks, Charlie. Vice Mayor has her hand up. Thank you. |
| 00:34:39.76 | Janelle Kellman | Thank you. Yeah, great again, Charlie. I really appreciate the way you've laid this out for us. So two things. First question is just to get this right. So something like a certificate of participation, the COPS, do they require voter approval? You just said we can't incur debt without voter approval. My understanding was that was a mechanism to incur debt without voter approval. Can you just clarify? |
| 00:35:03.53 | Charlie Francis | Yeah, okay, yeah, certificates of participation are, I think, Because they're so what a certificate of participation is, it was a legal methodology invented by the state of California to get around the boat of the people. So it's a lease, it's a lease lease back situation. And it's a I mean, it's totally legal way of doing things. And so thank you for correcting me on that. |
| 00:35:27.24 | Janelle Kellman | Oh, I didn't mean to correct you. I just was confused. So I thought I just, all right. So then my second question is on the reserve policy. So if I hear you correctly, the goal is to have cash reserves that allow the city to continue the same level of service during a downturn, right? I think we talked a little bit about a sensitivity analysis. And I think last time at the finance committee meeting, you talked about how competent cash management would have sensitive analysis of the revenues to understand the magnitude of potential declines, things like a pandemic or the 2008 recession. Can you talk a little bit about that from a policy perspective and how cash management can analyze the discretionary versus the fixed expenses under that scenario? |
| 00:36:11.39 | Charlie Francis | Well, so, I mean, So... Yes, I can. So there's primary risk factors and secondary risk factors. The primary risk factors are infrastructure failure, In other words, let me give you an example of what really happened in Sausalito. where the Spinnaker is in the Sausalito Yacht Club and Sausalito Harbor. up. was failing. That was an infrastructure failure, and we had to move quickly and nimbly to get that fixed. And what we did is we restructured the lease with Sausalito Yacht Harbor, Thank you. Because that said, You want an extension on your lease. We want and we're responsible to pay for that bulkhead pay for. If you want an extension on your and we didn't have the money to do it. We just did not have that level of reserves to replace the bulkhead. So, Uh, in the negotiations, we said to South Carolina at Harvard in return for giving you an extension on your lease, you're going to pay half the cost of. the bulkhead. And then we said, you know, the city only has 1 million for our half of the cost. Can we restructure the lease so that We will that is a credit against your lease for paying the cash flow on our share of the bulkhead, and they agreed to that. So that's kind of a way of saying that Oh. strategic financial management does look at cash sensitivity in order to examine our exposure to risk for infrastructure failure and vulnerability to extreme events. |
| 00:37:57.43 | Janelle Kellman | Well, and the reason I ask, and that's a great example for the South State Rock Harbor, so now we entered into a 99-year lease. No, no, no. It's, we extended it. It's quite long, well beyond most of our leases. And I want to make sure we understand the implications of that and then how, you know, the tail wagging the dog around driving lease terms along those lines. |
| 00:38:03.86 | Charlie Francis | No, no. THE FAMILY. |
| 00:38:05.68 | John DeRay | Thank you. |
| 00:38:19.50 | Unknown | Right. |
| 00:38:23.23 | Jill Hoffman | Okay, looks like Oh, sorry. |
| 00:38:26.69 | Unknown | Thank you. |
| 00:38:26.71 | Jill Hoffman | Thank you. |
| 00:38:26.72 | Melissa Blaustein | I just had it. Follow me. Yeah, I just, So just following up on the certificates of participation, I'm just learning from this workshop. And I think everyone can benefit from getting a little more clarity on on how that would work. The general question is, to what extent can the city of Sausalito used debt markets to as part of our reserve policy. and hence free up cash. for other social purposes. The COPs, my understanding are, were structured in the way they were because there were lease agreements against which they could be securitized, in other words. Are COPs limited to situations like that where there are private party |
| 00:39:08.24 | John DeRay | I'm not sure. |
| 00:39:13.22 | Melissa Blaustein | financial instruments that have been established against which you're taking current cash Uh, securitized against that debt obligation or can the tax authority of the town itself. |
| 00:39:25.74 | Charlie Francis | Thank you. Thank you. |
| 00:39:26.14 | Melissa Blaustein | be securitized in some way. |
| 00:39:27.54 | Charlie Francis | Thank you. No, so that's the entire distinction. The tax obligation can only be secured through a vote of the people. What a certificate of participation is, COP, you're participating in the flow of lease proceeds. So there has to be an underlying asset, a lease agreement between two entities, the two entities are the city and the financing authority that they will share as the lease moves back and forth through those two entities. And then that's what securitizes the issuance of the bonds. Okay. |
| 00:40:01.97 | Melissa Blaustein | Thank you, Mike. |
| 00:40:02.59 | Charlie Francis | Thank you. Thank you. |
| 00:40:03.11 | Melissa Blaustein | Other question, different one, is the general fund has a cash reserve policy. We have separate reserves for different funds. The general fund's reserve policy, when we've looked at it in the past, was... partly tied at least to some sort of general best practices standard of how many months of cash of general expenses needed to be maintained. in that cash account. Um, I don't maybe mentioned it, but I didn't hear the exact mention about that. And I'd always wondered to what, except that benefited the town, that certification of uh, Cash on hand. if we can't take debt, then why do we care about our credit rating another week? Yeah. Oh, well. Good government, good government reading. Sorry, so we get an award for that. I know if we have a certain amount of cash on hand, but is there some other benefit? |
| 00:40:52.59 | Charlie Francis | Good job. |
| 00:40:59.82 | Charlie Francis | Oh, well, I don't think we get I mean, Having a good credit rating is absolutely essential because of, number one, because of our outstanding debt, it affects the secondary market, but it also affects whether or not we want to... you know, access to credit market again for other strategic reasons. And I'm going to be recommending later on in this presentation, uh, to analyze looking at accessing the credit rating to address our pension rate, our pension liabilities. So let's put that question on hold council member and we'll come back to it in the, at the last section of policy issues to be addressed today. Thank you. Thanks. |
| 00:41:49.16 | Jill Hoffman | Okay. Any other questions on this section? Yes, Council Member Fridin also. |
| 00:41:53.16 | Ian Sobieski | Um... Thank you, Mayor. I just have a clarification for us and for the public. Mr. Francis, can we make sure that this presentation is posted So that both we and members of the public can access it and refer back to it. There's a lot of good information here. I didn't see it this morning, but I might have missed it. |
| 00:42:13.93 | Charlie Francis | and I did say that. I was just finishing it while you were in club session, so. |
| 00:42:20.93 | Ian Sobieski | All right, thank you. |
| 00:42:23.87 | Charlie Francis | but I will put it up there immediately following this meeting. |
| 00:42:23.92 | Ian Sobieski | Yeah. |
| 00:42:28.39 | Jill Hoffman | Yeah, and the video of this will be posted as well. Anybody who needs a tutorial There might be some credit hours associated. Okay, any other questions before we move on to our next section? |
| 00:42:41.10 | Charlie Francis | You know, I mean, that's very interesting mayor. We might want to during the fiscal year, have a citizens fiscal Academy. |
| 00:42:49.03 | Jill Hoffman | And that's... |
| 00:42:49.08 | Charlie Francis | I actually give out a certificate. |
| 00:42:50.78 | Jill Hoffman | I was just going to say, Graduation with a certificate is an awesome idea. I love that idea. OK, we have lots of people in our community who would participate in a row bus. Yeah. |
| 00:43:02.09 | Unknown | I'm sure we would. Thank you. |
| 00:43:03.04 | Jill Hoffman | Bye. |
| 00:43:03.17 | Unknown | Thank you. |
| 00:43:04.17 | Jill Hoffman | Okay, so let's move on to our next section. |
| 00:43:06.60 | Charlie Francis | All right. So the next item that policy issues be addressed are the use of the American rescue plan funds. Again, this idea of, Fiscal management saying we need to stabilize and we need to strategize. And the money that we are receiving from the American Rescue Plan, as you know, already is $1.3 million. That $1.3 million will come to us in two trances, first one being the middle of June and the second one, will be Well, Yes. And the second one will be no later than a year after, or no earlier than a year after the first trench. So, Nice sizable amount of money we have until December 31st of 2024 to use it. We can use it to respond to the COVID-19 emergency. So an example might be if we wanted to set up a vaccination station. Um, uh, another way is to provide premium pay to essential employees. Uh, but that premium pay, you know, we're already exceeding the cap. That's already, uh, that's in that bill. But the third point is the most flexible, and there'll be more guidance coming out on the use of this money by the middle of May. And that's to provide government services affected by a revenue reduction resulting from COVID-19. In other words, revenue loss. So one use of funds might be if there's a desire by the city council to stabilize the economy, to bring the library back to its full level of service. And that extra cost is $200,000. That was hypothetical. I don't know. I just threw that number out there. Then that amount of money could be appropriated from the use of the American Rescue Plan for that particular service. Or you can use it to make investments in water, sewer, and broadband infrastructure. The money cannot be used towards pensions or to offset revenue resulting from a tax cut. We haven't done that. But there is some debate, and we're looking for guidance from the U.S. Treasury on whether or not the money can be used to pay OPEB liabilities. For me, it doesn't pass the make sense test. If you can't use it for pensions, and OPEB is other than pensions, post-employment benefits, it sounds like it's the same thing. So I would not recommend that we use that money for OPEB liabilities because the government could recoup it if you fail to comply with any of those costs. laws and regulations that they come up with and they will be auditing this. We could transfer this to private nonprofit groups, public benefit corporations. In other words, sort of like a local community development block program where we could actually Um, have another you know, nonprofit group deliver services for the city if we wanted to. And there'll be reporting requirements that will have to be set up to give detailed accountings on the uses of the funds. Um, There's one other bill out there right now called the America Jobs Plan. That's about a $2.2 trillion plan. The Republicans yesterday unveiled their $568 billion infrastructure proposal. We will be monitoring both of these, the whole Oh. Bill, as it goes through Congress and if money is available for infrastructure for the city of Sausalito, of course, financial management will be monitoring that and making recommendations to the city council as it becomes available. So, The policy issues to be addressed then are is that we would want to examine the use of the American Rescue Plan funds as we go through the budget preparation process. What funds should we use to stabilize? In other words, what I mean by stabilize is to return to to our pre-COVID levels of service? And then what amount of funds should we strategize? And then should we put it towards people that are in need right now or businesses that are in need right now? Maybe even a three-year revolving loan fund for businesses could be anticipated. We could use it for programs of inclusivity or to invest in future prosperity or to augment programs that we already have in place and we want to see continue. So this is a point now for our city council to kind of talk about these and see what you, how if that's consistent with how you would want to address the use of the American Rescue Plan |
| 00:48:01.66 | Jill Hoffman | Thanks, Charlie. Yeah, I agree with that strategy for sure. Anybody want to have a question or any council member have a question or want to weigh in on that? |
| 00:48:12.10 | Unknown | I had a couple of questions. Just given the amount, and so if we'll get, you know, a little over almost 700,000 this June, do we know looking at our budget and the reductions in level of service for pre and post COVID, is that enough to just apply and return to our pre COVID level of service if we were to make it decision to do that? |
| 00:48:33.62 | Charlie Francis | Thank you. So the... Earlier in the presentation, I put up a graph of our labor costing software. The difference between our pre-COVID funding level and our current COVID level is about that same dollar amount. |
| 00:48:51.02 | Unknown | Right, okay. So, okay, that makes sense. I just wanted to check on that. |
| 00:48:57.82 | Janelle Kellman | Okay, any other questions? Yeah, just real quick. Charlie, I think it was your slide before this that talked about the different uses, not this slide, but restore economic recovery, respond to COVID-19 emergency and addresses economic effects. How would you recommend the council approach that statement? And specifically, what are we looking at when we think of economic effects? Are you looking at our bottom line? Are you looking at our sales tax? aging infrastructure, what, Where are we looking in the finance |
| 00:49:33.52 | Charlie Francis | Thank you. Yeah, so good question, Vice Mayor. And I've been struggling with this one myself, and as has been the local government community, we're all seeking U.S. Treasury guidance on what exactly they mean by economic effects. You know, I have other customers that, work in the higher education area. And the Department of Education and U.S. Treasury has already come out with very specific guidelines on how to address this for like universities. And I expect to see the same sometime in the middle of May for what exactly they mean by address its economic effects. At this point, I'm not sure. |
| 00:50:15.61 | Janelle Kellman | Thank you. |
| 00:50:16.45 | Charlie Francis | Yeah. I am sure that I put a comma in there though, and I shouldn't. I just noticed that, sorry. |
| 00:50:24.82 | Jill Hoffman | Charlie points off for grammar. okay so any other questions and then yeah go ahead councilman play one else |
| 00:50:31.96 | Ian Sobieski | Yeah, so I would just, I think these points that Charlie has up here now are, I agree, a good way to frame the discussion. I mean, it is really important to me that we use these funds to help restore some of the service that we did need to cut. last year. I also like the idea of you know, some Corresponding expenditure towards revitalization and using these. kind of, I like the themes of inclusivity and immediacy. and future prosperity. So I think, that's a good way to frame any kind of new business assistance is with those values. values kind of layered onto that. Thank you for framing the conversation that way. And, but I wouldn't want to put it all into one bucket or the other, I think we need to first address our, our house, our own house. and then, simultaneously. look at the community's needs as well. |
| 00:51:39.51 | Jill Hoffman | Okay, any other comments on this section? All right, Charlie, rocketing on. Go ahead. |
| 00:51:45.93 | Charlie Francis | Oh. I'm hoping you're forgiving me. We're moving through this rather rapidly. We might finish sooner. than we initially thought. |
| 00:51:54.67 | Jill Hoffman | Thank you. Hey, don't jinx us. Go on, sir. |
| 00:51:56.95 | Charlie Francis | Okay. |
| 00:51:57.67 | Jill Hoffman | Bye. |
| 00:51:58.06 | Charlie Francis | So... Thank you. There is a wrap up session. We're gonna wrap all this up and talk about the bigger picture after we've gone through each of these four items. So the policy issues to be addressed is, the other one is other resource generation policies. And this council finance committee and the city council has been asking for presentations on pension liabilities and cost alternatives. I've come up with a kind of an innovative idea on our OPEB liabilities and costs. There's other department service delivery options that we will be examining during the process. And I just want to give high-level overviews of each of these. First of all, pension funding options. As you know, at a recent meeting, we kind of... put together a presentation where we want to continue with the same funding policy of $250,000 per year. That equals about 3% of payroll. Council then asked at that meeting to have a future meeting on other options. Well, one other. And when I say this $250,000 per year, That's going into a Section 115 trust fund, and it's accumulating interest and capital towards accelerating the payoff of our pension obligation. I think if I recall correct, it brings it from 25 years down to 21 years. we could accelerate that to a higher percentage of payroll based on revenue generation and use of funds for other purposes, right? You can't use the American Rescue plan fund for pensions, but the money is fungible, right? So if we use it to augment library services and we then take that additional savings and say we're going to accelerate our contributions to the Section 115 trust program, then we could do that. The third option is to do a pension obligation bond, which is a taxable bond. Uh, and that's a pure arbitrage play right now we can borrow money for I'm not sure. A little less than 3%. CalPERS is charging us 7%, although they may lower their discount rate in the near future. and we can fund our CalPERS to 95% UAL. THE Pure arbitrage play like that is like taking a second loan on your house. and saying, trust me, honey, I'm going to invest it in the stock market. And it's almost even a little bit worse than that. Because when you borrow the money, you're switching hard debt for soft debt. And that soft debt is you have no control over the arbitrage because it goes into actuarial abyss at CalPERS. And it's subject to the risk thresholds that CalPERS undertakes in order to achieve their current 7% discount rate. So, PENSION OBLIGATION BONDS WILL YIELD SAVINGS. I'M GOING TO SHOW YOU THAT AMOUNT HERE. AND THEN NEXT SLIDE. but it has risks. So another strategy that recently came out and helped a large city implement They issued a lease-backed, in other words, certificates of participation type. pension obligation bonds. And instead of putting the money into the state retirement system, CalPERS, the money was all of it was placed into the Section 115 Trust. Now, why that's important is now it's the city is controlling the arbitrage, right? We've switched our hard debt. And we put it into soft debt, but it's sort of like we're going to pick the investment strategy and we're going to incur the risk threshold that we want to incur. And then you take the earnings to come from that. You reduce your general fund obligations to the CalPERS PAYGO amount. I know I'm getting a little technical here, but it still ends up in substantial savings to the city and you're controlling all the risk yourself. But the third one is the most intriguing to me right now. And that's a combination arbitrage. Oh, let's come back to this lease-backed arbitrage here. It's like taking a second mortgage on your house and then to pay off, you know, you know, some soft debt, but the husband and wife together say, we're going to manage the investments of that firm rather than to give it to someone else. But the combination arbitrage, I think is really fascinating. And, um, right now I'm exploring this. I have explored it with legal and with actuaries, uh, and everyone says it's feasible and doable. What that is, is you combo the pension obligation bond and the least fair to take the second mortgage out of the house, give the 95% to CalPERS, but to actually issue 130% or 125% of UAL in debt. And this gets to Council Member Sobieski's point of using debt to reduce our our expenses. So, and what that, we would put the excess money into the Section 115 trust, and that acts as a hedge against future actual aerial versus experienced volatility. For example, CalPERS assumed a discount rate of 7%, but last year they only earned 5.5%. What that did is it increased our UAL by a substantial amount of money. not only next year, but throughout the future. It creates a new base. And what that means is that it created a new loan within all of our structured loans that comprise our UAA payment. So if we pay this off to 95%, and they incur another loss, Then we use the amount of money with the earnings that were accumulated in our hedge fund. off that newly acquired base so that we're always staying at 95% UAA. KILPRS will be lowering their discount rate. If they don't do it this year, they'll probably be within the next year or two. So we could actually start setting aside money in the hedge fund now to meet those future actuarial assumption changes. |
| 00:58:34.52 | Jill Hoffman | Council member Silvieski has his hand up but before I call on him I had one question. What do you think the discount rate is What they're lowering it to. |
| 00:58:44.68 | Charlie Francis | But... Oh, I think, um, They'll probably gradually march down to 6.5. |
| 00:58:50.91 | Jill Hoffman | Okay. Okay, Councilmember Sobieski, go ahead. |
| 00:58:54.50 | Melissa Blaustein | Thanks, Merit. Who manages the 115 Trust? We do. I mean, who invests the money? Like what, on what strategy is it invested? |
| 00:59:01.89 | Charlie Francis | Okay. So right now the, so there's an investment policy that's been adopted by the city council for our current section 115 trust that puts it into a moderately conservative policy. of the risk uh, not only conservative, um, investment strategy managed by Highmark Capital within US Bank. How has that strategy performed against the |
| 00:59:23.96 | Melissa Blaustein | and I think that's a great thing. |
| 00:59:24.69 | Charlie Francis | All right. Yeah. There has been a recent report to the city council. I don't have it in front of me, but we have that information and how it's performed. |
| 00:59:35.18 | Melissa Blaustein | has it been consistently superior? |
| 00:59:37.89 | Charlie Francis | Well, The goal of the Section 115 Trust is not to be more superior than CalPERS, but to be more stable than CalPERS. So the city council that adopted that policy valued higher interest rate than you can get with LEIF. They valued stability over an aggressive policy, kind of wanted to make sure. So I think we've been averaging five and a half to 6%. Have any municipalities |
| 01:00:08.97 | Melissa Blaustein | adopted a combination strategy that includes a a smile. small allocation to different investing strategies. and actually been able to get returns substantially superior. to- |
| 01:00:26.79 | Charlie Francis | We have complete flexibility within our Section 115 trust to either manage the investments ourselves or to give specific directions to an investment manager. Or we can completely lower the basis points that we pay and have set it up to be invested in a Vanguard hedge fund. |
| 01:00:46.75 | Melissa Blaustein | I'm not sure. |
| 01:00:47.04 | Charlie Francis | Thank you. but that's... |
| 01:00:47.73 | Melissa Blaustein | Have any municipalities adopted a strategy that's something like that. |
| 01:00:53.47 | Charlie Francis | Yeah, I don't know of any off the top of my head. I could, we could certainly ask partisan to find out. |
| 01:01:01.06 | Jill Hoffman | Okay, thanks. I think Council Member Blaustein had her hand up next. |
| 01:01:05.64 | Charlie Francis | So I have one more slide. |
| 01:01:07.24 | Jill Hoffman | Thank you. I think that's okay. Yeah, go ahead and then Councilman Blassey will ask. Your follow-up. |
| 01:01:12.76 | Charlie Francis | So just on pensions. So how a pension obligation bond works is again, you're, you're, you're, You're getting hard debt for soft debt. And the top blue lines over here are UAL payments and the but Line graphs are three scenarios of pension obligation bonds. And you can see that we have substantial amount of savings in the early years. Then we're a little bit higher in our debt service payments in the later years. Then that results in these three scenarios. Average annual savings on a 20-year restructuring of 842,000. 24-year $900,000, and 25-year restructuring $1.1 million. So that's annual. Now go back to An earlier question. Just this right here funds the library and now you have not the library, brings back the current level of service, although I wouldn't recommend that. I don't think rating agencies would look favorably on immediately spending your savings, but partials of it can be used for changing your levels of service. So with that, now I'll talk about... we can answer more questions about pensions. |
| 01:02:32.54 | Jill Hoffman | Okay. Go ahead, Council Member Blastey. |
| 01:02:35.55 | Unknown | Thank you, Mayor Hoffman. I understand that there are specific requirements around what we can and cannot do with CalPERS. Is there any flexibility beyond our 115 trust that we might explore other than the scenarios here? or is that the extent? And what are our requirements for commitments to CalPERS? in terms of how much money we have to put it. |
| 01:02:59.26 | Charlie Francis | Oh. So these are all the options. that a city has. There's not a whole bunch else. We're mandated by law to fund the actuarial payments that CalPERS incurs on us. Right now, it looks like our annual UAL payments is about $2.5 million. |
| 01:03:28.84 | Jill Hoffman | Okay? Um, Vice mayor. |
| 01:03:32.48 | Janelle Kellman | Vice mayor. Great. Thank you so much, Charlie. Really appreciate this, as we've talked about in Finance Committee. You know, I think one of the main takeaways is that the problem is quite large and it's getting worse. So I'm glad that we have the opportunity to review and you have some suggestions. Looks like our pension dad has grown. I think nearly continuously for the last 20 years, um, One of the things that I would like to get more clarity on is around plan assumptions, especially the assumed CalPERS actual investment return on investment. So I understand that the 115 keeps the city's pension contributions from the general fund fairly stable despite increased demands from CalPERS. But whether or not it'll be a success depends on the assumptions made and the actual investment results. And we're already behind on our pension contribution. How can or can we just put a placeholder here to get more information and more clarity around the assumptions behind the scenarios? That's sort of question A. And then question B, Councilmember Sobieski kind of asked around this. You know, we have the target RR is now 7% and about 80 million of assets. But if CalPERS earns on average only 6% per year, then we incur a massive amount of additional debt. So, Those two questions, I had way more clarity on the assumptions and then how do we the We're managing our own stability, but we can't account for what CalPERS's rate of return is because it's a built-in loss. |
| 01:05:06.98 | Charlie Francis | Thank you. So from Kelper's standpoint, The assumptions are set by them. We have no control over. So right now, the major assumption that affects us the most. is the discount rate. Discount rate assumption is at 7%. Discount rate means that's how much they're discounting the present value of benefits for all retirees. They did make mortality assumptions. They make assumptions about average wage growth and payroll growth. But the experience versus the actual, versus the assumption, the actual experience versus the assumption, doesn't have as much volatility on our contribution and this impact on UAAL as does the discount rate assumption and the inability to make it. You know, they assume 7% if the new normal is 5.5% We have no control over that. Our actuarial liability will grow. So, The strategy is to make contributions into the Section 115 trust assuming an investment rate of return that's set by the City Council, And than the uh, using those payments to do one of two things. You can put that money aside and have the earnings from the Section 115 trust address any new costs that emerge because of not meeting the discount rate assumption, or it can be used as to say, okay, they just created a new base. Now let's pay off that new base so that we're always at the same level of UAAL. |
| 01:07:01.58 | Janelle Kellman | Yeah, I guess the thing I'm trying to understand is I don't understand how investing at a lower rate than CalPERS is charging us is better than paying CalPERS directly, right? Because ARBs don't borrow at 6.5% to invest at 5.5%. So that's what I'm trying to understand. |
| 01:07:17.24 | Charlie Francis | Yeah. Kale Pierce tries to get 7%, but they don't get it. And, Right? They didn't last year. They tried to get 7% and they only got five and a half. It increased our liability. If we plan to invest at 6% and we get 6%, that's kind of stabilizing the amount of money we're earning. And we don't answer to the public saying, Oh, you put money into the Section 1FNT Trust and you lost it. I mean, that's the last thing, you know, we enter into recession and the value of our assets go down. So the many, most municipalities, when they're putting money into their pension pre-funding section 115 trust, are investing for the safety and the liquidity and paying less attention on the yields. |
| 01:08:15.14 | Jill Hoffman | Okay. Council member Cleveland Knowles. |
| 01:08:18.88 | Ian Sobieski | Great. So thank you for all this, Charlie. I, you know, at some point I'm hoping we can get some written. information too. digest that. Can you move back to the slide on combination arbitrage again, and just walk us through that one more time. |
| 01:08:40.05 | Charlie Francis | Yes, I'd love to because I think this is going to be the new emerging best practice. So it's a combination of a taxable Pension obligation, buy it. with a tax exempt. Certificate of Participation. |
| 01:08:58.61 | Ian Sobieski | And can I just interrupt? So, and the bonds do require voter approval or do not? |
| 01:09:05.00 | Charlie Francis | Oh, I don't believe pension obligation bonds require voter approval. |
| 01:09:10.52 | Unknown | Thank you. |
| 01:09:13.12 | Charlie Francis | I know Mary might know. Chris. |
| 01:09:16.51 | Jill Hoffman | I'm sorry. |
| 01:09:17.32 | Charlie Francis | I'm pretty sure they don't. Yeah. |
| 01:09:19.63 | Jill Hoffman | Yeah, you know what, we can find that out and we can answer that question. We can have a fact session or something. And we can answer that at a future... meeting, finance community meeting. |
| 01:09:28.81 | Charlie Francis | The pension obligation bond issuance would go into CalPERS to bring our funding up to 95% UAAL. |
| 01:09:28.93 | Jill Hoffman | Okay. |
| 01:09:40.00 | Charlie Francis | Now, we never want to be 100% funded. because if you become, if the next year CalPERS meets or, I mean, exceeds their discount rate assumption, you can become super funded. And once it's super funded, it's, we're right back into the discussion of, Why do we have more money on him than we need? And then, The other part of it is you can't get it back. From CalPERS. The new regulations say if you're superfunded, it stays with CalPERS in case it ever goes back down again. So funding to 95% UAL is becoming the best practice for pension obligation bonds. the lease back, or the certificates of participation bonds, would then give us another 25% to 30% to go into the Section 115 trust, invested more conservatively. And it's used then as a reserve, if you will, but it's a positive arbitrage reserve. You borrow it at 3%, you're earning 6%, and that money is being accumulated then as a hedge against future actuarial discount rate versus experience volatility or future actuarial assumption changes. In other words, rating agencies, I believe, would give us a triple A rating if we're saying, We're arbitraging money to anticipate the discount rate assumptions in the future. And I've had discussions with municipal advisors about all this, about there's two sides to it, right? You're hedging against future assumption changes, but you're incurring debt at the same time. Would they mitigate against each other or would they actually add to your credit rating? |
| 01:11:22.11 | Ian Sobieski | Yeah. |
| 01:11:30.97 | Ian Sobieski | Great. And then just feeding from this slide to the slide that we were on at the end. Does that kind of show the revenue. sort of those savings. here, is that feeding into that strategy? Am I understanding that correctly? |
| 01:11:48.07 | Unknown | Thank you. |
| 01:11:48.10 | Charlie Francis | Just. |
| 01:11:48.42 | Unknown | Thank you. |
| 01:11:51.00 | Charlie Francis | You are the bottom line is for the strategies. Uh, oops. three through five here. I should have numbered these. So this is... |
| 01:12:03.71 | Ian Sobieski | Thank you. |
| 01:12:04.94 | Charlie Francis | This is the bottom line. |
| 01:12:07.76 | Ian Sobieski | Great, so these, the blue, green, and orange correspond to those three arbitrage strategies. And then on the bottom line, you have the average annual savings. That's it. Every year. from 2022 to 2036. |
| 01:12:26.76 | Charlie Francis | Well, it's every year I have to go back, except these later years. |
| 01:12:33.60 | Ian Sobieski | I can't, you know, |
| 01:12:33.71 | Charlie Francis | Thank you. |
| 01:12:35.45 | Ian Sobieski | I'm wearing glasses for a reason here, Charlie, |
| 01:12:39.25 | Charlie Francis | Yeah. |
| 01:12:39.30 | Ian Sobieski | I can't see on the bottom. the years that Oh, definitely. |
| 01:12:42.93 | Charlie Francis | Where is he? Yeah, oh, I can't see the years. Like from 2037 to 20. Yeah, I can't see him either. |
| 01:12:49.71 | Ian Sobieski | Okay. Well, anyway, but from 2022 to 20, 36. |
| 01:12:53.34 | Charlie Francis | Yeah. |
| 01:12:53.68 | Unknown | Thank you. |
| 01:12:55.70 | Ian Sobieski | we would be saving this amount of money under the strategy is the estimate |
| 01:12:58.13 | Unknown | I knew this. That's correct. |
| 01:13:00.70 | Ian Sobieski | That's huge. It's a huge box. It's huge. Yeah, I mean, that's amazing. So that's very encouraging. Um, And is that net, like, is that, including the cost of doing this. |
| 01:13:18.74 | Charlie Francis | it. that. You know, so I got these preliminary estimates from the municipal advisor that I've used all the time that I was with the city. And we would just, we would get, of course, all of the comprehensive detailed analysis we need to make this decision. I'm recommending that if we, if council directs staff to pursue this, I would bring it in a series of meetings to the city council so that the council and the community is fully briefed and understands completely all of the implications regarding going forward with this strategy. |
| 01:13:56.79 | Ian Sobieski | Yeah, but just on an order of magnitude, |
| 01:13:59.79 | Charlie Francis | but I am recommending that the city council give staff direction to further pursue this policy. |
| 01:14:00.87 | Ian Sobieski | I think. |
| 01:14:06.97 | Charlie Francis | Uh, And then, you know, and to leave it as a possibility for our continuous budgeting process. |
| 01:14:20.28 | Jill Hoffman | Right. So to be clear, we're not voting on this to implement today. What we are, the possibility is that we're going to give direction to staff to further work. explore this and for presentation to our budget discussions and our finance committee meetings, |
| 01:14:33.68 | Unknown | Correct. |
| 01:14:34.03 | Jill Hoffman | Thank you. |
| 01:14:34.07 | Unknown | Thank you. |
| 01:14:34.28 | Jill Hoffman | Okay, thanks. And Okay, so I think we're going on to Council Member Sobieski, Council Member Clevenals, unless you had a follow-up, your hand's still up. Oh, sorry, I'll take it down. Thank you, Mayor. I just want to make sure I hit everybody and everybody gets to. I'm not sure. So go ahead Council members will be asking |
| 01:14:50.82 | Melissa Blaustein | Thank you, Mayor. Charlie, just Just reasoning by this direction, why do we stop at 25 million? if we're saving a million dollars by doing this, then Why wouldn't we issue a larger bond and and actually, and actually pre get ahead of our pension obligations. Is it because of the super fund overfunded of how much we can Thank you. |
| 01:15:20.03 | Charlie Francis | I'm not sure. Right. |
| 01:15:20.68 | Melissa Blaustein | Yeah. |
| 01:15:21.74 | Charlie Francis | Yeah, so I only asked for from the municipal advisor an analysis of just What cities traditionally do with pension obligation bonds. The last two scenarios that I had on the screen, we did not run numbers against. This one would be about the same, but this one Since it's going into a Section 115 trust, we would not incur additional cost savings because it's going into a Section 115 trust that can only be used for pension purposes. But if the question is... why don't we go to 100% UAL? It's the answer is the super funded status. |
| 01:16:10.59 | Melissa Blaustein | Okay. And then is a strategy like this at all possible to change our relationship altogether with CalPERS? I mean, just as an intellectual exercise or Can you not issue private bonds to to exit coppers and establish a different retirement system altogether. |
| 01:16:28.04 | Charlie Francis | So that was a previous analysis I sent to the city council, and it ends up costing the city, oh, I can't remember, but it was huge. Right now our liability is at $25 million. That's discounted at 7%. That is the 7% discounted. If we brought it down to a 3% discount rate, I believe our UAL is $100 million. So now you have to exit CalPERS, you'd have to to a bond issue at $100 million, and not only pay the debt service on that, but also implement some kind of a retirement program for new employees. And the cost of doing both of those is so it would It would significantly impact levels of service. |
| 01:17:19.51 | Jill Hoffman | Okay. Any other questions on this section? Or, Charlie, are we moving on to a new section? |
| 01:17:25.36 | Charlie Francis | Well, it's another category within the resource generation section. |
| 01:17:30.78 | Jill Hoffman | Okay, go ahead. |
| 01:17:33.28 | Charlie Francis | The next category is our OPEB funding. So, You know, when... When monies are set aside either in a pension fund or into a Section 115 trust, their money is converted to equities or it's converted to real estate. So, in other words, when we send our money to CalPERS, they invest it in the stock market, they invest it in fixed income instruments, they invest in real estate. We've all heard about the real estate deals that CalPERS invests in. Our OPEB is invested into our Section 115 Trust Fund. That money is a, and right now our annual required contribution for actuarial purposes is $300,000 annually. And we have about a four and a half million dollar unfunded liability. And That's a best practice we're meeting our obligation for our OPEB funding and this is what it costs us we have about $1.3 million set aside in our section 113 trust now for that purpose. We don't want to change that practice. But, If we can contribute money into a Section 115 trust, This is the question I ask myself. Why can't I contribute? income producing assets into a 115 trust. Well, our existing trust doesn't allow us to do that. But the. City can always set up another section 115 trust its own section 115 trust and we can contribute a real estate income producing contribution into that 115 trust that approximates the 95% UAAO. What that means is we would not have to contribute $300,000 annually into an OPEB trust. All we would have to contribute is about $150,000. That's our pay-go portion. But if the income producing asset produced $150,000 a year. boom, we're out of the OPEB business. Now it gets a little more complex than that in terms of structuring and all that, but that's the idea. And I've run this idea... past our own actuary. And we've talked about all the complexities and and how it would work and how we could present this to the City Council. And then the third scenario is We might wanna Leave some money in our Section 115 trust to cover what's called the implicit subsidy for our PEMCA. OPEB portion of the trust. but we could draw the 1 million out. So, Basically, and I'm saying if we could take a building like maybe Old City Hall Uh, and put it into a section 115 trust and use the income from old city hall to make the pay go portion, then we could take a million dollars out of our section 115 trust, use it for infrastructure, use it for reserves, use it for community programs, and we reduce our annual costs by $150,000. So this is just an idea. I would like to explore it more robustly. And what I was thinking that the city council could do is direct staff to continue with looking at this policy and have follow-up city council meetings on progress. |
| 01:21:08.76 | Jill Hoffman | Okay. Any follow-up questions on this section? Again, these are just discussion points. Yes. That we're |
| 01:21:14.29 | Unknown | Bye. |
| 01:21:14.31 | Charlie Francis | Yes. |
| 01:21:16.30 | Jill Hoffman | considering. Yes, council member. |
| 01:21:19.45 | Charlie Francis | balancing discussion points, but yes, you know, things that the activities that could be undertaking during the fiscal year 21-22 budget to help provide resources to provide pre-COVID levels of service to our citizens. |
| 01:21:36.89 | Jill Hoffman | Thanks, Charlie. Okay, Council Member Blasting. |
| 01:21:39.53 | Unknown | Yeah, it's really exciting to see how you've discovered these new pathways to save us all of this money. I'm thrilled. What I'm trying to understand is it seems like this is a no-brainer to just explore this opportunity. Why is this something that hasn't been considered before? Is it a new approach or an innovative approach for municipalities or is it something that's commonly done similar to council member Sobieski's question about combining arbitrage. I, It looks so good. I just want to know that it's not too good to be true and understand further a little bit what might be the risk here. |
| 01:22:11.73 | Charlie Francis | Absolutely. So it's not too good to be true. It's something that can really be done. Essence and Kind contribution to pension funds are, are done rather infrequently Uh, And it's because It's kind of a concept that that a trust fund isn't comfortable with. A typical trust fund wants your money And then they want to convert that money into an asset like equities or fixed income or or pans or buying their own real estate. up. The second thing that worries people in the industry is that some entities might just say, you know what, I'm going to put all my streets in my pension fund. and just call it get rid of the unfunded liability that way. You know, and, or they'll put property that's worthless, you know, like abandoned property that, and, um, in a city that's losing population, they could just say, oh, we're going to take all that abandoned property, give it a value and put it into our OPIP fund. That would give employees security. It wouldn't give them, you know, it's like a false hope. And it's a it's a fiscal it's a physical trick, smoke and mirrors. I would never recommend anything like that. But assets in kind contribution that are income producing, income producing to the tunes of of the of the paygo portion of the liability. It's. are being proposed by forward-looking thinkers from East Coast to West Coast. There's people that are exploring this and recommending it. |
| 01:23:58.42 | Unknown | Great, thank you so much. Okay, thanks. |
| 01:24:01.32 | Charlie Francis | You know, just so I'm sorry, council member Boston, one last thing. City of Sausalito has always been considered a thought leader. We were the first city in the nation to establish a pension pre-funding trust, section 115 trust. Uh, since then 230 cities have done that. And now it's moving across the United States. It's becoming a financial management best practice. People look to us and say, provide us that thought leadership to solve this problem. And I believe this, when it's applied to OPEB, not to pensions, is a solution that many cities will embrace going forward. |
| 01:24:41.33 | Jill Hoffman | Okay, thanks, Councilmember Clemenals. |
| 01:24:44.69 | Ian Sobieski | Great, thank you. Yeah, I agree. That sounds like a fantastic idea. And I assume Charlie, that if we picked an income producing asset that hit a troubled time for example, during a recession or like the pandemic, that we could supplement. If needed, if the income producing asset wasn't meeting the PAYGO obligation for several years, for some reason or another. we could balance that out. |
| 01:25:18.86 | Charlie Francis | Um, Yeah, if the income dropped down, then there would probably have to be a general fund contribution coming in to do that. or you continue setting aside money in your Section 115 trust, earning income at a higher rate than you would with LEIF, and using that as a as a hedge against that happening, recessionary hedge. That's why I'm not recommending drawing all the money out of the $1.520. |
| 01:25:45.86 | Jill Hoffman | Uh-huh. Okay. All right. Thank you. Thanks. And Vice Mayor Kilman. |
| 01:25:50.80 | Janelle Kellman | Yeah, no, thank you for this, Charlie. There have been some really interesting reports from MCCMC and Former council member Withy worked on something with the mayor of Mill Valley, Macaulay, around pensions, which we should share, because it's a really interesting report about pension reform and transparency. Um, I guess, uh, I, worry when something seems too good to be true. So it makes me want to, you know, have more opportunity to look at this. And so I think my overarching request would be that we move slowly here and we really Take our time to understand this. There was an interesting article going around, actually titled, When a Section 115 Pension Stabilization Trust is Too Good to Be True. So they actually created that title because the limitations around being able to move the money back and forth to cover general fund opportunities. And so I just wanna ask that we go slowly and we all try to challenge each other's assumptions on this. But I think you also recommended that we have some really in-depth public workshops. Thank you. I just want to ask that we go slowly and we all try to challenge each other's assumptions on this. But I think you also recommended that we have some really in-depth public workshops. And I think that's the right way to go. Do you see us bringing back Bartle & Associates? So Bartle & Associates was a third-party reviewer of our pension obligation who, I think the last report was from 2018. It was always nice to see kind of everything consolidated. Would you recommend we bring them back to kind of give us a Another look at what's happening sort of within California on a broader scale. |
| 01:27:21.98 | Charlie Francis | No, I'm John and I are good friends and I have always found that his presentations are informative and helpful. John is a traditional actuary, not forward-looking, and he's very opinionated and sometimes says things that go beyond what an actuary should be sharing with the city council. |
| 01:27:36.12 | Unknown | Thank you. |
| 01:27:42.16 | Charlie Francis | But I don't know, I welcome his feedback. John and I are really good friends. Um, Uh. we've had some interesting presentations together where it was the actuarial, the actuary versus the accountants, because, you know, accountants deal with reality and actuaries deal with made up facts or made up assumptions. And, and, and I mean, sometimes when John's speaking at the conference and he sees me sitting in the audience, he'll stop and say hi to me. So yeah, I'm happy to recommend bringing John back for an annual review of our campus reports. I'm not recommending we change our OPEB actuary. I think Bartell would be more expensive. |
| 01:28:27.86 | Jill Hoffman | Okay. Thanks, Carly. Council Member Sylvia Esty. |
| 01:28:31.12 | Melissa Blaustein | Just feeding off of the Vice Mayor's question, Chairman, Um, you know, in the land of the blind, the one-eyed man is king. And I'm just wondering to what extent You, if you were being asked to dispassionately design fail safes and checks and balances on anything innovative in the financial world, you would recommend to increase the chances of being I appreciate you're the expert in your proposing a set of guidance, or will propose with your team, a set of guidance that you recommend. But how do we get a second or third opinion about any actions we take. that we can be confident in having discharged our duty to look at this from several different angles. |
| 01:29:23.51 | Charlie Francis | So any kind of debt issuance that we do, council member, requires opinions by both the bond attorney and the city attorney. And so even though the bond attorney is part of the financing team, a bond attorney is not going to put their license on the line to do anything other than what is legally allowed under California law. In terms of the OPEB contribution, we have actuaries telling us what they can do and what we can't do. And again, all of those reports are reviewed by our own in-house city attorney. And at any point in time, if council member is uncertain, they can always ask for a third-party attorney to review any actions. |
| 01:30:12.86 | Jill Hoffman | Okay. |
| 01:30:13.45 | Charlie Francis | Thank you. |
| 01:30:13.46 | Jill Hoffman | Thank you. |
| 01:30:13.51 | Charlie Francis | Thank you. |
| 01:30:13.55 | Jill Hoffman | in. |
| 01:30:13.56 | Charlie Francis | Thank you. for the, oh, sorry, go ahead. Oh, yeah, just going back to the bond attorneys, those The due diligence on issuing bonds, whether they're certificates of participation, which are tax exempt or taxable pension obligation bonds, there's a significant amount of risk. And from the bond council standpoint, you know, if we're issuing tax exempt bonds, no one's going to risk losing that tax exempt status. You know, I mean, the consequences and the penalties, the compliance penalties of the city are huge. So, yeah, the due diligence is very significant. And when you issue, you can be assured that it meets all the legal requirements. |
| 01:30:59.24 | Melissa Blaustein | I would just love to echo the vice mayor's comments about Going slow and being prudent, I think I'm all for innovation and I absolutely know from lived experience how mechanisms like this can be extremely meaningful and impactful and we want to be sophisticated and innovative, but we also have a fair number of residents in town who are financial experts that could provide a second look at some of this thinking. sort of formally get a second doctor's opinion on the |
| 01:31:32.88 | Charlie Francis | Yeah. |
| 01:31:33.40 | Melissa Blaustein | Thank you. |
| 01:31:33.42 | Charlie Francis | That's part of the public process and I welcome that. |
| 01:31:33.52 | Melissa Blaustein | Yeah. |
| 01:31:39.91 | Charlie Francis | when we when we did set up our pension section 115 trust we moved very slowly through that it was a series of meetings of First, uh, First, we just set up, let's have that tool in our toolbox. And then the second step was, okay, we have the tool in our toolbox. If we ever put any money into it, Oh, and it didn't cost us anything to put that tool on our toolbox, you know? So it was like, let's do that. Second step was... Uh, if we ever do, what investment policy should we put money in there? And then the third step was through the budgetary process of how much money should we initially put in? And then the fourth step would have been developing a pension funding policy, section 115 pension pre-funding policy. So that was the order of how things were presented to finance committees, city council meetings, and the public. |
| 01:32:41.95 | Charlie Francis | And in all of these, I'm not recommending rushing anything for all of those who here in the call today who knew me from the past. So like I recommend bringing it through the public process, the only right way to do things. |
| 01:32:58.15 | Jill Hoffman | Okay, so any other questions on this section? And it looks like then after this section, Charlie, we'll go to other department service delivery options |
| 01:33:07.68 | Charlie Francis | Yes. |
| 01:33:08.36 | Jill Hoffman | Okay, yeah, let's go. |
| 01:33:11.06 | Charlie Francis | I think. So, So there's other service delivery options that we could and we are looking at or could be looking at. Outsource financial management is kind of what you're doing now. On an interim basis, we may look through this process saying, how do we institutionalize it? Sewer consolidation is underway. We've had a lot of robust staff discussions since January when I was first retained to look at the sewer consolidation. The sewer joint task force meeting is being scheduled here in the near future. Are your committee members, the city council committee members that have been appointed, have been briefed on the progress of the sewer consolidation meeting. And we're moving ahead, analyzing that. And then, uh, I understand there's been some discussions about police consolidation, nothing solid yet, but you know, I think what we're trying to say is the management of the city is continually looking at arrangements that help the city deliver services strategically, effectively, and efficiently. So we're looking for other suggestions for shared services agreements that the council might have as well. |
| 01:34:33.83 | Jill Hoffman | Okay. Okay. |
| 01:34:35.97 | Charlie Francis | So, So this is kind of like the part where Um, Any discussion around other resource generation policies, any direction to staff? |
| 01:34:49.37 | Jill Hoffman | Okay, from, yes, Council Member Cleveland has her hand up. |
| 01:34:57.01 | Jill Hoffman | I believe you're still on. Thank you. |
| 01:34:58.80 | Ian Sobieski | Thank you. So, you know, I think, whoops, I think we've switched slides there, Charlie. Anyway, you know, I'm definitely in favor of moving forward with our efforts on sewer consolidation. We had some great conversations last year on police. |
| 01:34:59.51 | Jill Hoffman | Thank you. |
| 01:35:08.37 | Unknown | Okay. |
| 01:35:20.99 | Ian Sobieski | shared resources and shared services, which I think would be have a lot of benefits to the city moving forward. We also talked quite a bit last year about a shared kind of permit counter somewhere in southern Marin, which I thought was a great idea, sort of potentially you know, near where a lot of contractors go, and maybe having more limited service here, you know, not every day. We also made great strides in the virtual |
| 01:35:52.16 | John DeRay | Thank you. |
| 01:35:56.35 | Ian Sobieski | service delivery system, which could also help. So I would add that. potentially to the list of things to look at. We've also talked, we've talked about sharing are maintenance yard. Um, corporation yard. and consolidating some of those corporation yards to potentially free up public land or other uses like housing or or others. So I would add that it's not quite the service It would save some funds, but it would be more of a one time. |
| 01:36:38.69 | Unknown | Yep. |
| 01:36:39.01 | Charlie Francis | Thank you. |
| 01:36:39.19 | Ian Sobieski | Um, thing. So I would add those to the list. |
| 01:36:43.02 | Charlie Francis | Okay. Yeah. Kevin and I are actually meeting on that Monday on the corporation So. Okay. |
| 01:36:51.95 | Jill Hoffman | Thank you. |
| 01:36:51.97 | Janelle Kellman | Thank you. Yeah. |
| 01:36:53.13 | Jill Hoffman | you |
| 01:36:53.18 | Janelle Kellman | Thank you. |
| 01:36:53.20 | Jill Hoffman | Vice Mayor Kettleman. |
| 01:36:53.22 | Janelle Kellman | Vice Mayor. Thank you. Charlie, thank you. Again, super, super helpful. I really appreciate how you're framing the issues and giving us a framework for for dialogue, I have a micro and then a macro, request, or macro request first, I guess. So at finance committee, Yuli had prepared a reference document that explain the restrictions on each fund with an easy to understand reporting of each fund balance. I think it would be really, really helpful if you could provide us something like that that also included How much of the fund fund is explicitly committed or allocated? What inflows to the fund are expected in the next four fiscal quarters? and the reserve balance for the fund. And I think this could be something like the goal would be that when the committee or the council looks at this, every one of us will know how much money is discretionary and we can talk about how that gets spent. So that's if other council members think it would be helpful, I think that would be a macro. And then on the micro, the reason that sort of comes to mind for me is as an example with sewer consolidation, So as of the end of last year, the city had $5.8 million in the sewer fund. And the city takes in about $2.8 million a year for the sewers. But in the last two years, we haven't spent about $1.7 million and have $5.8 million sitting in the bank. So. I want to know why that is before we start making decisions on sewer consolidation. It's a revenue generator for us. So that would be a micro example of why my macro request is coming up today. |
| 01:38:31.58 | Jill Hoffman | Thank you. Understanding that you don't have those answers off the top of your head right now |
| 01:38:37.49 | Janelle Kellman | Oh, certainly not. Yeah. I mean, if others think would be helpful, I just think if we could have that we all had, we'd all be on the same page about discretionary funds. Some of the funds have negative fund balances, which is quite confusing. So having that cleaned up, it lets us inform the debate around what we're seeing on the screen right now. |
| 01:38:53.20 | Jill Hoffman | Okay, thank you. Okay. Um, Okay, any other comments on this section? And is this your last section, Charlie? |
| 01:39:02.53 | Charlie Francis | So last section, I just have an overview slide. |
| 01:39:06.32 | Jill Hoffman | Okay. I need to take a break. I was thinking that we would either take a break now and then take a public comment after our break. Or maybe perhaps let's take a break and then Charlie, you can do an overview slide to Catch us all up. And then we'll take public comment. |
| 01:39:26.44 | Unknown | All right. |
| 01:39:26.54 | Jill Hoffman | I'm sorry. Thank you. Anybody have a thought? I'll add it either way, but I need to take a 10-minute break. Sounds good. The second time is like, oh. |
| 01:39:32.58 | Unknown | the second. |
| 01:39:34.34 | Jill Hoffman | Yeah. |
| 01:39:34.37 | Unknown | Yeah. |
| 01:39:35.81 | Jill Hoffman | 11, 18? Yeah, 1118. Is that good for you guys? Everybody? Okay, so those of you on the call, we're going to take a 10 minute break, and then we're going to come back, we're going to have an overview, and then we're going to take a couple |
| 01:40:31.31 | Unknown | What is it called? |
| 01:40:46.21 | Charlie Francis | Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. |
| 01:41:10.95 | Charlie Francis | Thank you. |
| 01:41:11.06 | Unknown | Thank you. |
| 01:41:11.18 | Charlie Francis | Thank you. |
| 01:41:27.01 | Charlie Francis | Well, what if they pay $250 an hour to do this? Thank you. Yep. |
| 01:50:07.32 | Jill Hoffman | Okay, I think since, Charlie, are you back? Yeah, you're back on. Yes. |
| 01:50:12.47 | Charlie Francis | Yes. |
| 01:50:13.14 | Jill Hoffman | Oh, very good. Okay, so it's 1119. Go ahead and proceed with your summary and then we'll open it up for public comment and work. |
| 01:50:22.64 | Charlie Francis | Okay. Great. So in summary, I just wanted to say that the budget preparation process begins with Oh. Looking at our current year situation, we're saying, okay, here's our beginning fund balance for the current year. Here's what our expected revenues, our expected expenses are. And here's what our ending fund balance is going to be. Fund balance in total being our reserves. Okay. And then once we have a handle on that, then we project those revenues into what we think they'll be next year. And I'll be projecting revenues under a COVID-induced economic scenario, a snapback economic scenario, and a gradual return to pre-COVID economic scenario. And I'll model our revenues the same way then that we'll be modeling our expenses and our levels of service. You know, continue with the COVID staffing level of service, gradually return to the pre-COVID staffing and fully return. Once we have a picture on the economy, we'll be monitoring, you know, measuring the economy and monitoring our our macro and micro economies, so that we can look for those forward-looking indicators that will tell us the economy is improving, we may want to consider accelerating. are returned to pre-COVID staffing and level of service. in conjunction with that. We're going to be analyzing the level and the use of our reserves, bringing those to the city council for policy decisions. We will be developing strategies for stabilizing and strategizing our use of the American rescue plan funds, combining that with other resource generation policies so that when you are ready to adapt to your budget. that you'll be able to adopt a budget that takes all of the resources that are anticipated, you know, for allocation. So it's going to be a complete and comprehensive process. It will be collaborative with staff and council members. and community members. Of course, And then I think we'll will be prepared to adopt a budget that will be continually monitored so that execution can be adjusted to meet the economic resources that will be available to us, as well as the community's needs and expectations. So it's – and I think that's why we want to continue this year with a one year budget process. But when I say one year, it's continual in the terms that it's always forward looking as council member, as vice mayor of common suggested that we're always projecting out for quarters in advance. Not only will we be doing that, but we'll be projecting that into our. our long-term financial plan so that any point in time, you know, we know where we are, where we're headed, and we'll have the data and the evidence to support recommendations that the city council is ready to hear and make policy decisions with. So that kind of summarizes the budget policy today, and I'll just open it up for more city council discussion. |
| 01:54:04.40 | Jill Hoffman | Okay, so what we'll do is, If we have any short comments now or questions for Charlie, I guess now just based on the summary. We'll ask those, but our discussion will follow the public comment. So do we have any specific questions for Charlie based on the summary that he just gave? or any of us that are. Okay, see nothing from the city council. We'll move on to open... public comment and i will now open public comment for our budget workshop. And I will let the clerk call in the order that she sees people because they bounce around for me. |
| 01:54:42.75 | Heidi Scoble | Thank you, Madam Mayor. Before I start calling out the names, would you like me to read the introduction on how public comments may be received or given? |
| 01:54:50.62 | Jill Hoffman | Thank you. |
| 01:54:50.72 | Unknown | Bye. |
| 01:54:50.77 | Jill Hoffman | Thank you. |
| 01:54:52.35 | Heidi Scoble | So video or audio public comment participation is limited to three minutes per speaker. If you'd like to make a comment, please raise your hand in the Zoom application. and you will be called upon when it's your time to speak to raise your hand from a phone press star nine each speaker will be notified when the time has elapsed it looks like we have four hands raised at this time the order of the commenters will be john de ray sandra bushmaker Vicki Nichols and then Wendy Richards. John, I have unmuted you. |
| 01:55:31.13 | Heidi Scoble | Thank you. |
| 01:55:31.17 | Jill Hoffman | John, are you there? |
| 01:55:31.89 | Heidi Scoble | Thank you. |
| 01:55:34.24 | Jill Hoffman | John, we're not able to hear you. |
| 01:55:35.50 | John DeRay | Bye. Hello. Can you hear me? |
| 01:55:38.00 | Jill Hoffman | Yes, go ahead. |
| 01:55:38.93 | John DeRay | Okay, thank you so much. Thank you for having this workshop. It's really been informative. I wanted to make three comments. The first one was regarding the staff report. |
| 01:55:44.14 | Jill Hoffman | Thank you. |
| 01:55:44.23 | Unknown | Thank you. |
| 01:55:44.24 | Jill Hoffman | I'm not sure. |
| 01:55:49.14 | John DeRay | Um, page five where some of the strategies for the ARP funding. Um, In the category of immediacy, there's a sentence in there, people need outreach and skills development to match them to available jobs. Thank you. Well, you know, it's interesting because at Spalding, we have an apprenticeship program that's just starting up. It just got some kind of a certification that was required. They're starting up in the fall. and I know that they're raising funds for that apprenticeship program. And unlike many other apprenticeship programs, it's, um, It's the kind of program that will pay pay the students to learn so they are seeking funds and this would be a great place, I think, to allocate even a small portion of the $1.3 million. The second thing I wanted to comment on was, this arbitrage strategy that Charlie mentioned. So prior to retiring last year, I managed convertible bond arbitrage funds for almost 20 years. and You know, one thing I learned is, first of all, very rare that you find a true arbitrage. And if you do, they don't last very long because everybody invests in them and they go away. But The other thing is I think the word arbitrage is associated with a risk-free investment. I suggest you change the name to something other than arbitrage because there's certainly risk in the strategy. If you're borrowing money at 3%, and looking to get a 6% return and using leverage, And I don't fully understand this, but this is kind of what I got from from the brief little outline that he gave. Um, you know, 6% return is great until it doesn't happen until you lose. you know, five or 10 or 20%. And then, you know, it's no longer an arbitrage. So there is definitely risk in these strategies, and it just needs to be, I think, articulated. The third thing I just wanted to comment on is There was a question about, um, the pension bonds, whether they needed to be approved by voters. I recall hearing something last year about There was a bill Um, about requiring pension bonds to get voter approval, I didn't hear anything about it getting passed. So maybe it was because of the COVID rush. where a lot of things didn't get passed. But anyway, it's something to think about. Thanks so much. |
| 01:58:42.02 | Heidi Scoble | Thank you. Sandra Bushmaker, you've been unmuted. |
| 01:58:45.87 | Unknown | Good morning, everybody. Thank you very much for having this workshop. Can you all hear me? Yes, we can. Thank you. Okay, great. I have four points I'd like to make. First is the assumption that full return to pre-COVID status is desirable. I think that is an assumption and should be examined very carefully. in terms of this is a good time for us to analyze if there's any deadwood, so to speak, that needs to be pruned out of our system. Secondly, The arbitrage plan. is a seductive alternative as I see it. And I was very concerned to see the drop off in the curve downstream. And I think that is a recipe for future financial and fiscal, problems in the city. And I would sure not like to see future generations have to deal with that. Third, as an overview policy on the whole budget process, I would sure like to see the city council adopt a policy of Maintenance is a good thing. And so whatever we're doing, and you've got letters in the file for today's conference or today's meeting about this, that maintenance of our assets. And I'm talking about the physical assets at the moment. is really an essential item for the smooth operation of the city. And I'd sure like to see that as a philosophy. of the city and I've discussed this with council members individual council members in the past Number four is the police consolidation. I think we lost something with the fire consolidation and we certainly have fiscal impact. arising from that consolidation and I would say proceed with caution. We also lost some of the what I would call personal touches. with consolidation that get that come with consolidation that we used to have with our owned fire department. There is less less community contact than I would like to see. And I would just caution us, as we proceed in discussions on police consolidation to be aware of that. That's all I have for right now. Keep up the good work. Thank you. Thank you. |
| 02:01:13.16 | Heidi Scoble | Vicki Nichols, you've been unmuted. |
| 02:01:16.75 | Vicki Nichols | Good morning, Council. I'm really pleased to be able to participate in this. I am an unabashed fan of Charlie's management and strategies. So I'm very pleased that you've gotten to get his, receive his overview. And I hope if the opportunity comes up and he's willing that we hire him, The last several years in terms of budget have been very opaque in my opinion. Charlie brings transparency to this and he's the only one that recently has mentioned that this process is for the council, and the community. Hurrah for Charlie. I'm wondering, I heard a mention that we were late are delinquent on our pension payments I'd like to hear about that I don't think we were And in terms of the OPEB strategy, my understanding is that the reason we put 300,000 in is that we put more in, that is like the 96 to 100% overfunding of the general pension. Once it's in, you can't get it out. So I would. I think that that recommendation is good to try that other thing. I WANT TO TALK ABOUT And I hope that we have a way for the community to participate in our priorities. That hasn't felt like that's been the same in the last couple of years, it feels like there's been which is only natural lobbying to individual council peoples and discussion. And I think as you see today, there's not many people on this call, but there's many more people interested in this than our good, good, good friends at Sausalito Beautiful. So I appreciate his strategy, Charlie's strategy, that there will be many public workshops. This needs to go slow. And I don't see any new major expenditures happening or at least prudently happening within this year because we don't know where we are. And we were having litigation for the encampment thing. We haven't gotten the money back for the slide yet. So all these things come up, maybe overly cautious, but we're in a year of not knowing with everyone getting up to speed. So I would advise caution, but he certainly gives good advice. Thank you. |
| 02:03:32.66 | Jill Hoffman | Thank you. |
| 02:03:44.34 | Jill Hoffman | Miss Richards, go ahead. |
| 02:03:49.84 | Wendy Richards | Can you hear me? |
| 02:03:53.57 | Jill Hoffman | Thank you. |
| 02:03:53.60 | Wendy Richards | Thanks. |
| 02:03:53.77 | Jill Hoffman | Thank you. Yes, yes we can. |
| 02:03:54.90 | Wendy Richards | OK. |
| 02:03:55.34 | Jill Hoffman | Thank you. |
| 02:03:55.36 | Wendy Richards | Great, good. Hi, good morning, thank you. This was excellent and I agree with the previous three comments that were made that I'm thrilled to see the level of commitment to accuracy and visibility for our budget. Very well done. I also concur that there are some very serious risks on the pension strategies. And, you know, those of us in the private world, our financial advisors have reduced that discount rate from five down to 4% for many of their clients and And meanwhile, we're dealing with this 7% number, that's a huge gap. So that really needs more time, more discussion, and as was said, more input from our neighbors and the experts. |
| 02:04:43.05 | Julie Myers | Yeah. Thank you. |
| 02:04:44.43 | Wendy Richards | Um, I also concur that the looking back to pre-COVID is not the be all and end all and we need to question. the level of services. ONTO THE one of the points in the report regarding the federal funds Um, in the, report, it said, And I quote, people and businesses are hurting. And that brings me to the ongoing saga of Measure M. Surprise, surprise. Now, had we had the level of professionalism and detail and time that we had today, if that had been done when Measure M was rushed through, It wouldn't be your problem to solve. It would have been done in a more timely and proper manner. That was not done. In your tenure as a council, there have been multiple letters, multiple voices, multiple meetings, multiple venues, EDAC, HERE, one-on-one with with Vice Mayor Kelman and the head of EDAC and the vice head of EDAC. Nothing's been done multiple months And now is the time to cure the flaws of Measure M. So I ask you to, and I've put a few notes up on my whiteboard here in my home office. The effect that Measure M is having is it's making you stand for deceiving the voters hiding the truth, endorsing a conflict of interest, discriminating against neighbors, ignoring residents who speak out, skimming off the top in, right off the top of what we earn as home-based businesses And a triple tax. When in fact, I know that you stand for integrity. Telling the truth. Equity. due process, quality and representative government So what I asked you today, is start with The home-based business Exemption, please restore it. Do it today. Thank you. follow your method you've had before. What, by when, how? And why? Because your three minutes have to. |
| 02:07:07.04 | Heidi Scoble | and then attack. relapsed. |
| 02:07:08.44 | Wendy Richards | the integrity of Everything and everyone. |
| 02:07:14.90 | Heidi Scoble | Thank you. Our next speakers will be Ava Crisante and then Julie Myers. Ava, you've been unmuted. |
| 02:07:23.98 | Unknown | Thanks so much. Can you hear me? Yes, we can. Welcome. Thank you, Mayor. |
| 02:07:28.76 | Unknown | Thank you. |
| 02:07:28.78 | Unknown | Thank you. |
| 02:07:29.22 | Unknown | I really find myself so in agreement with so many other callers. I definitely, want to echo John DeRay's comments about the risk of arbitrage. I think that's serious. I think we have a nearly 53 years old, you know, I started at Shearson-Leman when I was 19, right after the 87 crash. And I've lived through many, many bubbles working in the finance sector. And I can tell you that this moment in particular looks extremely bubblicious. So I think taking on additional risk is maybe not wise. I also want to echo Ms. Bushmaker's comments. that maybe we don't want to go back to full staffing. And predictably, I would say that one department you wanna take a look at is your police department and I say this with all due respect to Chief Roe Rocker, who I think is a fine fine man, but it does seem that your police department has some liabilities. And it would be a simple enough way to reduce pension liabilities to take a look at officers that may need to move on from policing. And of course, I will suggest Nick White as a candidate for that, given his record. So all of these things, how we strategize to actually meet the needs of people in your jurisdiction, is critical and I know you all move forward with care. I do think it is a really good opportunity to take a look at what's important, what's necessary for public health and what might be damaging to public health And I think the police department is definitely something to take a look at there. Thank you. |
| 02:09:25.99 | Heidi Scoble | Bye. |
| 02:09:26.19 | Unknown | Thank you. |
| 02:09:30.34 | Heidi Scoble | Thank you. |
| 02:09:30.36 | Julie Myers | Julie Myers, you've been unmuted. Thank you, Heidi, and thank you to the council members for taking the time to have this workshop and for Charlie for putting on such a great presentation. I wanted just to, I know you guys know this about me, that I'm the SEIU Chief Steward, and I wanted to make sure that you guys knew, that the council knows that we are able to, I'm able to make myself available and my board available to you to discuss staffing levels and levels of service. As you know, and it's just been this way for everybody, but it's been a rough year for all of us. And the members of the union and administration staff has all dealt with low staffing levels and a 10% pay cut. And so we're pretty opinionated when it comes to staffing levels and levels of service because we come to work every day to give our best to have the highest level of service to the residents of Sausalito. And we would love to just join in the discussion of staffing levels and how and when to return to pre-COVID levels. And I just want to thank you for your time. |
| 02:10:38.92 | Jill Hoffman | Thank you. Thanks, Julie. Thank you. |
| 02:10:41.59 | Heidi Scoble | Okay. |
| 02:10:44.86 | Heidi Scoble | Madam Mayor, there are no additional hands raised at this time. |
| 02:10:48.46 | Jill Hoffman | Okay, very well, then I will close public comment and we will... continue our discussion up here. with the council and Keep in mind, We haven't, there's no vote today. We're just giving direction on the workshop subjects that were presented to us. Um, In addition, if we haven't already given discussion, right, so there's no need to go back over that we've already given or feedback that we've already given. Would anybody like to start us off? Roar. Yes, Councilmember Clegan-Holst. |
| 02:11:20.67 | Ian Sobieski | Mayor, could I? just be a little easier? Do you wanna perhaps take each item and then we can all comment on that item and then so that we can have a little more |
| 02:11:23.27 | Jill Hoffman | easy. |
| 02:11:31.34 | Ian Sobieski | sense of agreement instead of each of us walking through the four or five items. Um, |
| 02:11:35.68 | Jill Hoffman | Thank you. |
| 02:11:36.84 | Ian Sobieski | Thank you. |
| 02:11:36.86 | Jill Hoffman | whatever will be faster and clearer. So I have no. |
| 02:11:41.24 | Ian Sobieski | And either way, if Mr. Francis could put the items back up on the screen, that would be helpful. |
| 02:11:47.88 | Jill Hoffman | Yeah, I'll just say, I just have one or two comments overall. So in addition to what we've already talked about, so in, in comments and direction that there's already been. Um... expressed. Okay, sure. |
| 02:12:06.35 | Ian Sobieski | That's fine, I can just start. I'll go through all of them. Okay, go ahead. |
| 02:12:09.24 | Jill Hoffman | Okay, go ahead. |
| 02:12:11.11 | Ian Sobieski | or the ones I haven't already commented on. So just in terms of the scenarios, you know, I think it's really important. I know this conversation is going on in a lot of different cities. |
| 02:12:13.68 | Jill Hoffman | So, |
| 02:12:13.96 | John DeRay | Thank you. you know, |
| 02:12:22.00 | Ian Sobieski | that we, um, you know, project confidence to our residents and visitors about the state of our economy and COVID reopening. So I sort of feel like this, discussion is a little bit of a cyclical or chicken and egg type. I think we want to aspire to get back up a lot of our services. |
| 02:12:43.90 | John DeRay | Thank you. |
| 02:12:44.05 | Unknown | Thank you. |
| 02:12:44.09 | John DeRay | Thank you. |
| 02:12:47.16 | Ian Sobieski | to full staff as quickly as possible while being prudent and continuing to watch our financials. I agree with some of the thoughts that some of the speakers had that we may not want to completely replicate what we had pre-COVID in some instances, but I think a lot of the core services that are residents, workers, and visitors rely on, you know, I'd like to see those coming back. as quickly as possible, again, watching our financials. I definitely agree that the maintenance issues are important and a focus on that. One thing Charlie didn't mention in terms of other funding, I know to the point on maintenance that was raised by a number of public speakers, our measure O, which is our half-cent sales tax, and goes to fund a lot of our good infrastructure investments. is set to expire, I think it's 2024 and we had a lot of discussion in the previous Council. of when and how to reauthorize that, kind of when the right timing is. So I'd love to put that kind of on the table for discussion at some point. In terms of level and use of reserves, I think This is a good time to use our reserves as it was last year. But I'm pretty cautious on that front as well. So I have some appetite to use our reserves to kickstart Um, city, but like this kind of slow risk-based analysis that Charlie was discussing, I already made comments on the use of the American Rescue plan. funds. And I think I already talked about the other resource generation policies. I, you know, I would love to be on the forefront of some of these ideas to be a thought leader. You know, we need a lot more information on some of the ideas that were presented today. And I'm a big fan of getting some written materials out. both the council and the public so that we can better digest some of these innovative It's great to hear them today, but I don't feel ready to Thank you. you know, applying either way, really, on the risk. and prudent, you know, how prudent they are. But I'm really excited that Charlie is bringing them to us and excited that, um, he's being forward thinking. and thinking creatively about what we can do. So thanks for today. Thank you, Mayor, for making this possible. And thank you to Charlie. and further community input. |
| 02:15:31.74 | Jill Hoffman | Thank you. Thank you. Who would like to go next? Yes, Councilmember Sobieski and then Councilmember Blastin. |
| 02:15:39.37 | Melissa Blaustein | So I agree with many of the sentiments that Councilmember Cleveland Knowles articulated and also our speakers today. if I might suggest a theme. that's been used by others, we could have a theme of build back better. So much like the idea of restoring level of service, we could actually think of not just restoring our level of service, but improving our level of service. And this theme could include ideas such as incorporating maintenance and longer term implied liabilities in our built infrastructure. in our thinking about our budget and our reserves. And it could include also in the sense of building back better the idea of nimbleness, not just in our budgeting, but in our approach to all our issues. It would be an opportunity here for a slight cultural shift. in our organization that we might all try to thematically build around And that is one of a willingness to innovate, but also to be cautious. I'm a big fan of making being willing to make mistakes, but we ought to make sure that the mistakes we make are And so I do encourage or just recognize the impossibility of seeing around all corners. but you can often peek around the corner. And so I do suggest that we have an approach that encourages innovation and nimbleness with caution and takes advantage of experts such as Charlie and others, but also some of the incredible resources we have in in our residents to double check our thinking and watch out for. Thank you. dangerous. But I'm excited by the opportunity. Every crisis is an opportunity and we have a real opportunity here when we're building back. to shift our the culture and the way we do things. And building back better is an exciting opportunity. And I look forward to being part of it all with all of you. Thanks. |
| 02:17:56.41 | Jill Hoffman | Go ahead, Councilmember Blaustein. |
| 02:17:58.74 | Unknown | And thank you so much, Charlie, for taking the time. And thank you, Mayor Hoffman, for putting together this workshop. It's really... I really appreciate members of the public who chose to take their Saturday morning to spend with us to think about the future of our town. It just reinforces what a great active, engaged community we have. And on the scenarios piece, I really appreciate and would agree with a lot of the comments were made, Of course, where necessary and possible, it would be wonderful to return to COVID levels of service, pre-COVID, especially when I think about what our staff has been through this year. and what a difficult time they've had and how much that they've sacrificed. So I really appreciate Julie for showing up and offering to make herself available for these conversations. But I also, really appreciate that we have an opportunity to come up with a budget that accurately represents our values and who we are. And I do think it's important to consider, for instance, things like policing because we actually spend $902 per capita on our police budget. And we have 2.8 officers per thousand people, which is more than anywhere else in the county. And we spend pretty much the most in the county. And so I think as we consider this, I hope that we look at that as well as other places where we can can innovate and think about services on reserves. I think using our reserves cautiously, I appreciated Charlie's representation of why you would use them during recession and not during growth periods and that those come into your two year cycles for the most part. And I think I talked about the American Rescue Plan, but I'm just really thankful that we do have those funds to help us return to pre-COVID levels in an innovative way. As far as the resource generation policies, as I said, I'm a little concerned about too good to be true because whenever there seems to be free money, I get nervous, but I am excited about an opportunity to pursue these and see where some of them might be viable and where others might have too high of a risk. So I'm really feeling so fortunate that we have a great team with us to help us assess our budget challenges together and that we have an engaged community And I'm so thankful for everybody's time. So thanks a lot. I think this was really productive for everybody. |
| 02:20:11.78 | Jill Hoffman | Okay. |
| 02:20:11.97 | Janelle Kellman | Thanks, Vice Mayor. Thank you. This was a great way to spend our time. I love having the opportunity for us all to get on the same page and then to hear from because I know it's going to get really complicated So on the scenario piece, I'll just, and pardon me for repeating some of the things I already said, but I do, I would like to see how we can be more nimble. And as Charlie mentioned, these monthly report outs would be, I think, really, really helpful. I also want to take a step back and look for ways that we can invest in our people. Over the past several years, we've lost a lot of institutional knowledge, either with folks leaving or with use of consultants. And so I'd like us to give a look to key positions where we really want to make either make the right hire or be concerned about who we have so that we're sure to retain a lot of that institutional knowledge, which I think is really, really helpful to our community. On the topic of level and use of reserves, I mentioned already that fund list. I think that'd be really, really helpful for us to understand discretionary funds and what's available. But I also think we need to take a look at our reserve policy and embark on a sensitivity analysis so that we understand how we are impacted one way or the other. in close alignment with that is there is some outstanding reconciliations that need to happen. So I think we need a little bit of a deep dive on cash management. so that we really know what do we have in cash reserves? And what is earmarked? And what is discretionary? So right now we're talking very conceptually about available monies, but I think we need to have some actual numbers on the table. Um, Use of American Rescue Plan funds, I think, is a lot of opportunity. here to kind of go back to brass tacks that really symbolize who we are as a community. I know we have a lot of struggling artists as well who could really benefit from from some incentives or some support here. I know we're talking about doing some really interesting things downtown. as Councilmember Sobieski mentioned, the opportunity to innovate I think this is a great, great time for it. And then finally, under other resource generation policies, I think you all heard me. I want to go slow on the pension. I want to understand the assumptions, the built in loss factor and the rate of return. And anytime I hear a really great idea, I also want to hear the downside, so I want to hear the limitations of the 115, as well as the potential benefits. I know that EDAC, as well as the mayor, we're looking at grant monies. So there may be some opportunities to pursue some grant funding right now. Um, I think I've also mentioned to many of you that As part of the finance community, we have a benchmarking effort currently ongoing which I think I will definitely want to share with the full council extremely interesting as councilman blaustein was mentioning and this is not a judgment um but as part of that we realize that seven of the eleven highest paid positions in the city are actually in the police department. And that's very interesting when you benchmark that against other communities. And then finally, I just want to make sort of a general policy comment around innovation, which is I'd like for us to drill down into our expenses. I think our revenues are actually pretty healthy. We withstood a pandemic, came out I think on top, even though we did have to make some real budget cuts. And so I think now as we turn the page and have a new council, Let's start looking at our expenses and how we're spending money and create some efficiencies there. So I have. No disagreement with anything my fellow council members have said. So I think those are all good pieces of direction as well. Thank you. |
| 02:23:49.45 | Jill Hoffman | Thank you. Okay. Thank you. Thanks to everybody. Thanks to Charlie. So, um, You know, council member I'm sorry, Vice Mayor Kelman and I are on the Finance Committee, so you seem to schedule that we're going to have the next six to eight weeks, which is very robust schedule for finance. So we're going to be delving into all of these areas during our finance committee meetings. Finance committee meetings are public. They are posted and they have a Zoom link. So anybody who would like to come and join us for any of those finance committee meetings, You are welcome to join us. I am very pleased with this presentation. I am very pleased with Charlie's level of competence and what he's brought back to the table and what he's almost immediately turned around our transparency with populating our OpenGov site to make it much easier for the council members frankly and the public to understand where we are with our budget. I think this theme is something we talked about at the very beginning of the year, You're going to continue to see this theme across all sectors of our efforts, I think. with our city government, but certainly with our budget and the increase in competence, efficiency, transparency, with how we're managing our budget. So I'm very pleased with that. Thank you to everybody who worked on this. Charlie, your tremendous lift on this. I thank you for that. And so I look forward to continuing this conversation And thanks to the council members for your attention and your and I think that's a great participation today has been enormously helpful and the public. Thank you so much for our smart public who always dials in for us. And so with that, |
| 02:25:35.81 | Melissa Blaustein | the question there? Sorry. I see you on track. I'm just wondering, it's just a question that occurred to me, seeing how dense a lot of this information is and what the schedule is for the Finance Committee. I know the Finance Committee reports out at the City Council meetings, of course. But is there any value in considering some sort of written summary of the meetings that the public can have access to so that they don't have to watch the whole meeting? |
| 02:25:38.38 | Jill Hoffman | Yeah. |
| 02:26:01.60 | Melissa Blaustein | to get, and that's maybe a little bit |
| 02:26:01.82 | Jill Hoffman | Bye. Yeah, you know what? That's not a bad idea. We'll discuss at our first finance committee meeting. So that's going to depend on staff time. So written summaries will take staff time of an hour to do a summary for each one hour finance committee. Or two hour planning screen. |
| 02:26:18.17 | John DeRay | Two hours. |
| 02:26:19.42 | Jill Hoffman | So it'll be a... It will be a trade-off but let's certainly discuss that. Because there's a lot that's going to be coming up. |
| 02:26:27.43 | Melissa Blaustein | I don't even just value your opinion and the vice mayor's summary, even if it's not Okay. technically comprehensive, even if it's just your guys' take on what you considered and what your thoughts were. I think that in a written form would benefit everyone. |
| 02:26:45.34 | Jill Hoffman | We'll figure out, we'll see what we can do, how we can do that. |
| 02:26:45.58 | Melissa Blaustein | Bye. because |
| 02:26:49.44 | Jill Hoffman | Now you're getting into Brown Act issues, right? And how the vice mayor and I can, you know, Um, Anyway. We'll look at all those issues and we'll certainly discuss that at our next finance committee meeting. And with that, our discussion is closed. And so I'd like to adjourn the meeting after six hours, if that's okay. After four, sorry, not six, four. So, I'm adjourning the meeting. Thank you so much to everybody for coming. |
| 02:27:18.97 | Unknown | Thank you. |
| 02:27:19.95 | Jill Hoffman | Thank you. |
| 02:27:20.41 | Unknown | Thank you. |
Sandra Bushmaker — Against: Questioned the assumption that full return to pre-COVID staffing is desirable. Expressed concern that arbitrage strategies could create future fiscal problems. Advocated for a policy prioritizing maintenance of physical assets and cautioned against police consolidation, citing lost community contact from fire consolidation. ▶ 📄
Vicki Nichols — In Favor: Praised Charlie Francis for bringing transparency to the budget process. Supported exploring OPEB strategies and emphasized the need for community participation in setting priorities. Advised caution on new expenditures due to ongoing uncertainties like litigation. ▶ 📄
Wendy Richards — Neutral: Appreciated the commitment to budget accuracy and visibility. Expressed concern about risks in pension strategies, noting the gap between private sector discount rates (4-5%) and CalPERS's 7%. Urged council to address flaws in Measure M and restore the home-based business exemption. ▶ 📄
Ava Crisante — Against: Echoed concerns about arbitrage risk, especially in a 'bubblicious' market. Suggested not returning to full staffing and recommended reviewing the police department to reduce pension liabilities, specifically mentioning Officer Nick White. ▶ 📄
Julie Myers — In Favor: As SEIU Chief Steward, offered union availability to discuss staffing levels and service restoration. Highlighted staff sacrifices during the pandemic and emphasized their commitment to high service levels for residents. ▶ 📄