DRAFT MINUTES*

SUNNYVALE CITY COUNCIL

SPECIAL MEETING

FISCAL ISSUES WORKSHOP

MONDAY, JANUARY 30, 2006

The special meeting was called to order at 2:30 p.m. in the Council Chambers,
at 456 W. Olive Avenue, Sunnyvale, California with Mayor Swegles presiding. 

Mayor Swegles led the salute to the flag.

PRESENT:                Mayor Ron Swegles

                             Vice Mayor Otto Lee

                             Councilmember John Howe

                             Councilmember Dean J. Chu 

                             Councilmember Melinda Hamilton    

                             Councilmember Tony Spitaleri

                             Councilmember Christopher Moylan

ABSENT:                    None

STAFF PRESENT:      Amy Chan, City Manager

                             David Kahn, City Attorney

                             Robert Walker, Assistant City Manager

                             Charles Schwabe, Deputy City Manager

                             Mary Bradley, Director of Finance

                             Marvin Rose, Director of Public Works

                             Robert Paternoster, Director of Community Development

                             Erwin Young, Director of Human Resources

                             Deborah Barrow, Director of Libraries

                             Shawn Hernandez, Director of Information Technology

                             Cathy Merrill, Assistant to Director of Parks and Recreation

                             Grace Kim, Finance Manager

                             Katherine Bradshaw Chappelear, City Clerk

Introduction

City Manager Amy Chan gave an overview of the workshop and stated that the Budget Issues Public Hearing was held on January 24, 2006 and that component is now closed.  She stated that this workshop is an opportunity for Council to raise any additional issues for staff’s attention during the presentations.  City Manager Chan stated that Council has the option to recommend, defer or drop any budget issues or they may choose to recommend them all to the City Manager for consideration as she prepares the proposed 2006/2007 budget which will come back to Council for the May Budget Workshop.

Update on Regional and Statewide Economic Conditions

Director of Finance, Mary Bradley gave a presentation the current regional and statewide economic conditions.

Director Bradley gave a presentation on the Governor’s recommended State Budget for 2006/2007 released on January 10, 2006.  Director Bradley also reported on the impact of the Governor’s budget to the City and concluded that there would not be minimal effect on the City from the State Budget.

Councilmember Howe asked how the one-time funds of $556,000 from Proposition 42 could be used.  Director Bradley stated that the funds (same as the gas tax) could be used for any street purposes.  She stated that Finance will bring a budget modification to Council on February 14, 2006 asking that the one-time funds be used for street maintenance within Public Works; therefore, freeing up an equal amount that could go into the General Fund.  The recommendation could then be that the funds go into the 20-year Resource Allocation Plan Reserve.

Councilmember Howe asked what is being taken out of the reserve for the current FY 05/06.  Director Bradley stated it was about ten million.

Councilmember Chu asked about the amount staff has projected for percentage of sales tax revenue increases.  Director Bradley stated that for 2006/2007 staff projected 4.5%. 

Councilmember Chu asked who calculates these percentages.  Director Bradley stated that staff comes up with their own composite projections based on four elements.  Councilmember Chu asked if staff uses external guidelines to formulate percentages or is it all done internally.  Director Bradley stated that the projections are internal.  City Manager Chan stated that staff’s predictions are better than any model may provide.

Councilmember Hamilton asked if the City receives any interest from the State for the repayment of mandated cost reimbursements.  Director Bradley stated that the City does not receive interest.  City Manager Chan clarified that the State does not consider any repayments as loan related.

Councilmember Spitaleri asked how accurate the projections on sales tax have been for the last five years.  Director Bradley stated that the projections have been poor due to the business to business element and the dot-com boom.  She stated that when the City received 52% of sales tax revenue from business to business (during the boom), staff did not project high enough, but otherwise staff has been fairly accurate and has not required major cuts due to incorrect projections.

Mayor Swegles asked if staff had looked into the fully subsidized State Program for Energy Efficiency.  Director Bradley confirmed with Marvin Rose, Director of Public Works, that the City updated its facilities for energy efficiency five years ago.  City Manager Chan stated that there are requirements for these programs and confirmed that staff does monitor grant opportunities and will apply when appropriate.

City Budget Challenges and Opportunities

City Manager Chan noted that the Governor’s budget is a proposed budget and has yet to be adopted. The Legislative Analyst’s Office has predicted the proposed budget may be off by about a billion dollars.  City Manager Chan reviewed the philosophies (previously embraced by Council) used by staff in managing the budget. She stated that these philosophies can be changed.  She presented the challenges and opportunities that are ahead for the City.

Vice Mayor Lee asked if the City invests in any energy efficiency programs which could benefit the City whether the prices drop or rise due to our investment.  Director Bradley stated that the City’s investment portfolio is limited by law to government securities. 

Councilmember Howe asked if the increase in utility user and gas tax offset the rise in costs the City experiences for its energy costs.  Director Bradley stated that although the amount received from these taxes has increased it does not offset the increase the City pays for the services.

Councilmember Chu asked if the City is engaged in long term energy contracts for fixed pricing to help reduce facility energy costs.  City Manager Chan stated that the City only receives short term contracts on oil pricing due to the volatility in the market.  Director Bradley stated the City has more frequent contracts rather than long term contracts.

Councilmember Moylan asked what staff has indicated for the cost of fuel within the twenty-year projection.  Director Bradley stated that they are currently developing that projection. 

Councilmember Spitaleri asked if the City uses as much fuel as what it gets back in gas tax.  Director Bradley stated that the City spends considerably more on gas compared to what it gets back in gas tax (1% of the tax).  City Manager Chan stated that staff can let Council know the cost and revenue impacts when the budget is presented.

City Manager Chan resumed her presentation on City Budget Challenges and Opportunities and distributed Budget Recommendations for the Community Recreation Fund Imbalance as well as a list of adjustment ideas for Council to explore.

Mayor Swegles asked City Manager Chan if increasing non-resident fees at golf courses was considered.  City Manager Chan stated increasing non-resident fees was not included as part of golf course revenue and that she would follow up on the request to explore increasing non-resident golf course fees. 

Councilmember Howe stated that he would like to see the income from recreation programs and revenue from fees for the placement of cell phone towers be specified as coming into the General fund and then allocated out.

Councilmember Moylan asked staff about the elimination of Superintendent of Cultural Arts position and if the duties of the position will also be eliminated.  City Manager Chan stated that Council took action on this item in August 2005.  She stated that in the past there were two Superintendents which made program management, communication and decision making difficult.  Staff suggested eliminating the positions of Recreation Superintendent and Leisure Services Manager and dividing the duties among a new lower administrative position and one Superintendent which created a cost savings.

City Manager Chan continued with the presentation on the Challenges and Opportunities presentation.  She stated that there is a remaining challenge not listed on the handouts and that issue is the MOU Impacts and the result of these negotiations could impact the long-term financial plan.

Effect of Year-End Results for FY 2005/2006 on Long-Term Financial Plans:  General Fund and Community Recreation Fund

City Manager Chan gave a presentation on the Effect of Year-End Results for FY 2005/2006 on Long-Term Financial Plans:  General Fund and Community Recreation Fund and Fiscal Year 2004/2005 Year End Results.

Consideration of Proposed Budget Issues for City Manager’s Recommended
FY 2006/2007

City Manager Chan presented the seven proposed Budget Issues for Council to consider recommending to the City Manager for possible inclusion in the FY 2006/2007 recommended budget. 

Councilmember Hamilton asked if the project cost of $65,000 for Support of Hospitality Industry would include hiring an advertising agency or marketing firm to develop a campaign.  City Manager stated the $65,000 cost is for the assessment of achievement, payback and funding mechanisms.

Councilmember Hamilton asked (regarding Case Management) if would be easier to provide financial support to an existing program rather than providing our own program.  City Manager Chan stated that more research and study is required for this program and clearly if the City were able to leverage with another program that would be part of the study.

City Manager Chan recommended that Council vote on each item and state if they want to refer the item to her for consideration with some criteria attached or to the want to drop or defer the issue.

Councilmember Howe asked if Council were to approve the seven items would the costs be added to the current $400,000 deficit going into the current fiscal year.  City Manager Chan stated that was correct, but that in the earlier report addressing the Recreation fund, staff identified approximately $400,000 in cost saving and revenue opportunities.  Councilmember Howe stated that if the cost savings were adopted then the deficit would zero out as long as no other items were added.  City Manager Chan stated that was correct but if Council approved some items, they could make recommendations at exploring service cuts in other areas to offset the increases.

Councilmember Howe stated that “Support of the Hospitality Industry” was not the intent of the maker of this motion, rather it was to start an Identify Sunnyvale Program and he would like that identified in the motion when Council votes on this issue.

Councilmember Howe stated that Council had given direction on the Neighborhood Grant Program for ongoing costs of $10,000 not $13,896.

Assistant City Manager Robert Walker stated the total for grant awards would increase from $2,500 to $10,000 per Council direction.  He stated that additional staff hours involved with the additional grants accounted for the difference in the overall cost.

Councilmember Spitaleri asked how staff determines which neighborhoods receive grants.  Assistant City Manager Walker stated that the proposal states that Neighborhood Associations would apply for the grant with a committee reviewing the applications and up to $10,000 would be awarded per year.

Councilmember Spitaleri asked if the $20,000 offered by the Council on Aging had been researched in regard to Case Management   City Manager Chan stated staff would do the research on this proposal if Council recommends the Case Management Budget Issue.

City Manager Chan clarified that all seven items before Council were sponsored by Councilmembers.  Similar to the Study Issue Process, only Council-sponsored items will be considered for the budget.

Councilmember Hamilton asked what the cost of the Liquidambar tree removal cost would cover.  Director Bradley stated that the cost was for removing trees as determined by the City.

The seven proposed budget issues and Council action:

·         Liquidambar Street Tree Removal

Councilmember Howe moved and Councilmember Moylan seconded to recommend $50,000 for Fiscal Year 2006/2007 and the look at how the program progresses for future fiscal years.

Motion carried 7-0.

·         Support of Hospitality Industry

Councilmember Howe made a motion and Councilmember Moylan seconded to recommend a reduced project cost of $35,000 and that the money be added to the Department of Community budget specifically for economic development Fiscal Year 2006/2007.

Motion carried 7-0.

·         Neighborhood Grant Program

Councilmember Howe moved and Councilmember Spitaleri seconded to recommend reducing the total project cost to $10,000 for Fiscal Year 2006/2007 and ask City Manager to look at the amount of grants currently being awarded with the intent of providing more grants at amounts less than $1,500 each.

Motion carried 7-0.

·         Records Management

Councilmember Howe made a motion and Councilmember Hamilton seconded to approve the expenditure of $350,000 for Fiscal Years 2006/2007 and 2007/2008.

Motion carried 7-0.

·         Case Management for Seniors

Councilmember Howe moved and Councilmember Hamilton seconded to reduce the project cost to $60,000 for Fiscal Year 2006/2007 and to direct the City Manager to explore what the City can do on a half-time basis, explore what other agencies are doing in Case Management, and identify if sharing of resources with other agencies would be feasible. 

Councilmember Chu stated he would like to encourage the use of an outside agency for this program.

Motion carried 7-0.

·         Street Sweeping Service Levels

Councilmember Howe moved and Councilmember Hamilton seconded to recommend an increase of 50% (to $110,000) in residential street sweeping levels. 

Councilmember Hamilton offered a friendly amendment to keep the current street sweeping levels during the summer months and increase for the winter months.  Councilmember Howe stated that the motion was not to include directives; instead it was meant to have staff come back to Council with recommendations.

Motion carried 7-0

·         San Antonio Park Restroom

Councilmember Spitaleri moved and Councilmember Howe seconded to defer this item. Councilmember Spitaleri stated he wished to defer this item in order to look at options.

Councilmember Howe recommended that Councilmember Spitaleri add this as a study issue with the inclusion of looking at the possibility of using Park Dedication Funds for the restroom.

Councilmember Moylan stated deferring this item was premature.  If this item were recommended to the City Manager for consideration, staff would come back to Council with a recommendation on whether or not to proceed. 

Councilmember Spitaleri withdrew his motion.  He then moved and Councilmember Moylan seconded to recommend the issue to the City Manager for consideration. 

Councilmember Howe stated he agreed with Councilmember Moylan that San Antonio Park contains the only City-owned sports field without a permanent restroom.  However, the City uses school district fields which do not have permanent restrooms and portable restrooms are provided.

Motion carried 5-2.  Councilmembers Howe and Hamilton dissented.

Public Comments

Werner Gans commented on General Fund Budgeted Revenues/Expenditures and suggestions for reducing City expenditures.  He stated that previous budgets had been balanced through the use of reserves which he projects will last until 2012.  Mr. Gans stated that this was an unhealthy position for the City and was in favor of getting the budget balanced as soon as practical.

Nancy McDonough wished to thank the Council for their support of Case Management.

Tap Merrick offered suggestions to Council about removal of liquidambar trees and street sweeping.

Mayor Swegles declared the meeting adjourned at 5:08 p.m.

Katherine Bradshaw Chappelear

City Clerk