 Let's E06503 that I don't know if that's John or not. No, that's a city employee. I think someone from budget. Yeah, the E0 that. That's a sometimes our logins as well. That's why I wasn't sure for John. Got it. I just sent him a text to see if he's coming. Yeah, he and I talked about an hour and a half ago about a different issue. And so I know he's, I know he's coming. I know he has a hard stop at five. I didn't know if you have any time constraints Tom. Okay, that's an option. Absolutely five o'clock to hard stuff for me then. All right, there he is. He just popped up as a guest. Okay. Howdy, John. Hey, Chris. All right, let's go. Hey, John. We'll go ahead and call it to order. Do you want to go ahead and call the roll? Yes. Thank you. Chair Rogers. Here. Member Schwethelm. Here. Members where? Here. Let the order reflect the all sub committee members are present. Excellent. We'll go on to public comment for non agenda items. Do you want to give a brief overview for folks on how they can participate either in public comment or during each of our items? Yes. Thank you. At each agenda item, the item is presented. The chair will ask for sub committee member comments and then open it up for public comment. The host and zoom will be lowering all hands until public comment is open for the agenda item. Once the chair has called for public comment, the chair will announce for the public to raise their hand if there is a public comment. If there is a public comment, the chair will announce for the public to raise their hand. If there is a public comment, the chair will announce for the public to speak on the specific agenda item. If you're calling in to listen to the meeting audibly, you can dial star nine to raise your hand. The host will then call on the public who I've raised their hands. Public comment will be limited to three minutes and a timer will appear on the screen for the sub committee members and public to raise their hand. Public comment will not be read during the meeting. Additionally, there is one public comment period on today's agenda to speak on non agenda matters, which is item two. This is the time when any person may address the sub committee on matters not listed on the agenda. And I'll turn it back over to you, chair Rogers. All right. Thank you so much. So we'll go ahead and we will do item number two right now. That is the non is public comment on non agenda items. If you're interested in speaking, we have a public commenter on zoom. I'm not seeing any hands. Did we have any voicemail public comments? No public comments were emailed. Great. We'll move on then to item number three. Item number three approval of the minutes. This is from our February 11th meeting. John or Tom, did either of you have any amendments to the minutes? I did not. I did not. Okay. So we'll move on to item number three. I would check really fast public comment to see if anybody is interested in speaking on this item. Not seeing any hands. So we will go ahead and show those adopted as submitted. Mayor, can I just house a bit of housekeeping? If possible, if we are through the presentation, I would have kind of a bit of a hard stop at five o'clock. But if we do go over during the presentation, because like it is a fairly long one. So we'll move on to item number three. We'll move on to item number three. We'll move on to item number three. Okay. Understood. And Tom was happy to, to have a hard stop at five as well to try to help out. We'll see. We'll see how we can do here. Okay. We will go on to item 4.1, the long range forecast. And Jan, I believe you're going to take this away for us. Right. Actually, Alan is going to take this away for us. Thanks. Thank you. Today we are going to go through the, an update of the long range financial forecast for the general fund. We have Bob Leland. And Andy. I'll map here from management partners. They are the ones that have that work with staff to develop the long range forecast. So I'm going to go ahead and do that. I'm going to do that. It is rather lengthy. So I think we'll just kick it right over to them and. Let them have at it. You there. Yeah, I'm sorry. I should know how to do this by now. Oh my God. It's only been a year, right? Bob, you want to put up the presentation. We'll try to get, we recognize that you've got. Other things to do. So we'll go. Reasonably. Quickly with this. Is it up Bob? I'm having some trouble. Does everybody see it? I can see it. I can see it. Okay. I've got it now. Okay. So we'll certainly, I think actually we've been a. The managing partners has been around Santa Rosa working on. Various things. So. You're aware of our firm. We do. We exclusively serve local governments. So we exclusively work for cities, counties, and special districts. And do a variety of. Services. Including long range fiscal modeling. So the next slide. So we've actually been working for Santa Rosa since 2019 on fiscal modeling. And it's been pretty active. A lot of things going on in Santa Rosa. When we first started in 2019, the biggest risk factor for the city. Was the expiration of measures. Oh, and P. In 2025 and 2027. You've acted on that. By placing the measure on the ballot in November of 20, March of 2020. And then we've been able to store these sales taxes until 2031. And then in 20, we had the, at the end of 20, we had the PG and E settlement. Which is about 95 million for city of Santa Rosa. And then just recently we've had in 21, we've had the. Just learned about the. American recovery act. And we'll talk about that a little bit. And finally, the cities in the midst of FEMA reimbursements. So those have been rolling in and we'll continue to roll in. And we'll cover that in a model. Next slide, Bob. But just to put all this stuff together, we put together a little table that, that looked at all the moving parts. That Santa Rosa is dealing with. And you can see some of the things I just mentioned are. Are noted there. The things that I haven't already mentioned. We'll be seeing the expiration of the public safety. Tax measure and. Which is a little extending is a little bit more problematic because it's a special tax requires a two thirds vote. We, I think, as you know, because we presented our models before we do build in. And we're going to start with the periodic recession. So this timeline shows when the recessions. Are scheduled. Probably most significantly, our model goes out to the, actually out to 2040, because we want to see the impacts of pension. Moderation due to PEPRA. And you don't really start picking that up. You start seeing it in 34. And then you start to see the pension costs. You start to see the pension costs. To drop level off first and then drop. And then by 37 and into the 38, 39 and 40. You're actually starting pension costs. Drop. Until that happens, it looks like. It's just continual misery because of the pension costs, but actually eventually we do get to moderation. So Bob, you want to pick it up and go over the forecast. Well, the good news is the forecast is improved from last year. This time last year, there were a lot of fears as to just how bad the Corona virus could make forecasts for the next several years. We've got some more experience under our belt. Improving sales tax. And so we're in a position to show an improved forecast. And as Andy was saying, you have options. So we're going to be talking about those one time revenues coming up. So the slide here goes through some of the key revenue assumptions and the rationale for them. Economic cycles, local sales taxes and one time funding. And he's touched on these basically the pandemic recovery. Previously we'd shown recovery by fiscal 25. We've moved that up to 24. Avenue insights third quarter. Forecast from last year is much stronger. We have that built in, but as you'll see, the TOT rec and park fees are going to be much slower to recover. And then we have moderate recessions built in every seven years after that. So we're going to be talking about that. And then again, we've got some of the handy covered measures in and Q. At this point, because they sunset, the baseline forecast shows them going away, but we have alternatives will where we will show them being approved. And then again, on the one time funding. PG and E settlement in the baseline forecast is not included. The best practice, of course, that is to make sure that we have the best practices. But that is a lot of money and council has discussed in its goal setting session using up to $40 million to support operations. And the key thing there is that we'll buy you time. To restructure expenses and not be pushed into. Making cuts sooner than you might otherwise have to. The ARPA aid is excluded. some constraints on how the money is used. And basically the only way that it's going to benefit the forecast we're showing you is if all are part of that money is deposited into the general fund, essentially to replace revenue loss or to reimburse expenses already incurred. And that will help the general fund bottom line. But if it's used for increases in expenditures, then to the extent that happens, the two will cancel out. And then the issue with the FEMA reimbursements, there's a fair amount budgeted for the current fiscal year 21, but anything beyond that is excluded. Staff is preparing a schedule of potential reimbursements, but it could take years for all that to be received. FEMA likes to haggle over the details. And so at this point, we think it's premature to build in anything beyond fiscal 21, but there are additional reimbursements out there. So what we're gonna do now is take a look at the major revenues. And this slide gives you the big three, property tax, sales tax and utility users tax. All of them are relatively stable in the overall scheme of things. And what each of these slides is going to show you that there's several things relative to each individual chart. The blue line is historically the actual and then for the future, the forecast. This red line is a long-term trend from fiscal 2005 through 2020. The dotted green line is a short-term trend, just going back the last four years. So those two lines provide context for the forecast. We also show the budget for each year. That's the pink line with the diamond markers. And so you can compare budget to actual for past years. And then one more set of indicators for the current year, the orange circle is the year-to-date amount, and in this case, through January. And the green triangle is a simple year-to-date trend based on that year-to-date amount. Now the year-to-date trend will be more or less meaningful for each category here, depending on what the cash flow is like. If it's not even throughout the year, the year-to-date trend may not be all that indicative of where we end up. The property tax you can see dipped after the Great Recession built its way back up has really not been affected by the pandemic. And we're showing that going forward, paralleling the short-term trend. And this takes into account the fact that there is only a 1%, a little over 1% inflator next year. So you see a little bit of a dip here in the line. Then it becomes 2%, we're assuming thereafter. That's based on the California CPI calculation that's embedded in Prop 13. We're assuming continued home prices being strong as they are now. We're assuming all rebuilds are completed by 2025 and that on an ongoing basis, we have 500 units a year. So we have ownership transfers, new construction and inflator all built into this property tax estimate. Now you go to the right on sales tax, you see a much greater dip after the Great Recession. And that was what we feared going into the pandemic. And it dipped initially pretty significantly, but then it recovered with a lot of people ordering things online. The sales tax prognosticators were somewhat caught by surprise by that, but that's good news. As you can see, the forecast amount is a little higher than the budget that was adopted for this year. And we're showing the ongoing trend again, kind of paralleling that long-term trend line. Down in the lower left on the utility user tax, the main reason that dipped in the wake of the Great Recession was a lot of home foreclosures. And so there were simply fewer households using utility services. That's recovered. And while it can sometimes dip due to changes, especially affecting the technology area like telecommunications and cable, we're on a track to raise more money this year than the budget. So we're outperforming the budget. And then we're assuming that we pretty much split the difference between the long and short-term trend lines going down the line. Now, in terms of three other significant taxes, franchise payments, you can see just how stable some sources are, just like clockwork that has gone right along this long-term trend line. Dipping a little bit in the last year, we're assuming that the budgeted amount is what we hit this year in 21. It could be from the last couple of years that the amount will come in higher, but we're really not going to know until we get the PG&E payments in April. And then we'll see about this trend. Over here on the right, real property transfer tax is always some volatile. And of course, it dropped quite a bit in the wake of the Great Recession, clawed its way back up, was budgeted at a lower level, assuming that the pandemic would significantly affect property transfers. And while there's probably fewer homes on the market, it's generally been doing pretty well. And the year-to-date trend is right at where we have the revenue coming in for fiscal 21. So significantly higher than what was budgeted, but not out of line when you look at past years. And we're pretty much continuing this arc of the last several years, ignoring the last couple here and starting off at about $4 million and going forward. Then you see the little dip envisioned for the next recession. The business tax, of course, also dipped in the Great Recession. It was expected to be quite a drop due to the pandemic, but based on the year-to-date collections and amounts that aren't reflected in this chart that have just come in in the last week or two, staff is comfortable with about a $4.5 million estimate for this year. And we're assuming that improves a little more in future years and comes right back up to this long-term trend line. Now, here are some revenue sources that have gotten hammered by the pandemic. And you can see in each case a significant drop-off. The transient occupancy tax lost more than it did back here during the Great Recession. We're expecting it to come in under the budget for this year. And it also will claw its way back, but we're assuming not until 2025 where it will essentially resume along its long-term trend arc. Recreation and park revenues have also plummeted simply because of social distancing and limits on event sizes. We are assuming a recovery by fiscal year 24, but this year should come in under budget. And then other fees, charges and fines that's just reflecting lower activity in various programs. We're showing that the year-to-date trend is right at what's been budgeted and that is where we are showing revenues for this year. And then again, it splits the difference between the long and short-term trends going forward. The last group of revenues we're gonna look at are what they have in common is that they've recently had sizable peaks in revenue collection that are not going to be continued going forward. In the cases of licenses and permits, the peak is due to the height of the fire rebuild efforts. Therefore permits soared over fiscal 18 and 19 dropped off in 20, still above the historical average. We're looking at a year-to-date trend being right on that long-term trend line. And then we're assuming that we continue, we'll drop a little more next year as again, this level of building activity returns to something more approaching normal and then continues from there. Over here on the right, intergovernmental, that tends to be somewhat volatile over time and not always easy to predict, but the peak in 20 and 21 is due to the CARES Act and FEMA reimbursements that have either already been collected or are expected. On an ongoing basis, it wouldn't be prudent to assume that we're anywhere in this neighborhood of above the red line that's been the long-term trend. So we're backing things down to just below $4 million on an ongoing basis. And again, that does not include potential new federal aid nor does it include additional FEMA reimbursements. And then down in the lower left, you have all other revenue. You have, and this is again, pre-PG&E. The reason for the peak here was for insurance reimbursements. And those again, were connected to the fire. Once we finish up with those, again, the year-to-date trend is right at the budget for this year. And so going forward, this is really a continuation of what we saw back in the teens in terms of the trend. Okay, so now we're gonna take a look at the expense side of the ledger. The three big categories there are issues involving sustainability over time, cost inflation and pensions. So we look at the left here on sustainability. The first question is what to do with the position freeze. In the baseline forecast, we are assuming that it goes out for five years and there's a specific reason for that. There is uncertainty at this point over the fate of measure N. And that really requires the city to conserve its fund balance, to put it in the best position possible to deal with the potential loss of those funds in fiscal 26. One of the ways to do that is to keep positions frozen in order to keep fund balance up. And when we get into the balance portion of the forecast, you'll see the implications of that. Now, having said that, we do recognize that there's need to have some flexibility in dealing with population and workload growth over time. That's going to create pressure to either unfreeze positions or to add new ones over time. So we're proposing to add two FTE per year starting in fiscal 23. And that responds to this need in a graduated fashion. It doesn't solve all the needs, but it allows a little bit of flexibility while still keeping most of those positions frozen until we get an idea of what will happen with measure N. And again, the thing with measure N is although that's a special tax and in a different fund, it's a high priority service, public safety. And if the revenues were to go away, there would be a lot of pressure on the general fund to backfill the loss of that revenue. And that's what we're assuming happens if measure N goes away. The last item here under sustainability is capital improvements. We're assuming a $4 million CIP transfer starting in fiscal 22. There's ongoing need for preventative maintenance. Almost every city is deficient in that area and needs to catch up. So we're making an allowance for CIP without designating specifically what it's for. But it's been the average of the CIP transfers over the last 15 years. So $4 million is probably a pretty good number. Okay, the middle section on cost inflation. We do have 2% COLA's starting in fiscal year 21. Now COLA's, the MOUs have expired. So the MOUs are not a certainty to start and negotiations are ongoing, but labor is the largest expense and you really have to include inflationary pressure for the forecast to be realistic over time, especially since we're looking 10 or 20 years down the line. Now the other big item of conserving resources is discussion that's going on now between management and the departments in terms of budget direction for the coming year. And that's to hold O&M costs as well as part-time and overtime costs to the lesser of last year's actual, so fiscal 20 actuals or whatever the projected increase would be from the fiscal 21 budget if that amount winds up being less than what the actual was in fiscal year 20. And so growth would resume starting in fiscal 23 but based on this adjusted fiscal year 22 level. The cost of current positions wouldn't be restricted. This would just be for non-personnel costs and part-time and overtime. The idea being that if you can get costs down now, the sooner you can reduce costs, the better shape you'll be in for the future. And since the baseline budget is assuming at this point that PG&E settlement is not incorporated, this would be a necessary element to keep costs enough under control so that you can stabilize fund balance in the near term. That would reduce expense by about $6 million or 3% compared to just allowing the forecast model growth for fiscal year 22 without any adjustment. Now the last category here is pensions. We're assuming 6.2% average returns that was the estimate from Wilshire Associates as a reasonable expectation of investment returns by CalPERS over the next decade. We'll show you in just a moment how investment returns have been gradually falling for about 30 years. In terms of discount rate, we're currently at 7%. We're assuming that we phase into 6% over 20 years. And again, CalPERS wants to decrease rate volatility and improve funded status. And that really means long-term and inevitable reduction in discount rate. So let's take a quick look at pensions. A lot of numbers here, but on the left hand chart, it shows the annual rate of return by CalPERS from 1992 through 2020. The pink line is the discount rate. That's their target. Back in 1992, the discount rate was eight and three quarters percent today at 7%. So it's been a steady decline over time. And the little boxes at the bottom here show you the points in time when those discount rate changes were made. The amounts in red here that are above the pink line, those are years that the actual returns exceeded the discount rate. These amounts below the pink line are years when the return was below the discount rate. The green dotted line is the trend line over this period. And you can see it's gradually going down as is the discount rate. So that's a backdrop. And if you take a look in the box down here, it shows that if you pick particular time periods, what has been the average return over those times? Now, if you go back for the whole 29 years, it's 8.43%, which is pretty healthy. And it's certainly above the 7% discount rate. But the last 20 years is only 6.07%. And so timing is everything. If you pick the last 10, you're back to 8.7. That's actually the most favorable of these combinations. But the last five years and the last three years, you're in 6% territory. So overall, the return has been generally declining. Now, the chart on the right takes just the discount rate, focuses on that. You can see it going down and it's been set through fiscal 22. It'll still be 7% in fiscal 22. But if you take the linear trend, just over this 30 plus year period, you hit just below 6% in 2042. And that is what the model is assuming is a decline to 6% over that period of time. Now, at this particular point in time, one in five of the nation's largest pension plans are now under a 7% discount rate. So that's clearly the trend. Sonoma County plan just changed to six and three quarters. And so, I'm sorry, Marin County plan just changed the six and three quarters. So you're getting to see that among county plans as well. Kelpers is reviewing its strategic asset allocation and discount rate in this calendar year. Any change they make will be made in November of this year and would take effect next July. Okay, so let's look at the expense categories. The same principle is with those revenue charts. You're seeing obviously with the salary, part-time benefits, credits and vacancy savings. I've rolled all those up into one because that's the best indicator of personnel costs, putting aside retirement health over time in retiring medical. So if you look at those, you can see that in recent years, the actuals have been very close to the budget incorporating vacancies. Over the last couple of years, the budget had been much higher. The actual costs have been less and starting this year in 21, we've got the impact of the position freeze. And you notice there is this dip here that continues for five years. That is the impact of the position freeze for five years and then it would jump up starting in fiscal 26 under the baseline assumptions. Basically, it's going along in the short-term trend line and the year-to-date trend is just a little bit over where we are projecting right now and a little bit under what was budgeted. In terms of retirement over here on the right, there have been planned increases for a number of years with payroll growth. We're assuming that we pretty much continue on the short-term line and then you see a jog here in fiscal 25. That's the end of the pension obligation bond debt service. And when that drops off, we continue from there, but it's significantly less because of the POB debt service savings. Then in the lower left, we've got health. Now, one thing about health, you'll notice that the budget for health has been pretty continuously higher than the actual amounts, especially in recent years. So we have brought the forecast down to below the budget for this year. It's basically 90% of the position control cost estimates for authorized positions. And then we continue that and then it grows when the position freeze ends and those positions are refilled and would also start incurring health costs. So this is the trend for health. Now, overtime is kind of the opposite situation. Like most cities, Santa Rosa has been optimistic in what overtime will be. The budget is down here, the actual is up here. Now, it went up in particular the year of the fire and not only for the fire in Santa Rosa, but strike teams where you have sent people to other fires. So clearly this number is too low for this year. The year to date, the end of January was almost equal to the budget for the year. Now, while the year to date trend is up here, we are putting as an estimate overtime right on the long-term trend line and continuing it going forward. So higher than the current budget, higher than recent years, but just reflective of reality. Over here on the right on retiree medical, that is based on the OPEB actuarial reports. Going forward, we could refine this estimate if we had a actuarial forecast of where we're going in the future, but it's going to approach the long-term trend line and for retiree medical. Now, when you take all of these together, lower left is total personnel. And you can see total personnel costs are actually pretty close to the budget every year, except for these last couple of years. Again, you see the dip from the five-year freeze. This other dip is from the POB payoff and then it continues again, paralleling the short-term trend. This last slide on expenses looks at the non-personnel side of things. Operations and maintenance. Basically the last few years, expenses have been higher than the budgets for that year. This year, the year-to-date trend is right on the budget for the year and that is what we're putting the forecast at. This drop-off is the assumed impact of holding expenses to being the lesser of fiscal year 20 amounts or a growth on fiscal 21. And so that means some costs could increase, but a lot of others will drop. And so it would put the total for fiscal 22 just below the long-term trend line and then we show it paralleling that ongoing. In the overall scheme of things, if you look back to recent years, you could pretty much draw a straight line from these years and the teens right to where we would expect to pick up and go forward. So this is gonna depend ultimately on what the council decides to do with next year's budget. But again, that's what we're showing in the forecast and we'll show you why in a moment. Over here on the right is CIP transfers. Those who've gone up and down over time. The city's had a practice internally of the budget actually is tracks not only new CIP projects, but also the value of any carryover projects that are still in the works. So you kind of have to ignore these budget amounts here. They're much higher than what you're actually approving each year. And again, we've got the amount that we're proposing ongoing is in keeping with historical trend and we have some growth in that. So when you come down to comparing total revenues and total expenditures, they're on the same scale here. So you can see total revenues will be pretty much hugging the long-term trend line going forward with a little dip for the next recession. Total expenditures, assuming both the O&M costs being curtailed next year and the position freeze kept in effect for five years would look like this kind of in between the short and the long-term trend line. What the net result of all this is, is the impact on fund balance. And I'm showing this to you in two ways. The top half is a 10-year forecast and that's kind of the closer look. And then stepping back and looking at the 20-year forecast and that's below. So looking at the top left, you can see that if you have the restriction on O&M costs and build on that starting in fiscal 22 and keep the five-year freeze in effect, you pretty much balance things through fiscal 25. What happens in 26 is the assumed loss of measure N and followed by the next year, the next recession. So the peak loss in here is about $19 million. The average loss here is about $5 million over this whole period. The key is what happens to fund balance. The vertical line here helps orient you toward fiscal 21. So that's where we are right now. You can see the last few years, you've gradually increased and we should be just a tad above last year's estimate or last year's fund balance would be the estimate for this year. And then we can pretty much hold that stable. Now it is below the 17% reserve level. It's even below the 15% reserve level but doing the things that we'd mentioned before would stabilize things until it drops off with the loss of N and the next recession. Absent any other budget corrections that would put you in the hole in fiscal 27. Now you notice here over here on the right we're showing what's happening with PG&E but there isn't any used in this particular forecast for the baseline, but we'll show you under the alternate scenarios what that looks like. Okay, now if you just step back and look at the 20 year, you can see it's more of the same. It just gets worse. The loss in fiscal 31 of measure Q adds to the problem and then you have the next recession shortly after that. And even though things begin to get better as pension costs go down, that would just lead to an ongoing structural shortfall. So this approach doesn't work long-term. It works in the short-term, doesn't work in the long-term. But what we're gonna show you now is some scenarios under which everything is balanced. But before I do that, I just wanna stress again, there are some major variables that you have to keep in mind for coming to that particular baseline forecast. Things that can change things for better or worse, vacancies, that's gonna be the most likely reason for lower expense in the near term and that would make things better, obviously. In terms of paying benefits, that's a huge part of the contract. We've got 2% colas built in to the extent that adjustments are higher than that. That's your biggest risk in terms of higher costs going forward. Pension costs are more conservative than what CalPERS is proposing right now, which is 7% returns and discount rate forever. But what we have is a realistic outcome, given where we have been and where CalPERS actually wants to go in terms of restructuring investments. So pension costs, the returns are gonna be higher or lower every year no matter what. Over the last 30 years, they haven't exactly hit their discount rate once and aren't ever likely to, but that's volatile over time. The growths that we have built in, which is adding back two positions a year and the 4 million for CIP, those are budget decisions. Those can be eliminated at city discretion. We recommend including them in terms of long-term stability of city services and infrastructure. And then there are these one-time funding amounts. FEMA reimbursements are going to happen and they could be significant, certainly in the millions of dollars over the next few years. They are one time in nature and they are a reimbursement of costs that you've already incurred, either in the general fund or often for capital projects where the general fund advanced the money for the capital project. So to the extent that you get reimbursement for that by all rights, the general fund ought to get that money back. Now, the ARPA legislation could add $36 million based on what we know now. The timing of that, it has to be claimed by the end of calendar 2024. There are regulations that have to come out and it already speaks to, well, there are some constraints on how you can spend it and it takes a look at whether you've lost revenue relative to the year before the emergency, which was fiscal year 19. And there's a lot of issues in here, including how are you gonna count one-time funding you got from FEMA in insurance reimbursements? Is that gonna count against you in this ARPA calculation? A lot of things to look at. So at this point, we have not included anything. Okay, I wanna wrap up by going through these alternate scenarios. What you see here is a matrix of the baseline forecast and seven alternatives labeled A through F. And you've got certain budget actions, only one of which is really not within your control. And that's what happens with measures N and Q. It will be up to you to put them on the ballot, but whether you get voter approval or not, that is not something you can control. So what I'm gonna do is just quickly walk through here and show you the basic approach that we've taken here. Now we could have had 700 scenarios, but we took seven to kind of keep it manageable. In terms of whether PG&E settlement is used, that obviously that's the amount that kind of buys you time. The baseline forecast, we don't use it. In scenarios A, B, and C, we do assume $40 million, drawn down as the general fund needs it to keep its reserve goal. Scenarios D through F, like the baseline, assume we don't use it. The second item is the fiscal 22 O&M being equal to basically the fiscal year 20. The baseline forecast has it. A and B do, C and F do not. So for example, if you are not using the PG&E settlement, you really do need the impact, the beneficial impact of curbing the O&M costs. If you have both of them, like scenario A has, then you're in really good shape going forward. But there's also a scenario in which you would have neither of them. And that has an impact. The frozen FTE, we've shown being in effect for either five years or 10 years. And the reality is with a lot of these, it's not a binary choice. Under PG&E, you could pick 20 million, you could pick 30 million. So we've just gone with 40 or zero. Same goes with the frozen FTE, could be anywhere between one and 10 years, realistically. The two FTE, we've said either yes or no, it does or doesn't happen. You obviously could kind of split the difference and do one FTE a year. The big issue down here on the sales taxes is, whether they both expire as the baseline forecast shows, or whether they're both renewed as scenarios A and C show, or whether it's a mixed bag, maybe the safety expires, but Q is renewed. So there are different ways this can go. And the advantage of the live model is that on the fly, you can change all these assumptions and instantly see what any combination of these or any other scenario would result in. Now, these last two items are important because after you've done all of this on the first five lines, then you're going to, in some cases, wind up short. And in the case of scenario B, if this is what happens, you need either an expense decrease in fiscal 26, and this is largely because N expires of $11 million. You either need an expense decrease or you have to find some other revenue increase, but the voters would have presumably just said no to one revenue and continuing one existing revenue, which was measure N. Now that 11 million would not have to stay in effect forever. This bottom line shows what happens in the future when ongoing expenditure increases could be instituted. And in the case of scenarios A through F, all of them have increases pretty much in the mid to late 30s of amounts in the neighborhood of 10, well, actually six to $12 million, depending on the scenario. But except for the baseline forecast in A and D, the others, B, C, E and F, all involve additional expenditure reductions on top of everything else that's been done here, okay? In order to balance out. Now, the results of all this, I won't require you to commit this all to memory. Hopefully you've had a chance to look at this previously and you'll have a chance to look at it after, but just to flip through these really quick, what each of these is going to show is that the shortfall goes away, the general fund is balanced. And then on the far right, it shows you how much the general fund draws down each year from PG and E. In this case, drawing down from the $40 million, which you see right below it, this is the balance of that 40 million. The other 55 is separate. That is for either projects or other programs that are not part of the current general fund budget. So that $40 million, if drawn down at this rate, would come down to the point where by fiscal 35, it's depleted. But that's a scenario that's balanced. So as B, there's a little bit of a dip here where it doesn't meet the reserve goal the whole time. And that's because the PG and E money would be depleted by fiscal year 30, but by doing the PG and E settlement, making $11 million of cuts starting in 26 and then giving back 6 million and 38, this is what you would wind up with. And then scenario C, a little kind of similar to the prior one, you've got a dip here for a time that's below the forecast. You would wind up depleting the PG and E money even sooner, but by fiscal 27, it would be gone. And again, to try to compensate, even though you're doing the 40 million of PG and E, you've got frozen FTE for 10 years, no FTE growth, 5 million in budget reductions, and then you can not only give back that 5 million, but augment services by another three starting in fiscal 37 right here. So again, model lets you time these going forward. The, this scenario, D is again balanced all the way through. There's no PG and E used, but you have to freeze FTE for 10 years. You have to get both the sales taxes renewed and then starting in fiscal 36, you can increase spending by $12 million a year. You have to get to scenario E again, balanced, no PG and E use, 10 year freeze, 12 million in cuts starting in 26 and nearly all of that given back by fiscal 36. So you see, there's a kind of a common thread here where you have to bridge about a 10 year period where cuts or alternate revenues would have to come into play. And then the final scenario F again, it's balanced in this case measure and expires. So you do the freeze for 10 years, you do the cuts and in 22, some more cuts in 25 and then by 36, you can restore 10 million in cuts. Okay, so now we get the long-term financial policies. That's the name of your subcommittee. So this is right up your alley. The first is to really determine a policy for the use of the one-time revenues. PG&E, FEMA and ARPA. FEMA basically is going to be reimbursement for expenses incurred, but there will be a question of if the general fund fronted the money for capital projects that get reimbursed, does the general fund get the FEMA money back or does it go for some other capital project? So that has to be determined. ARPA aid, hopefully in the next few weeks we're gonna get a better idea of what that may look like in terms of a drawdown schedule. And again, that will help the forecast because it's not built in. And then again, on the PG&E, there had been discussion about using up to $40 million of that. That is a discussion that needs to be finalized. We need a course of action and timing for measure N. You did move up the clock on measures O and P by going at this last election with the measure Q by putting that issue out of the way that eliminated a lot of uncertainty. Now that just leaves the remaining quarter sent. There's definitely an argument to be made for accelerating the timing of the vote on that as well. But that is a decision that needs to be made. And then finally, there are the impacts of policies that are going to determine timing and magnitude of any early expense reductions to conserve general fund resources. And that's the position freeze that we've talked about whether new positions would be added over time or whether the position freeze would be reduced over time. And then holding O and M part-time and over time cost to the lesser of fiscal year 20 actuals or growth on fiscal 21. So I went through this just as fast as I could. We're getting close to five. So at this point, we thank you and we turn it back to you for questions and comment. Great, John, do you wanna kick us off? Sure. Well, thank you for the presentation. It's going to be very interesting to see how the council takes it. It is hard to think out that far, but I know that that was the charge and that is what we were trying to do and planning for the worst, hoping for the best. I appreciate the conservative nature of this. I mean, I think that we need, I think the council is getting a good dose of reality, both from Jan being at our helm, our financial helm, and I know that she is going to be keeping us to task and keeping us aware of our challenges. And that's what this does for me, is it lets us know that it's really, we will have some, it will ebb and flow and we'll have some pluses and minuses, but I see this as a very beneficial guide. I don't expect the council to follow it and councils will change over the years as they do, but having this as a, basically as a roadmap and giving us options and I very much appreciate it. I don't really have any questions. I have concerns as I see some of these graphs when they drop, but I also see designated kind of responses on our part, policy decisions that will help mitigate some of those drops. So I just, I appreciate it again of this roadmap. So thank you. Tom. Thanks, I just had two questions like John said there's a lot of policy decisions come from this, but the first one I noticed on slide 18, the ARPA dollars, the handout that we got, it was 26 million and all of a sudden we gained $10.4 million. Are there any other number changes and can we get the updated numbers? I don't want to make any sense. No, actually at one point it was down to 26. Temporarily they were discussing cuts and timings everything when putting the slides together. So the version you got had the lower level. It's 36.4 at this point, but with some strings attached regarding revenue loss and other eligible uses. So how much of that would actually be available for the general fund as opposed for some other purpose that has yet to be determined, but we're in that $36 million amount now. Oh, I totally get there. There's gonna be strings attached to all this. I totally get those funny, but I just want to make sure I have the accurate numbers that I'm making some assumptions. It's this make, so if we could get those figure or that the new updated slides. I will send you the new slides. Great, thank you. And then on slide eight, I just have a question. It was about the franchise payments. And that was the one where the last 15 years, all the lines have almost been straight lined up. But then in about 2020, the short-term trend skyrockets and the long-term trend stays low. And I'm not sure how you come to that conclusion for the next 10 years. When 15 years have been so consistent to the next 10, more revenue is coming in. I'm guessing around 78 million. Yeah, we need to take a hard look at that. That's what's one of the, as I mentioned, that's an area where the budget for this year may be too conservative. Now, this is not an area that's affected by the pandemic, but the budget has for the last couple of years been right on that long-term trend line, whereas the actual amounts that have come in have been higher. Franchise payments are not by their nature a volatile source. And we've got to determine how much of this is a change in, you know, how much of it might be audits or other changes that might have affected the telecommunications area, because the impacts on the impact of the pandemic and the energy area generally are just not that volatile. So that is an area that could potentially improve. Okay, it's just, again, that one just stood out to me because I think as the hard, this is a relatively easy discussion because it's all on paper. And it's once we start giving into the human impact and community impact as some of the decisions we make, that's why I just want to be clear as we can be based on the data. But thank you for this presentation. I love this information. It really helps us come up to, sets the foundation for some more challenging discussion. So thank you. Yeah, I appreciate that as well. I'll admit your forecasting is actually less negative than I had assumed that it was going to be based on some of our previous conversations. So I'll say that that is a breath of fresh air. Just for my colleagues, one of the questions that I kept asking in some of our previous modeling was about how much to expect in terms of reimbursements left over from the different disasters from FEMA. And I actually did hear from staff an estimate for the 2017 wildfires that we still have, they think somewhere between 35 and 40 million worth of reimbursables that are out there to go after. And I'm not sure if that includes still going after the fire station, but keep that in the back of your head as well as one of those variables for us to continue to talk about, I think. I did have a couple of questions. If you go back, you talked about how we roll over capital improvement projects and show different spikes on the graph. Is there a better way for us to manage how we're tracking our capital improvement investments from year to year? The way that you presented it seemed that that's not the norm in how most cities would track their capital improvement expenditures. Well, that's true, it's not the norm. It's really not necessary. It's an unnecessarily complex step that's being done internally in accounting. In terms of appropriations, you only have to appropriate something once. And then in terms of the accounting system, it's good if you have an inception to date budget for a project. So you can say to date, we've put $20 million into the project, we've spent five, we have 15 left, something like that. But you don't have to completely restate the budget each year. That actually is not the amount you see in the budget document. It's an internal bookkeeping issue. So there isn't a really good comparison to what the prior year budgets were for just new projects because it's got the carryover rolled into it. It's not a major issue. This is something staff can deal with. Yeah, I was just curious, and perhaps Alan and Jan, that's something that we can talk a little bit more down the road on. It just caught my attention that that was not something that you see all the time. For our discount rate assumption, and I'm blanking on the number, every time CalPERS drops the discount rate by a quarter of a percent, I used to have the number in my head that every time they dropped it a quarter of a percent, it adds, I think it was around $20 million in total costs to the city year over year to meet our pension obligations because it's assuming a lower rate of return, but it's a more accurate number. And I apologize, is there a way that you look at that as yes, getting a more accurate feel in terms of what it's gonna cost us for our pensions because of the lower rate of return, but then from a budgeting perspective, how much additional do we need to budget each time that is adjusted? Yeah, the way the model is working right now, where the long-term expense incorporates the lower discount rate. From year to year, CalPERS, if they don't change anything or depending on what they do change, they will give you a rate for one year. And so they've given you what the rate is for fiscal 22 next year right now. That's all you have. They've done a forecast based on the 7% remaining in effect permanently. Our forecast is more conservative. And if you get John Bartell or anybody else that works in this area, they will give you a more conservative forecast as well. John, his estimates also assume 6% over 20 years. So it prepares you for, just like putting recessions in the forecast, prepares you for what you're up against so that you put solutions together that will be adequate to the task over time. You know, like any forecast in any given year, things can be better or worse. And we're thinking that we've pretty much captured a realistic outcome for pensions over time. It's something you don't control at all. But given that, it's probably a good idea to factor in this more conservative approach. Now it's not as conservative as pension critics that would be calling for discount rates as low as four and 5%. That would really break the bank. You know, it's lower than I think any reasonable expectation, you know, what their return will be over time. So we don't go that low, but 6% does seem reasonable over this period of time. No, I appreciate that explanation. And so over the life of the model, it builds in getting down to that 6%. But year over year, we're never gonna know more than a year or two out on when that drop is gonna add additional cost to us. Now, there are a couple of things that some cities have done. Some say, okay, we're gonna budget what our pension cost will be. And to the extent that the cost comes in lower, then we're gonna take that amount and either put it in a pension stabilization fund or use it to make an additional discretionary payment in ADP to CalPERS and pay down future obligations. The only thing to keep in mind with that paying down unfunded liability is that it takes 25 to 30 years for you to realize the benefit of what you paid down because they don't change any of the amortizations. They just count some additional principle being paid up front. So it does reduce your interest costs, but over a long period. But those are a couple of things you could do specifically if you wanted to track budget to actual relative to pensions. But that being said, there are a lot of moving parts in the general fund on both the expense and the revenue side. And just as a matter of course, you're gonna be wrong on some areas. And so you need to be more than right on others for them to cancel out. But that's just something to keep in mind. Yeah, yeah, definitely understood. And we'll talk more about that, I'm sure. The last is sort of just an observation from the chart. It looked to me like we have under budgeted for used overtime 15 of the last 17 years. And so that's something that I'm taking note of in terms of our future forecasts as well. When we do our budgets for the next couple of years. Now, yeah, Alan, did you want us to give some direction? We'll take public comment. And then did you want us to give some direction relative to the different scenarios and in particular slide 27, the long-term policies? I think at this point, if basically this presentation, aside from some of the slight changes that we'll need to make is what we're gonna present in study session. So if we want to, you know, those scenarios would be part of that presentation. So, you know, if there are changes to those that you would wanna make or not have them on there, then we could make that now. But right now we're basically showing you this presentation with the expectation that the next time you'll see it will be at study session on April 6th. Okay, great. I appreciate that. John, I know you need to jump off. So we'll do a public comment on this item, Tom and I can. But did you have any last thoughts before you get out of here? No, I don't, but I do agree with you. I was surprised this looks a little more rosy than I was expecting. So I'll hold on to that as long as I can. Thank you very much, well done. And I guess that was my question. Is it, you know, when we discussed our budget prior, we had 5 million that were in our general fund reserves. Is part of the update in this modeling why it doesn't look as bleak as it did, is that because we continued to see revenues exceeding what we had budgeted for them since we are so conservative about it last year? Is that the main reason? That's a big, big reason. And also that we've changed the forecast sort of on the fly based on what's really happening on the ground on sales tax, which is nearly as hard hit. TOT is a different matter, but that sales tax is recovering. The COVID didn't hit as hard as we thought. Okay. All right. Thank you. Thanks for letting me go. I appreciate it. All right. We'll go to public comments to see if anybody is interested. Go ahead and hit the raise hand feature here on Zoom. Okay. I'm not seeing anybody raise their hand. And I don't believe we had any voicemail or email public comments as well. Correct? We received no comments for emails. Okay. Great. I'll bring it back then. Tom, any last comments or thoughts? Well, my question is it's probably for you Chris on slide 27. Do you see that this subcommittee making some suggestions or having other meetings to discuss that topic? Or is that going to be a study session as the whole council have that discussion? The way that I took Allen's answer on that is that that would probably be a study session with the whole council. I have my own personal thoughts on which direction we should go on a number of these items. If you do, I'd be more than happy to hear what your thoughts are and give my thoughts on them as well, just in preparation for that conversation. Yeah. Today, absolutely I have thoughts on all these things. And some of the other notes are not, you know, Bob and Andy, it's not in their wheelhouse. Because I'm talking about service delivery impacts, you know, and not all FTEs are created equal, but some we can hire very quickly, others it takes up to a year to give them on speed. So that's where I'm interested in having some of those discussions about how do we strategize that whether we bring two FTEs back? Well, again, we can't assume all FTEs are created equal in the time it takes to recruit, hire and retain those employees. So I don't know. It's up to you, Chris, whether we want to have that discussion again in a subcommittee before that or go just study session before the whole council. Alan, do you have a preference? Well, it kind of sounds like it would make more sense to maybe leave those things out of the study session to have the study session be more of a, just an update of the forecast and have at least maybe our April, I think it's April 8th, whenever the next meeting here and that's what we'll do is discuss those items. Is that work for you, Tom? Yeah, and I would just say limit the items. So even if you just take the second bullet point, determine course of action and time for measure in, that can be a several hour discussion. There's so many different directions we could go. And the challenge is we know what the political environment, community environment is now, what's it going to be like in 2022? When would we go? So I would just say, please limit the agenda item. So we're not running into people off the leave. So we can go really in depth at the subcommittee level. Yeah, and I'd agree. And that was actually what I was going to signal out as single out as well was that bullet point, just because we've got to talk about the political dynamics of it and what the actual outcome has been when we've gone for ballot measures that weren't during a presidential election. For example, I think we've got to have an in-depth conversation. Has the measure committee in our violence prevention partnership groups have any of them started talking about measure and as an agenda item that you've seen, Tom? Oh, absolutely, there's been a lot of talk. What are we going to do? And again, just for Bob and Andy, it is somewhat confusing when we see measure N because on the violence prevention partnership, we're marketing it as measure O. This is the community investment. Now, unfortunately, that was three measure O's ago. But as far as marketing, I'm not sure everyone knows what measure N is because we don't have a measure N oversight committee. We have a measure O oversight committee, but that's what we're talking about. Well, would it be better for us to use measure O in our reference? Because I can change the slides to reflect that. Yeah, I would suggest or offer, if you said the measure O public safety sales tax. Okay, got it. Yeah, that's the challenge. The city has two measure O's and the county just had a measure O. Yeah, well, we can clarify that. Abby, I'll thank you. I think, so what I'm hearing from you, Tom, and I agree and this feeds into our next item here on the agenda. So we can just roll right into item five, if that works, which is next meeting agenda items. I hear you and I think that I agree. Maybe what we should do is set up each of these bullet points here, each of these three, determine policy for use of one-time revenues, determine course of action and timing for measure N public safety sales tax renewal, et cetera. Maybe we set those up as three separate discussion items and go through them one at a time. And if, for example, if we end up having a conflict and we can't get to the third one, we can just roll it over to our next meeting as an item. Yeah, and for me, the timing of those would be especially the first one. So PG&E settlement, we don't have any time constraints other than there's a big need for some investment. Femal reimbursement, I'm not exactly sure when those are trickling in, but the ARPA, if there are some timelines that we need to get on top of, that might be the first one we wanna talk about. I don't know, I'm just guessing. I'm dealing with some of the homelessness-related dollars where we have keep dollars need to be spent by June 30th of this year, and now also we have this emergency. So I'd rather, if we have timelines to spend these, let's tackle those in the order that makes sense. Yeah, and I think also for me, part of the way that it's been structured here, I can tell when you get to that third bullet point that that's gonna be largely dependent on what you did on the first two. So it makes sense to me to do the first two and then come to the third one after that. Yeah, and not that I'm a fan for let's have more meetings, but I'm guessing these are all important things that are gonna play into other budgetary conversation that the entire council is gonna be. So as hard it is for me to actually utter these words, if we have to have more meetings, I'm willing to meet so that we can get the feedback to staff move forward. Okay, so I think if I'm hearing this right, so our next regular meeting is April 8th. So on April 8th, our agenda will basically have each agenda item will be one of those bullet points. So we'll be able to treat each one of them individually and those we can't get to will roll to the, either to the main meeting or to a special meeting if we need to do that. I'm good with that. If you are, Tom, let me also ask, was there anything else that you had envisioned to Alan being on the next agenda that is just as critical? Not me, if Jan may, but yeah, so for me, I'm fine with those three. If Jan has something else he wants to have on there, that's fine as well. I think that's probably an extensive enough agenda. I know that the city manager and I had talked about discussing some of the budgetary alternatives. And yeah, we probably, we may add that, but these may be enough, but- And I'll agree with Tom, if the two of you think from a timing perspective, we need to have a special meeting of this group to talk about either the three items or the additional budget items that you and the city manager have. I can make myself available and I know Tom and John both are willing to as well. Okay, great, thank you. And either more meetings or it's a lot of talk about it in an hour or longer meetings. Again, not kind of a fan of any of those, but we got to do this, it's so important. Yeah, our budget study session, the workshop study session in May is May 11th and 12th. So it may be, and we can tell how things go on the 8th of April 8th, but yeah, it may be- Yeah, I think the discussion would be helpful prior to the budget study session because we sort of need that for input as well. Then what we'll do is for our next meeting on the 8th, we'll plan on it being a longer meeting and we'll make sure that council member Sawyer, hears that so that he can schedule accordingly as well. And then if for whatever reason, we don't finish what we need to finish, then we can do a special meeting a week or two later. That would work, great. And for me, if we're doing planning purposes, on the 8th, I'm also just elected chair of the Groundwater Sustainability Agency meeting and we have timelines there too. That goes from one to 330. So we would have to, at least for my participation in this meeting would have to be later versus earlier than the four o'clock. Okay, that's fine. Okay, anything else? Any last comments? Great, then we will adjourn and see you soon. Thank you all. Thank you, bye-bye.