 All right. It is October 19th, 2023, and we will be having a special meeting for our long-term financial policy and audit subcommittee. Madam City Hosts, may you please call the roll. Chair Rogers. Present. Members staff. Here. Member McDonald. Here. Let the order reflect that all subcommittee members are present. Thank you. Madam Recording Secretary, can you please explain to the public how public comments will be heard at today's meetings? Thank you, Chair Rogers. Welcome to the subcommittee members and members of the public. Thank you for joining us today in person and via Zoom. As a reminder to all present, please silence your cell phones. Our meeting format is integrated with members of the public watching via Zoom. Members of the public who are using Zoom may view and listen to the meeting and the meeting is being recorded. The City of Santa Rosa is committed to providing a safe and inclusive environment free from disruption and will not tolerate hateful speech or actions. Everyone is expected to participate respectfully or if necessary, the meeting will end immediately. After an agenda item has been presented, the chair will ask the subcommittee members for their comments or questions and then immediately following their discussion, the chair will open the item for public comment. If you're attending in person and wish to comment, you will be called on when the agenda item is open to public comment. Please raise your hand to indicate you would like to comment. You will be asked if you wish to state your name for the record. Each public comment is limited to three minutes and a courtesy timer will appear on the screen. Any email comments that were received by the deadline will have been included and uploaded to the agenda prior to the start of today's meeting. Emails received are not read into the record. Thank you. We will now proceed to item two, our public comment on non-agenda matters. We are now taking in-person public comment on item two, non-agenda matters. This is a time when any person may address the subcommittee on matters not listed on this agenda, but which are within the subject matter of the jurisdiction. Seeing no public in attendance, I do not believe we have any public comment. So we will move on to item three, which are approval of minutes for our regular meeting, September 14, 2023. Are there any edits or corrections to the minutes of September 14, 2023? Bye. I just had a question. I left the meeting after the first presentation. I didn't see it reflected in the minutes, but you might want to note that Council Member McDonnell left the meeting yet. I think it was right around, what was it, 445. Thank you. Sure. That would be it. Council Member Stop, are there any corrections that you would like to add to the minutes? Thank you. All right. Seeing no additional corrections to the minutes, we will now... Oh, okay. Approved. Seeing no corrections. Thank you. Now going to item 4.1, our general fund review for fiscal year in 2022, 2023. Budget and financial analysis manager will present the fiscal year in 2023 budget to performance for the general fund and recommend action. It is just for information. And Veronica Connor, take it away. Thank you. Good afternoon, Mayor, City Council members. As mentioned, I'll be going over our general fund review for fiscal year 22, 23. We can slide forward to the agenda. Today we're going to be looking at our overall surplus of where we end of the year. We'll dive into some more detail on both the revenues and the expenditures, and then finally look at where our reserves landed at year end. So on the next slide, our preliminary year end results, we had recurring revenues and transfers in of 205.8 million about recurring expenditures and transfers out of 199 million, which brought us to a surplus of roughly 6.6 million. We have closed spending, and this is our initial calculation. So we do want to mention these numbers are unaudited. They're pretty close at this point, but they can change and most likely will. So on the next slide, there's two comparisons showing our adopted budget to actual results. So you may remember last year, we adopted a balanced budget. So we assumed that when the year was done, we would not need to draw on any resources from reserves and we also wouldn't be putting anything back. But at the end of the day, we have about 6.6 million that we will be contributing to the general fund reserves, which is a good thing. You can't really compare the revenues from 199.8 million to 205.8 million. It's not correct to say that we came in at $6 million over because there were budget adjustments that happened throughout the year. We'll get more into that in the coming slides, but this slide is kind of a good takeaway to see where we thought we would end the year and where we actually ended the year, which turned out to be a favorable difference. So looking closer at our revenues, on the next slide, a little better. The first column shows our adopted budget plus changes. So this includes any carryover from the previous year, any mid-year changes to revenue. So our final budget was 200.9 million compared to our actual revenue, which came in at 205.8 million. So all told, on the bottom line there, the general fund had a surplus of about $4.85 million. That's about 2.4% over budget, which is pretty close and we're glad to see things come in above versus under. Kind of taking you through some of the big variances on this slide, property taxes, the top line, we came in very close at 102.9%. To give you a little more context with that, the bulk of that number is property taxes that we know that are paid on properties and that came in very, very close, but pushed us up over our budget a little bit was supplemental property taxes, which is an additional amount that comes in later and that's highly variable from year to year. So that brought us in a little higher. Sales taxes, we missed our mark by about 1.5 million. We came in at 98%. We have been warned by our consultants and by economic indicators that the sales tax market would kind of be slowing in calendar year 2023 and it has. It's not dropping, it's just not growing at the rate that it was. So at the time that this budget was put together, we knew that it was kind of this very optimistic time coming out of COVID. There was a lot of spending and sales taxes kind of started to taper a bit and we've adjusted for that in our upcoming year budget as well. Utility users tax, we saw a big jump in this year. There are three main things that we bring into UUT. We collect UUT on cable, telephone and energy costs. So PG&E and gas. Cable and telephone every year go down a little bit as less people are using landlines and cable TV. But as we've all seen, our energy costs have gone up considerably. So as a result, the tax we collect on that has gone up as well. Even coming out of the fires, we did not see this much of an increase. It really was just this last year, all of a sudden things went up high. This has helped though because the flip side of this is in our expenditure budget we're paying a lot more for gas and energy. So seeing some additional revenue come in on this side is helpful. Other taxes, we're gonna look at on the next slide because that one includes some more interesting topics but we'll stay on operating revenues. We'll keep going down the line. Licenses and permits, we came in at 127.9%. Those are our PED revenues mostly. Building permits and encroachment permits have been high. We've been told by our PED department that encroachment permits will stay high for the next couple of years temporarily while PG&E is doing a lot of maintenance work and fixing all their equipment out there. But then that will start to drop off. So we're kind of seeing a temporarily high plateau that will start to drop down in a year or two. Charges for services also came in over budget. That $1.8 million surplus, about 800,000 of that is due to PED revenues as well. And the other million is recreation revenues. This was our first season post COVID with everything being open and we came in very strong. We weren't quite sure how it was gonna go. So that was good to see. Other, which is fines, forfeitures and intergovernmental revenue. This includes various amounts. And we came in a little short due to a few different factors. One revenue item we have budgeted in here is for contract overtime for our FIRE strike team. There's an offsetting expenditure for it. So when they don't do strike teams, we don't collect revenues. It's not truly a loss. It's kind of a one-to-one, but that's one of those things that makes up for that. Another is a small grant in there. We back out most of our grant activity from these numbers because they aren't truly operational revenues, but there was one small one that was left in there that the revenue did not come in. We'll probably carry that forward to another period and collect it then. And then finally transfers in are fairly predictable at 102.7. So on the next slide, as promised, we'll take a look at other taxes. The big items in here that we get asked about a lot are mostly cannabis industry tax, business tax, real property transfer tax, occupancy tax. You could see altogether this category came in a bit high in the aggregate. Cannabis, we'll take a look at that one first. This is one that we've seen over the years as kind of the market has sort of stabilized at about 1.8 million. This year we came in high at a little over 2 million. We've seen that before, but we see it go up some years and down some years. So still being kind of new, we wanna give it some time to see where the trend goes before we can bank on it increasing steadily, but this year was a bit high. Business tax came in right about on target at 4.6 million. Real property transfer tax has been dropping as soon as interest rates have gone up, the market has slowed, we're not seen as much turnover. We've adjusted for this revenue in our next year's budget as well as it's kind of dropping off. But we do expect it to return as it does. We have a strong real estate market here in Sonoma County. So temporarily we're seeing a downturn. And then finally occupancy tax has been high. This is also due to post COVID, tourism is rebounding, where people are coming to stay. We also have that short-term rental tax in there now, which is new in the last couple of years. So we're starting to collect occupancy taxes on those. Our next slide is gonna give you a comparison year-to-year of these categories of where we bring our revenues in. If you look at the bottom line, we collected 2.2% more than we did in the prior year. Some of the bigger variances to touch on when property taxes increased by 6%, that's normal. We usually see anywhere from three to 6% about. So we did well. Sales taxes at 3% is about what we would expect. As I mentioned, we were growing very strong in sales tax coming out of COVID, but then kind of tapered off. So 3% is that average. UUT, we brought in 16% more. Again, it's been kind of unprecedented that growth in energy costs with UUT. Licenses and permits dropped a bit. And that was due to in fiscal year 21-22, we had some one-time revenues come in for those short-term rental permits. We don't expect that revenue to continue. So that's why we see it drop off and it will probably continue to hold steady. Charges for services dropped as well, but that's due to a reorg. We moved utility billing out of the finance department in fiscal year, mid-year halfway through 21-22, I believe it was. So we had half a year's worth of revenue coming in from the water fund into the general fund. So it's not truly a decrease in revenue, it was just due to a reorg. Fines and forfeitures increased. The driver for that 19% is mostly parking revenues, parking violations. Post-COVID, we don't have as many free parking programs going on, so therefore parking is kind of back up and running. And those are the big ones that we see. Everything else had pretty steady growth. And then our final revenue slide to look at is just a look back at where our major revenues have gone in the last few years. The top line is sales tax. And as I mentioned, you can kind of see a steeper growth curve there coming out of COVID and then starting to level off of it. We don't see it dropping, it's just not growing where it was growing for a few years. The next line down, the gray line is other taxes. And since other taxes has a few different components in it, they're always kind of pushing and pulling on each other. So we saw it grow a little bit. It leveled out in 1920. And as cannabis started to get traction, it started to grow. But now that we see RPTT dropping off and occupancy tax going up, it's kind of leveling off but growing a bit, so there's a few different factors in here pulling on that line. The yellow line down towards the bottom, this one is charges for services. We see this one drop off, that's also because it's accounting for that reorg with utility billing move. So we are losing revenue, well we are losing revenue, but we also decreased our expenditures in the general fund. So that was kind of a net zero change. But it does make our revenue lines drop. And we do expect that one to start to rebound more and more as recreation and as pet revenues continue to grow at a healthy rate. And then finally, the dark blue line down at the bottom is property taxes. So this one we always just see steady modest growth anywhere like I say, 3% to 6% is what we see year over year. Yeah, go ahead. So just to make sure we're clear on the water billing water billing move. So the way that we had this set up for ages was that water billing was in the finance department, which is a general fund department and was technically in the general fund budget. But the water department paid a true cost for that service. So a couple of years ago, we thought we would just eliminate the middleman and move that group into the water department, gave them better management, it just made sense. And so that's where Veronica is saying that the water department is no longer putting revenue into the general fund. It was that true up of there. So just to be clear on that point. Thank you, Ellen. I look at these numbers day in, day out and I assume everybody sometimes can catch up with me, but yeah, thank you for the clarification. So that ends our discussion on revenues. And then the other side of revenues we'll look at expenditures to see where we landed for the year. So general fund operating expenditures, this excludes projects. This is mostly just our ongoing operational expenditures. Salaries and benefits are our biggest expense in the general fund. They make up about 77%. And we did turn back about 2.3 million of salaries and about 1.3 of benefits. We do budget for our vacancies in the general fund. We budgeted about a 2% vacancy rate for this year. And with the hiring market being what it is, it ended up being about 2.5% of what we ended up turning back. So services and supplies, we overspent by a bit, but this was planned. So as the year comes to a close and we see that we have turned back our unspent appropriations and salaries and benefits with city manager approval, departments can get permission to overspend if we know there's gonna be savings in other areas for one time needs and things at the last minute that we've wanted to try to spend our appropriations on while we can. All told, we turned back 2.8 million. This equals 1.46% of our expenditure budget. This is very close. So as your budget manager, I will tell you, this is as close as we wanna get it and we nailed it pretty much. We don't wanna get any closer because all it takes is for the hiring market to change. Suddenly we have a lot more employees and we don't have that turn back anymore, but we also don't wanna not spend too much because now we aren't spending our appropriations. So we did a very good job on this. We're glad to see this come in as close as it did. So we are going forward. We did increase our vacancy rate for the current year and that's something that we're gonna have to keep an eye on as hopefully the hiring market shifts a bit in our favor. So the next slide gives you a breakdown of expenditures and this compares it year to year by department. So as we look at department spending, we would expect three to 7% is kind of a normal increase when you consider salary increases and costs of services rising year over year. Anything more or less than that can usually be explained by a one-off circumstance or a reorg, for example, in city council. Fiscal year 22-23 was an election year. So we had very high expenditures that year. City manager had a vacancy for assistant city manager back in 21-22. So once we hired that position, the expenditures went up as well. So finance again, that decrease of 20% is the utility billing side. We saw revenue go down, but there was the offsetting expenditures. Recreation, we did another reorg where we brought parks into recreation. So recreation and community engagement looks to go up significantly. And on the flip side of that, we're gonna see public works decrease. So that's a reorg as well. But altogether, the bottom line expenditures increased you every year by 3.5%, which is expected growth. And then finally, our final slide gives you a look at general fund reserves. So our general fund reserves are, we broke them down for you in a few different ways. So at the very top, 87.75 million about, but we first have to back out the planned deficit that we have for the current year, that we're gonna be using those resources to run our budget for fiscal year 23-24 of about 3.3 million. From there, we take out our fiscal stability reserves from our PG&E settlement a few years back of 24 million and that brings us down to 60.448 million of unassigned reserves. And we take out the required 17% reserve policy of 32.6 million. We now have unassigned reserves that are over that reserve policy of 27.85 million. So that number increased, as I mentioned, at the very beginning by about 6.5 million. That's what we see for this year and the results that we have, again, these numbers are unaudited, changes make them through. So this surplus, this available surplus is something that we, the staff will be looking at to use for one-time needs in the coming years. We cannot spend this without council permission. So you will see us come to council throughout the year for things such as infrastructure needs. The HVAC project is high on the list, security cameras for city council. So there are some planned one-time spending that we'll be bringing before council to be putting that towards. And that concludes the presentation. I'm happy to answer any questions. Just before that, just to kind of wrap up with that. So I think what you're seeing is that we are getting our revenues much more in line. So it's less conservative, more realistic. With it comes some challenges. Like I said, we have sales tax leveled off. We, I believe, held our sales tax flat. So I feel good about hitting the number going in for the upcoming year. There's always going to be these one-offs of revenue that is going to pop up, but we are working with planning and economic development to refine our revenue assumptions and estimates. Going forward to get that more in line to understand what could be available to us in the future. That's one of those where looking at past trends is not your best practice to figure out where we're going in the building market. But we want to be able to understand what is more in the pipeline that we could count on or that we couldn't count on. And so we have a collaborative effort with that department to better understand those and do better forecasting with it. All of this is along the line of us trying to ratchet into our revenues to be as reasonable as possible. And like Veronica said, we've done the same with our expenditures. So you're getting to what we would expect to see is a year-end amount where we're still, thankfully, with a surplus. You do not want me to come to you and say, oops, those aren't good, but to have a more in line surplus number. Having a surplus of $16 or $18 million does not do any of us any good. It erodes credibility, it's not a good thing. So this is, we've made a conscious effort to get to where we have that smaller number. The amount of unassigned reserves over policy is, we did not, we had intended to do some, appropriate some funds for one-time projects last fiscal year, but we were kind of uncertain on some of those reserves being used for whether they would need to be used for say the HIRN interchange and that. So we kind of held back on appropriating those. So it just built up and which is what it should do. It just more money in your savings account for lack of a better word. And so as Veronica said, we will come forward. We're developing a list to figure out what are some good priorities to come back that are true one-time projects that we wouldn't ordinarily be able to do. So with that, just wanted to kind of wrap a bow with a bunch of ums and aws. So we're available for any questions you may have. Thank you. I'll start with the questions if that's okay. You are not suggesting that we spend whatever is over the 17% mandated reserve. Are you? No. Okay. So the projects that you come back to us with will be in what, cause I see a lot of dollars here, right? And I'll spend them. I'm really good at that as my husband. But like what are you suggesting those projects come back? What number? So we're still determining what that would be. I would guess that we will come up with something that would allow us to accomplish some high priority needs in a short-term basis that still leaves an amount that for the unknowns. And then we never want to go below our 17%. So I wouldn't want to put a number on it right now. We would come back when we figure out what would be the list to come back with and how that would work with just overall good strategies for having reserves and then come back to probably this committee and then obviously to the full council and discuss clearly what our rationale was for dropping down below. So I don't know if this is a question or a comment. I'm going to make it anyway. Sure. And speaking to a lot of our staff, I feel like us having and I think it's great that we have more money than expected, but I'm trying to figure out how you have the conversation with the distrust that they have with our numbers that we present to them. And so that's, I'm having a, I know why we do, but how do we present that to staff? So they know that there was not anything. Like we were trying, there's no math just for hiding money. Yeah. Yeah. Yeah. Like this, like we weren't, this is not something we did on purpose. This was not something that we could foresee that was going to happen. And maybe that's a concern of mine because I have to have that concern. But I just, I want to be very clear that there was, that we did change the way we looked at the numbers that we were trying to be more actual, that we are elated, that we have extra monies and now we can find ways to spend them within the city. But I don't want there to be a feeling of continued distrust. So I'm asking you, how do I explain that without going through this presentation? Right. Well, so one of the things is I've met with the labor groups a couple of times. And I think with just about every one of them have had a good Q and A sessions. At that, at this point, I just had very preliminary numbers. In fact, our expenditures weren't even closed. When I talked to them, I will have a follow-up meeting with them. What I've pledged to them is to be open and transparent with our numbers. So I will continue along that path. We've had some very frank conversations about it and I've been very clear with them that I understand that the credibility issues and the distrust over the numbers and it's just gonna take time for them to hopefully be able to move past that. They may never and that's okay. But we will continue to explain. I guess your elevator speech would be we've been, we are more realistic with our estimating. We are seeing that surpluses of multimillion dollar surpluses, tens of millions dollar are becoming a thing in the past. And we hope to continue on that path. Those are the three things. That's our goal is to go on that path. I know you can't see it, but I have a smiley face over here because you are being proactive and knowing that these things may come up. And so it makes it a lot easier when we do have to have the conversations and explain that you're already putting the information out there. So thank you very much. And with that, I will bring it back to the subcommittee to see if there are any additional. Just to do this again, I'm being so close with the budgeting to come within like 1.5 or 1.6%. That's pretty impressive. And actually, just a general question for me. I noticed that the sales tax revenues went up by 2.9%. Are there any conclusions we can draw about the state of the local economy given the fact that the sales tax didn't keep pace with inflation? Is that a sign of a slowdown? Yeah, I wouldn't say it's a slowdown only in that compared to the higher growth that happened when inflation was really spiking. So you're seeing everything year over year, right? So now what you're seeing is, in fact, what we're doing is we're keeping things flat. What the consensus that we're getting for California and regional sales tax is that it is in this calendar year weakening, yet not going down. So we're still buying more goods and services now than a few years ago. Right. Okay. I also heard that consumers are spending a lot more on non-taxable goods. So it's not that the overall economy's slowing. There's maybe just a shift from those taxable goods to vacations and other experiences, that type of thing. Now that COVID is over, people are traveling, people are doing different types of spending. So we're still optimistic from that standpoint. And, but the growth that was happening in the last couple of years, especially when people were shut in and just spent like crazy or started doing home projects because they couldn't do anything else. So, and again, spending like crazy, those were in some cases, double digit increases in sales tax that had to stop at some moment. So now we're seeing that leveling. And then I believe in the out years, we start growing it at 3% again, which is a more realistic growth trend going up. So the fact that it's not dipping is good. Obviously there are things that could change that would affect that, but most economists are backing off of the recession watch that they had before. And in fact, we were never really factoring that into our numbers. Things were just always going. I don't think we want to say that out loud, do we? Are we chasing ourselves? There we go. Thanks for the background. Item number two, I noticed that we were in, we under budget or over budgeted for fines and forfeitures. I did get yet another parking ticket recently. So I'm not sure that it's worth having a separate line item for me in the budget, but I am doing my part in the years going forward. We appreciate that. Thank you. And final point for me, because most of the questions are answered in the presentation. Thank you for being so thorough on the changes. So am I remembering correctly that of the 27 million that we're thinking about as being surplus over the mandated reserves, a lot of that's effectively been spent, right? In terms of the future funding that we're gonna need to pay for things like additional downtown enforcement positions, the programs that are currently funded by one time funds that are gonna sunset over the next couple of years, expected budget deficits, like that 27 million goes away pretty quickly. Like was it by 20, not 2026 that we're thinking that's gone? Right. So that is that, and thank you for bringing that up. That is something that has to go into consideration when we look at spending down any of those reserves for one time dollars is that we do have, have out in the very near future where we could need extra time to figure out how to rebalance our budget under a new, I hate using the term new normal, but the new normal of higher labor contract costs. We have a strategy around that. We've talked about that in this group. We do have those fiscal stability reserves. Those would be used first before we would get into any of those unassigned general fund reserves. So that would be our first, and we did that this year. We used 3.3 million of it. So we will next year, we're trying to, we have kind of a target sort of of where we think that the deficit would be. We're trying to- It was like six, it was a set six million. And then the year after that to jump up to 10. That's when it starts going up. That's when the ARPA, yeah, the ARPA project start. Start to move in to the general fund. So what we, so we look at those first and then hopefully we're able to address that through either flat budgets or additional revenue. And then if we run out of the fiscal stability reserves, then that goes into the general fund reserves to be able to plug that gap. Our goal is to be sustainable. So we understand that we may even balance and then not balance and then kind of do that. But on the long-term, if you're looking out beyond that five years, the goal is that you're sustainably balanced after that. So we're actively trying to do what we can to make that happen. But yes, you have those reserves amounts are there to help us. Yeah, thanks for the reminder. And if you do want to continue to instill fiscal anxiety into our hearts, it might be helpful even just to have a little reminder what the projected deficits are for the next few years so that we don't get to thinking that we've actually got 27 million that is free to spend. Yeah, those are, it's always good to remember your ongoing costs and deficits and ongoing thing versus one time of reserves. So thanks again for the great presentation. Since we didn't have a deficit, the fiscal stability reserves, I'm confused why we even took money out of the fiscal stability reserves. If we didn't, it's for the current year that we're in. Yeah, I think this one. So Skywag and WDF are finance. So that is actually a requirement of our governmental accounting standards. And so we need to basically hold a portion of our reserves at any deficit amount we passed for the next coming fiscal year against our year-end number. And since we went from zero to that 3.3 number, you're seeing that full load of that number hit at that point. So really what I'm saying is not only is it the right thing to do, which we probably would have presented it this way anyways, but we have to. So even though it wasn't tied to that period, because we passed the next coming budget at a deficit, the standards of how we need to close our books for the prior year, say, hey, you passed a deficit the next year, that's basically you saying you're gonna spend some of your surplus and you have it dedicated already. And then when you had the leftover money, then that goes back into that reserve. So it's flat again. So it's basically you show where the money's gonna come from to the government. And then when we got the money at the end of this year, which they just closed, now we can say this goes back into that other reserve to back of it. Well, but then my question is, then we really don't have, unless I'm missing something, that we have no deficit for this year now, because this leftover money filled that back in. Okay, that was my question. And we did not have a deficit for this. We did when we passed budget, we don't today. So I want to thank you for these comments. Because yeah, I would make sure we're very, very clear. When we're talking about a deficit, we certainly did pass a deficit budget. Right, yes. That is, make sure we all are all the same. We got the deficit, we got that part. But you're right, Council Member McDonald, from a resource perspective of how we come up with our reserves, I think she's giving me a great characterization as far as saying, pass it with the deficit, we're gonna take that money away. Then when the year ends, which will really be the next year, not this one, it backfills. It'll backfill that amount and it'll be a difference. So I'm gonna try really hard not to get the needs of the creditors. So yeah, that was my question. So then we're still, we will be at the amount that we started. Yeah, next. That was my question. Yes, yes, I think I'm gonna say yes. I know we passed a deficit, but I'm saying like, we didn't really take that money and then say, oh, we have money left over because we really took money out of our reserve but if we spent the money, then we'd still be in a deficit. So it has to be probably direction of the council to say, backfill that back to the deficit so that we aren't in a deficit anymore. So we have to give you direction to backfill that it automatically goes back. That happens automatically. And there's a couple of things that are going on that make this overly confusing. So one is that the prior fiscal year, fiscal year 22, 23, we passed a balanced budget. And we haven't done that in forever. So now you're seeing as we go into 23, 24, now we passed a deficit. That was a deficit budget that by law, we have to pass a balanced budget. So confusion point number one is that we took money out of our fiscal stability reserves and use that to plug that gap saving our unassigned reserves. So we have assigned fiscal stability reserves. We used it for the purpose designated for those reserves. We preserved our unassigned reserves which is what we wanna do. Next fiscal year, when we closed the books on this one, now we get to do all of the fun, you had a deficit. So now when you close those books, you've gotta pay that stuff back. And we could actually have the question of should that, should the surplus that came back, should that go into our unassigned reserves or back into our fiscal stability reserves? And that's actually a really good point that when you were talking about it, that it just hit me that when I didn't go there. 27 million to me is not actual. If 3.3 need to go back to fiscal stability. Right, it will be worked out. And we need to be all thoughtful and ask from staff to present that information to council to make sure that we're being consistent with the intent and purpose of those fiscal stability funds that we're using them in the way that was set forth. And that absolutely, if we're going to backfill, I think there does need to be a come adoption when we come back to say, no, we're going to be backfilling the fiscal stability funds to make that whole again to come back. But I think from our perspective, where we followed in this presentation and our treatment, how that was set forth and absolutely we have the opportunity to come back and present that and say, now do we want to correct that? Yeah, it just doesn't make sense. It's like, oh, we have this, but it's like we took from a reserve to even, so is that really a surplus? If we actually took a subtraction under the fiscal stability reserve, if that's not our true amount, it shows 24 million. If it's less than that, to me, it should show that that's less as opposed to taking the money and sticking it down into amount over mandated reserve policy. And that 24 million, though, is where we began, when we went to budget adoption or prior to going to budget adoption, it was 27 million. Okay, so it is net of that. Then we go back to the 27. something million because to me, when we see the deficit in the out years, we don't have a mandated reserve policy for that, but that to me is smart budgeting on, we knew we needed it this year. We ended with a very tight budget, 3.9%, 3.1% on the mark. So that is, a 3% is shocking in this big budget to be able to get that narrow of a little window of what you guys closed with. So in my opinion, I think it's important to go back to the 2. or 27 million because we show the deficit in the out years. The other thing on the mandated reserve policy, is that set by the state or is that in our policy? That's our policy. What's the, because our city is growing, could you tell us in the future what a city our size with our growth targets would have for a mandated reserve policy? Because to me, 17% should be a minimum. But I mean, it sounds like it's a lot, but I'm gonna guess it's not even a month of payroll. I mean, what is our 17%? It is, what is it? It's supposed to be three months. So it's not even three months. It does work out that way more. That worries me because we're, I don't know where, if it's a proper mandated reserve policy based on rules. Yeah, so there's, I will say this and I'm really happy that you bring that up because that's something that it was one of my first assignments as an analyst was to go figure out what all other cities are doing with that. And I'll tell you right now, it's all over the board. It really depends on each individual city and the risks that those cities would come up against, right? So for a city that is in a wildfire prone area that is in an earthquake prone area, I would agree that 17% is too small. And I'll tell you that when we went through the fires and especially that first year and of initial response and setting up our recovery for it, we spent, we were over-reserved before that and we spent them down like crazy. And now we brought them back up, but if we hit a major disaster like that again, we will spend our reserves down like that because the idea is, nobody's coming to me and saying, Alan, can we spend this? Now we're just writing checks. We're writing checks to get stuff done and to take care of the community and then to start our recovery. So that's what reserves are there for, right? They are there for that, to keep the lights going in times of major distress. So I would, pardon? It's not gonna be popular politically. No, it's not because the idea is, is that, well, that's money that could be spent otherwise. Some folks think that that's money that could be spent on ongoing costs, which I would argue loudly against that and respectfully though. But it's just, you have to make that decision. And in prior years in this group, we talked about risk-based reserves. We talked about all those things and we never really made it to the council because it was so hard to figure out what you're, what are you gonna put into what bucket? We were fortunate of bad things that happened. A good thing that came from it was that PG&E settlement. It allowed us to seed that fiscal stability reserve. We wouldn't have gotten it without that. So we are very conscious of it, judicious with it. I agree that those funds should probably go back into it because those are the things that are gonna soften the blow as we try to rebalance our budget after labor contracts, after everything else that goes on, ARPA programs, whatever it may be. And so that is a wise way of doing it and we can have that philosophical discussion in here. I think I don't wanna get too far off of- I mean, layoffs are nightmare. I've had to do it before and it was terrible. I've had to make 10% cuts in a budget in a year. So it's horrific. So if we can plan better now when we have a reserve at the end, to me, that is stability as an organization for our employees that we value so much. So I think if we can gently have the conversation around what other cities are size or with other emergencies, what is their typical? Is it 20%? Is it 22%? I know in school budgeting, you have certain amounts based on student ratio but we aren't funded that same way. So I think that would be good information to have. And then last year, when we closed the books, what was the end amount that we had when we closed the books last year? I know you've told me this before, but I can't recall. Of reserves? Yeah, when we closed all the books last year, we had a reserve amount but I can't remember what it was right now. Is it, was it 3.9, was it 5 million? Where were we at last year? So we roughly increased our reserves by about six and a half million. So about that same amount, again, it was back down about 21 million. So that, I mean, it still is such a good, little target that I mean, you're so tight on that. It's not like we could say, okay, this is a pattern. And then I had a question on staffing. Last year it was really clear we were down about 130 to 60 people. Where are we at this year? I, you know, I need to get back to you with that. I have a feeling that we're still around the 10% amount, but it is, you know, there are some things that are way better than before. So our police department is pretty much fully staffed if not fully staffed. Fire is very close to that as well. It used to be, you can count on a significant amount of FTE vacancies and police. And right now they've been able to get people through their academy, you get them in there. They're very excited about that. So that's on a good side. On the other side, you have things like engineers, stuff like that from my understanding is that we're still struggling to fill those positions. Anecdotally, I can tell you that I know I know they're struggling in the water department with vacancies there and the constant turnover. And it's not just turnover because they're not getting the people back in behind it. So it's just an exodus. I'm losing somebody to the county for better pay in one of my payroll folks. Who is a really good work guy, I'm sad to lose her, but it's a great opportunity for her. And you go, okay. So again, the point that I think we've tried to make and definitely in my discussions with the labor groups is that, and this is weird for somebody in my position to say, but we're not competitive in the labor market at all. And that, I think we all can agree or at least see that that's what the case is. And so we need to move in that direction. So we're trying to set ourselves up to be able to be more competitive in there. So before we spend that money on one-time purchases and things like that, I think that's important to know is how far off the mark are we on competitive pay? And we are losing people and that costs us more money when we have to replace them. And we can't replace them right now because of unemployment rates. So that would be something I'd wanna know before we had the discussion on how much more we can go for reserves because we do know for a fact that another emergency will hit. We don't know if it's a flood of fire or an earthquake but eventually it will. Just not when I'm on council. So the other question I had is, do we have in other funds? Because this seems like a revolving fun when we have our conversations. We have money coming in, money coming out. But in other departments, do they have funds that they'd earmarked for other projects? And what are those fund balances? I'm curious. Well, I mean, in other enterprise fund departments. Yeah, I think we have 12 or 14 departments. Right, but so we have a number of those departments are in the general fund. Okay. And then you have other departments like the water departments and enterprise fund parking, which is within mine, but it is an enterprise fund. So I can tell you, I'll just speak for parking because I know it. We do have some projects that we have funding appropriations to, we also know that we have some in our, as we look at our capital needs, that we know we need the budget for them. They have an issue in that they are, right now they're underwater. So revenues are down, expenditures are up, even though they're doing everything they can to hold expenditures down. But so we push off some of those projects. In those enterprise funds, whatever they have planned, that can't come back to the general fund. That has to stay within theirs. So, you know, so whatever any savings that we were able to find in parking that just helps the parking fund. It can't help the general fund. I understand how the enterprise districts work. I understand that because of how they're allocated. It has to go for those specific things. It's more around, I think it's important for us to know the fund balances and the other things that are not or are being spent. So in a department. Well, it's like a fire and we're going to have a fire department at the Herne Hub. Of course they're holding that money until we break ground on the fire. I think fire gets a significant update on it. So it is police, it's the other ones. So maybe I can give just a very... I just wanted to say we do have a hand raised from the city manager. She has joined us as a panelist. So if it's, and we can, that's perfectly. I'm going to ask for public comments. I didn't mean to interrupt. Oh, it's okay. I'll let her talk about it. City manager. Yeah, can you all hear me? Yes, ma'am. I was only going to ask some clarification. I had my hand raised a minute ago when Vice Mayor McDonald asked about the vacancy rate. So we've gone from a 13.49% vacancy rate to a 8.9%, which is pretty drastic. That's really good. And I know we're budgeted for full staffing. So that's not going to change on our current budget if you do fully staffed. It's the potential of the out years, more people, more money, negotiations, all of the other things that we have coming up. Right, but we're also, we've also authorized police to overfill. I think, Alan, I think we allowed six officers. Really so, yes. Yeah, so we're allowing them to overfill. So that just reduces the amount that we would normally have, would have for turnback for vacancies. Okay. Thank you. Thank you. Sorry, it took me so long to get in. Apologies. No, it's okay. Thank you very much. That's pretty much most of my questions was just around where our target was the 27 million. Does that money need to go back in that we borrowed from the other one into the other account to me that should be an automatic for us if we're able to hit close to the target at the end of the year that we keep putting that money back in fiscal stability. I mean, to me that shouldn't be too bad of an argument. Increasing our mandated amount might be tougher, but I think being able to take that 3.3 especially when we see in the out years we haven't had a big deficit. I would recommend that we have that discussion with council if that comes forward to us. Again, because it's not the way I look at it and the reason why I ask the question is because it's not really a surplus to me. If we took it from a savings account to make everything run and then we have, we see that the paycheck, sorry, I have to equate to everything to a regular home, right? So you take it out your savings account to make everything run and then your paycheck is a little bit more than you budget it for. And for me, I'm gonna put it back into that savings account to make that whole and then that is actually what I had extra. That's how my brain works. No, it's a really good point. Maybe we should just say it that way at council. All right. But do you under, you get- No, I absolutely- Why are you asking? That's confusing. Because then I'm looking at it and I'm like, well, we really didn't have a surplus of all this money because we actually took out of our savings account. I think that's an early sound financial way to look at it. It's totally- I think it could be the actual amount, the 27 something minus that. What do you think? But we have to do it. And what I would suggest is that we can certainly present it that way in future presentations. And I think come, even adoption time, we can have just a direction from council to move forward with that direction. And I know everyone on the side would be very optimistic about that. Because then you have less money to spend right now in one time, but then we're shoring back up what we had before. Yeah, looking from staff's perspective, that flow we're not only meeting, I think the original direction we were giving, but we're coming back to council and saying, hey, here's the results of that direction and we want to slightly change our approach. And I think it's very appropriate. Yeah. I think it's a safe way for us to be budgeting right now with the deficit that we have coming up. Because there are some cities close to us that are having some difficulties. I don't want to be in that basket. So, any additional questions? No, thank you so much for the presentation and for all you're doing to hit the targets. And I'm really impressed with our finance department. I know you guys, I put the screws to you all the time and I'm asking all the questions, but it's because we're the ones that get peppered when we're out in the community. And we know that we need to pay our employees more. We do know that we're not being competitive and we see them leaving us. So there's a panic, I think, that you see from council as well, because we want to make sure that everybody stays and feels valued for the work they do. So thank you for a good presentation today. I appreciate answering all my crazy questions. Yeah, so when we look at employees, we're also looking at you guys. So we want you to know that we think you're doing a great job, but we also want you to stay here and let you know that you're valued. So thank you for your job well done. So at this time, normally we would go to a public comment on item 4.1, but it does not appear that we have anyone from the public that is in the room. So we will proceed to item five, which is future agenda items. Madam Vice Mayor, do you have any? I know you guys went through all the potential tax revenues at the last meeting. I guess my question is, when is that coming back for us to review or is that going straight to council? So can I give a quick update under that? Okay, so we did, we, our analysis on revenue impacts was just finished. I have a meeting with a consultant that did the business tax one tomorrow morning. We have, we've prepared some polling, we're ready to do polling. And then for the next meeting, I was gonna give an update on where we are. Thank you, that will be my only. And I do not have anything else. So saying nothing else on our agenda, we will now adjourn the meeting. Thank you very much. Thank you.