 Like to call to order the June 18th beginning of the budget hearings if we could have a roll call, please Supervisor Leopold here Coonerty here cap it here McPherson Chair friend Here if you could join us in a moment of silence on Pledge of Allegiance I pledge allegiance to the flag of the United States of America and to the Republic for which it stands one nation under God Indivisible with liberty and justice for all Morning, Mr. Postos. Are there any changes today's agenda? Yes, there are a couple of changes in the introductory items number four There's a correction the item should read budget overview 2018-19 proposed county budget Remarks by the county administrative officer Remarks by the auditor controller treasurer tax collector and then public testimony on the proposed budget Presentation on the general government budget category as provided in the proposed budget pages 35 through 37 And then on the consent agenda item number 20. There's a correction the item should read direct staff to return on June 26 2018 for last-day budget hearings with any final adjustments Thank you We actually start off with you in the budget overview I've noticed that your entire staff is only sitting on one side of the building so maybe Maybe they know okay Good morning chair friend and members of the board Your session this morning opens the 2018-19 budget hearings The documents before you today include the CAO's proposed budget which includes the accounting item Detail in addition you have before you the supplemental budget Which provides additional financial actions reports? The unified fee schedule and the continuing agreements lists our office will be presenting any last-day reports Including a financial update and concluding actions prior to the close of budget hearings on June 26 and Just noting that all of the budget documents are posted on the county of Santa Cruz update Over the next week the board will consider recommendations from our office on the 2018-19 County budget county department heads will present information on their programs and Members of the public will address you about the impacts of the budget on a wide range of community needs We believe our work-to-date represents a key number of successes that respond to your priorities And that this budget builds on that momentum You will hear more about these successes as each department presents their budget throughout the week When I began this job, I outlined a three-year work plan that included in the first year development of a strategic plan Including strong fiscal management and stewardship continuing our tradition of that and as well as augmenting services in some key areas In addition as I'll say later the second year includes an operations plan which is meant to have key programs and objectives to carry out the strategic plan and That will be a two-year document that will be linked to a two-year budget and so The strategic plan which is a six-year Document will be linked to the budget via the operations plan which we will we will be developing in the coming year So in terms of that strategic plan, you can see that we have completed or are almost complete You had the strategic plan presentation Last week, and we will be adopting it next week Next fiscal year will be developing operation plans That will be county-wide by department this will be linked to a two-year budget and Meanwhile during the next fiscal year, we will be developing continuous process improvement projects and performance measures as well I know that There's a lot of Anticipation of a lot of these projects and they do take time though. It is a complicated thing and we will be doing Continuous process improvement Pilot projects through this fiscal year and also doing a lot of staff training about performance measures It's a very complicated area Performance measurement is something. I know the grand jury pointed out in their Report on our budget It's something really that very few people do well. It's a very difficult area. There are some examples across the country, but there's not many and So we will be breaking new ground as we do as we implement performance measures to tie our performance to our strategic plan and This next year we will be especially spending a lot of time with some pilot projects as well as a lot of staff training in that area fiscal stewardship This is something that the board has made a priority and as well as your county administrative office And this is something that we should be proud of we have had great success in managing the county budget and at a time when other jurisdictions Near us have had to declare fiscal emergencies When others have actually had to go to a major layoffs in neighboring jurisdictions We have a balanced budget with no layoffs and That's due to this board's very thoughtful And careful management of the system of the county's budget So to start with we have tripled our reserves, which I know are our auditor controller treasure tax collector We'll go into more detail about But this is something that you set out as a goal in 2014 to get up to 10 percent We have We've achieved that three years ahead of schedule. You gave us a deadline of 2021 and we achieved it This last fiscal year. So three years ahead of schedule. We've tripled our reserves and reached your goal of 10 percent Which is a very good thing to have Accomplished behind us and we need to maintain it in the future We've also improved our credit rating because of your strong fiscal management No in November of 2017 S&P global ratings up to our increased our rating to a double a plus Which is equivalent if it were to have been for a jail bond to a triple a rating and In their comments, they noted that we have a very strong local economy But they also noted that we have a strong county management with good financial policies and practices We have very strong budgetary performance with balanced operating results in the general fund and at the total governmental fund level strong budgetary flexibility with healthy fund balance very strong liquidity and very strong debt Management in fact our debt Is very it's very interesting and represent our debt service represents less than two percent of our expenditures which is very conservative and Two-thirds of our debt is going to be retired within ten years So you've been very careful in managing our debt and that has led to a very strong rating and also To the fact that we have flexibility if we ever needed to issue debt in the future We've reduced pension obligations This is something that the board has done over a number of years in 2007 regarding retiree retiree health benefits In conjunction with our labor partners We negotiated the implementation of a cafeteria plan and a cap on retiree health benefits This action reduced the unfunded actuarial accrued liability for our retiree health plan by 35 million dollars and then in 2012 The county again with our labor partners implemented a retiree health longevity schedule That links the level of benefits to years of service and age at retirement These reforms reduced the unfunded liability by an additional 54 million So those two actions that this board took in conjunction with our labor partners Reduced our liability for retiree health benefits by almost 90 million dollars Which is a very significant achievement With regard to retiree benefits You've also been proactive in 2012 The county implemented a tier a second tier for per's retirement for all employee groups This again was done in partnership with our labor partners to increase the viability and sustainability of our Retirement system. This is something we did ahead of the state the state later and a year later implemented retiree Reforms, but we did it before them This simply increased the retirement age reduced the benefit formula increased employee participation This change was estimated at the time to have reduced retirement costs by 93 million dollars over 30 years 2013 the following year the state implemented Public Employees Pension Reform Act or PEPRA and this again reduced Increased the retirement age and changed the benefit formulas and increased employee contributions And this also will have an effect a significant event Significant effect over time to make the pension system sustainable and more viable We have controlled employee growth in the recession of 2008 We actually reduced our employee base by 15 percent And we went down to a low of almost 2,300 employees We're now at 2,470 employees We're still almost ten percent less employees than we were at the Before the recession so even today we're almost ten percent less and so we have had some modest growth We only have 2,470 employees versus 25 2700 in 2008. So Significantly less employees and this is despite significant growth in our health and human services staff Especially due to the Affordable Care Act So what that means is that in our general government sectors? We have not grown we have maintained the losses that we suffered during the recession So even today we're almost ten percent less employees than we were In 2008 during the recession And then we've made some inroads on deferred maintenance which could significant problem that all local governments face We stopped as everybody else did investing in some of our routine maintenance of our facilities and We are know we're starting in this budget to try and catch up on that Despite your very conservative fiscal management, we've actually Augmented some services and so these programs include the nurse family partnership Thrive by three whole person care and Medi-Cal drug expansion We've also responded to the needs of the homeless by expanding our shelter and Working to alleviate homelessness among our youth We've also made significant investments and new facilities and in public safety The roundtree and Blaine Street and sobering center are all designed to reduce recidivism and transition offenders back into our community in a Positive way, so it's a good thing that despite being very fiscally conservative Tripling our reserves controlling our pension costs reducing the number of county employees You have been able to augment county services. So it's a significant achievement. I Will say though that there remain as you will hear during these budget hearings that they're still critical unmet needs that the community faces and That we in fact heard from the community during our strategic planning public input process There's a significant needs and behavioral health and substance use disorder There's still a great need out in the community and there's the community Members have asked us to do more in this area There's also Significant needs both in capital and in operating in our parks and recreation services. We have some significant Capital projects that are underfunded as well as our ongoing operation and recreation services And then as I mentioned, we still have unmet needs and our deferred maintenance for our facilities And now I'd like to get into the proposed budget as I mentioned, it's a balanced budget We have taken into account community feedback That we received in our strategic planning process and this budget includes a new Funding for homeless services. It includes a new housing planner Includes new services in mental health and behavioral health substance use disorder road maintenance and storm damage repair Going into our overall budget our budget is It's a very big budget. It's a huge responsibility three quarters two-thirds of a a billion dollar budget 77 777 million dollars 519 of that is the general fund and as I mentioned we have 24 70 Positions and again, we're still below the 20 over 2700 employees. We had before the Great Recession the budget this are the Assumptions on our major tax revenues. You can see that property tax continues to grow We're projecting about a 4% increase The cannabis business tax has some growth which is very uncertain and you'll be hearing a presentation Later on today about cannabis and they'll get into detail about the cannabis revenues Sales tax is less than 1% So sales tax has stagnated Hard to understand exactly what's going on there But it's not just us it's statewide sales taxes is somewhat declining Somewhat people believe that it may be some of the online sales that are taking place But anyway sales tax is now not really growing at all TOT transmit the hotel tax transient occupancy tax continues to sing strong see strong growth to 7% these are our trends in property tax and And It's important to note that a property tax is the most important by far revenue source for our general fund It represents 20% of our total general fund But if our general County revenues, it's seven over 70% so we're very reliant on the property tax and our general fund and Also, that explains why we were hit so hard during the Great Recession when property tax decreased sales tax as you can see is stagnated over time and however, we continue to see strong growth in hotel tax part of this is due to the agreements that we've made with Airbnb and to the inclusion of vacation rentals and To be start paying the taxes and also the auditing that the auditor controllers office has done as well I'd like to now get into some more specific Overviews This is the proposed budget revenues by budget category and you can see that health and human services continue to be the major Source of our budget. These are intergovernmental revenues state and federal funds And you can see that our general Purpose revenues are about 20% of the overall budget This is the overall budget by source. You can see intergovernmental revenues are 43% Therefore we continue to be very reliant on federal and state funding and so any changes at the federal level will have great impact on us You can also see that our charges for services our fees and our tax revenue general-purpose taxes are almost equivalent At about a quarter of the budget each This is Expenditures by category and you can see again that health and human services are major 40% of our budget including The land use and community services at a quarter and public safety at almost 20% This is expenditures by expenditure source. You can see that again our Main costs are salaries and benefits, which is to make sense. We mainly have people who Do the work and then we do contract with many local providers And that's why a third of our budget is contracted with services and supplies This is our general fund, which is now 514 million dollars More than half of the general fund is health and human services Of the general fund expenditures 60% is health and human services and about a quarter is public safety You can see general government of the general fund expenditures is only 7% This is the net county cost or the proposed general fund contribution By supported by revenues that are not attributable to any specific use So if we were a city Which we kind of are this is what this would represent We're unusual again in this county that almost half of our population in the county lives in the unincorporated area and Counts on the county to provide municipal services So in a very real way, we are the biggest city in the county And we are one of the biggest cities in the whole region with saline We're almost the size of Salinas in terms of Doing municipal services now if you look at our budget in terms of what our net county cost 55% is to public safety and this would be typical for a city most cities General fund is about 60% Public safety and so we're right up there with about 55% and you can see general government again is pretty small And the health and human services, which is used to leverage federal and state funds is about 20% This is the general fund budget gap This is the general fund that is Supported by Fund balance and you can see that it's significantly been reduced over time from eight million dollars two years ago to six point three This year and we're protecting five point three next year This is a very low number So it's I don't think it's any cause of great concern. It's less than it's about a percent of our general fund Which is very small and this is the amount of budget that we're funding primarily with salary savings and budget reversions So that's why it's considered those are just by strict budgetary terms considered one-time funds But nevertheless, we've been good about reducing the amount and in overall. It's a relatively low number This is Our general fund as a whole this is our net County costs and Just shows the changes by budget category And you can see that when you look at the changes the major Dollars are in public safety and that's been this in net County costs if you look at net County costs The biggest growth has been in public safety with over eight million dollars of growth of increases And that's just to and that's normal. That's nothing atypical. That's what we're seeing in public safety all across other Jurisdictions and this also shows that we're using five point three million dollars of fund balance Which is again salary savings and budget reversions to help balance the budget This is our reserves history And I know that our auto controller treasure tax collector is going to go over this in more detail but you can see that this is something that We should be very proud of and that the board has set a goal and we've achieved it County staffing still below Again where we were before the Great Recession of over 2,700 employees and That is the growth that we've had since the recession has primarily been in that area of health and human services Which now represents almost half of our employees and the growth has been mainly in the Affordable Care Act and And drug Medi-Cal and other behavioral health services So in summary we have a budget that is good news We have a balance budget that we have not had to have any layoffs You've tripled reserves. You've increased your bond rating. You've held employee Pension and health benefit retiree health costs You've reduced them over time and you've also kept the number of employees below what we were before the Great Recession We will be adopting the strategic plan At your next meeting and then we will get right to work on developing a two-year operations plan Which is the very specific projects that will be carrying out the goals in the strategic plan And then we will be adopting our first two-year budget next fiscal year During this time period will continue to develop two initiatives continuous process improvement and also performance measurement and We also one major theme of this budget will be that they they're still even though we've augmented our services in key areas There's still some critical and met needs that this board is going to be challenged to figure out How do we meet those needs that the community is asking for that we very clearly were asked for during our strategic planning process That concludes my presentation and I'm now Either available for questions or going to turn over to the other controller And then you can ask us both questions. However, you'd like to proceed. Thank you, Mr. Possess will bring it over to Ms. Driscoll and then we'll open it up to the board for questions Good morning chair and members of the board eat at Driscoll auditor controller a treasure tax collector as we begin Our week of budget hearings as your controller I have a few brief remarks to make regarding the county's debt ratings and reserve balances I'll begin with debt ratings The county issues both short-term and long-term debt to meet its needs These two different types of debt are rated by standard and poor's and moody's and are given two different types of ratings Ratings from standard and poor's and moody's are important to the county The outcome of the ratings can save or cost the county money when in the form of higher or lower interest rates when we sell bonds I welcome these result reviews from a controller's point of view There are few opportunities for the county to receive an external review of its fiscal policies fiscal management and cash management The county currently has the highest short-term rating available Prior to the issuance of our recent trend the county finance team made presentations to these rating agencies the county once again received the top short-term rating available the county received sp1 plus from standard and poor's and MIG 1 from moody's that's positive news for us The county also maintains very strong long-term ratings when moody's reviewed our current rating in 2018 as the CAO mentioned it left it unchanged at AA3 For moody's that's the fourth step on its long-term rating Our long-term rating with standard and poor's is triple a that's the top step of their long-term ratings The triple a was updated in 2017 from a double a This reflects the highest rating S&P gives to both our short-term and long-term ratings Recently your board approved the issuance of this year's Trian Trian is our tax and revenue anticipation notes for a short-term financing We issued it in the amount of 45 million dollars I am pleased to report back that on June 13th. We sold these notes at a very favorable rate of 1.45% Standard and poor's provided a few comments with their rating that I want to call out to you They stated the rating reflects our view of the county's very strong economy liquidity and debt position and strong budgetary performance projected over the next few years Further strengthen strengthening the ratings is our view of the county's strong management and good fiscal policies In moody's ratings report. They provided similar comments, but also spoke to the county's challenges specifically calling out the county's rising pension costs Looking to our future costs the proposed budget includes fully funding the county's reserve target of 10% as the CAO mentioned Not only are we meeting our reserve goal, but we are meeting it early and I congratulate you This reflects your board's dedication to invest in the future through sound fiscal management I urge you to continue this practice of maintaining spending constraint throughout these budget hearings Thank you, and this concludes my remarks Thank you, Ms. Driscoll. Are there questions or comments from board members Supervisor McPherson? I'd like to just recognize that the The county would congratulate our our staff throughout the county for Getting together and some long-term Agreements that we have it gives us stability and predictability of what's in the future, and it really helps our budgeting process so I want to thank the 2,470 employees of county government for coming together and coming to an agreement on that and for the management and what it did to bring that together and to Applaud to the county administrative officer for this presentation this proposed budget It's it's very understandable, and I think it lets people know just exactly where we're at and where where we're going to be going and I think that we should be recognized that this is a mouthful, but the government finance officers Association of the United States and Canada Gave us a distinguished budget presentation award That's not doesn't come to all county governments, and so the way this is presented and What the position we're in today compared to four or five years ago is to be applauded by everybody and I especially want to thank the employees for Seeing what what was ahead of us at that time To reach this 10% reserve. I think what three years ahead of time is really really Very very good news Also that we we still have challenges though as you you said As good as this is we know that there's long-term challenges in our public safety A budgeting process, but especially for health care and human services and the homeless issue that we're we're facing As well as every other of the 57 counties in the state We have some real Uncertainties in the federal government and what it's going to do and that's good I could have an impact on how we get through this fiscal year, but that aside I think we're in good position with our reserve and the way we've been managing things through the years the I Was really pleased to see in the the state budget that it appears that The state is going to allocate or we or release some Some funds again for unfunded mandates, which is a member of the California State Association of Counties We've been really working on that for the state unfunded mandates for that jargon is through the years What the state has told us what the counties when locals governments what to do They didn't give you the money to carry out the programs now They're seeing the light and they gave us some of that what three years ago They have released that in the budget. I think that the governor will sign now so that is very good news and I I think that's going to help us a lot. I also want to Really address one one project the solar projects and Really Carol Johnson who has done so much in leading this and a supervisor Ryan Coonerty and the whole board too About what we have done to offset the utility use by the county governed by cut it in half And that's going to have long-term positive budget impact force and our Association with the Monterey Bay area community power is going to be another big plus for so in that that area, especially For Energy use reducing our energy and environmental protection in general I want to congratulate everybody who's been a real big part of that that's been a fantastic thing that we're doing and Really, we're a leader in the state in Letting other counties know how this can get done so Those are a couple of the comments that I really wanted to make We have a tremendous Health and human services behavioral health challenge ahead of us the homeless issue is it's everywhere in the state and it's everywhere in this nation and We have to just do what we can do with the cooperation of the state and federal government and our Are all our other local jurisdictions the four cities in Santa Cruz County, but by and large I just want to say thank you to the employees of Santa Cruz County for getting us to where we are and to be in getting us in the right direction of where we're Going to be in the future. It's really good news compared to four or five years ago Thank you. Surveys are first and Surveys are cap it I want to turn on your it looks like I want to thank you and That we're heading in the right direction I Don't have it in front of me, but the Okay, the reduced pension obligations part of that is due because We're all contributing more towards our pension as percentage wise than we did what about Six or seven years ago. What percentage difference is that just a ballpark figure? Well the missile a miscellaneous employees now contribute seven percent Towards their retirement and public safety. I believe it's 12 12 Across the board as far as I'm concerned. What percent is that? possibly Well, seven percent you would be in miscellaneous category and it would be seven percent that you're contributing towards your retirement Seven percent would be the miscellaneous group. So that would be The group that the board is in as well as all miscellaneous compared to what Six years ago seven years Three and a half percent. I think we doubled it. Okay That's good. And then I Read a lot of us read that the pension obligations are in trouble some of that is because of peres and the way that maybe they Invest the money that they put in 7% growth is supposed to be somewhat sustainable or seven and a half and So we're tied in with that also, right? That is correct. They had reduced their Investment or earnings projections from seven and a half was actually seven point seven five a few years ago And then they reduced it to seven point five and now it's at seven percent And so that reduced earning projections has resulted in our costs going up Luckily the board did a couple things one is that we Both as I mentioned in my presentation Renegotiated with our labor partners the retiree health benefit Formulas as well as we implemented a second tier of retirement benefit formulas as well Prior to the implementation of the state reforms. So that has reduced our long-term liabilities significantly Does it look like we're gonna have to contribute more Maybe a percent or two percent more as far as our contribution to the pension obligations Well, the the county's Proportion will be going up for the net over the next Seven years it will be increasing and so the county will be contributing more that's based on Estimates that peres has given us We are Have not done have not anticipated anything yet with regard to labor negotiations and changing the formula that we have now But when you say changing the formula we're talking about percentages percentage of how much employees contribute Right, so you don't see that going up or do we do see it going up a little Well, that's going to be part of negotiations in the future That we would we would then address it if it right now we don't anticipate that but it's that's always possible in the future But right now we don't anticipate that What I'm getting at is a future obligation and sustainability somehow if Our generation is going to have to do something to make it better for the next generation coming behind this Tax revenues Are down a little bit but That is also We've raised Countywide that the tax rate has actually gone up the percentage of tax, right? Overall our tax revenues are increasing they continue to grow Overall like I think about 4% It's just in sales tax that they have sales taxes actually Stagnated but our property tax on transient occupancy tax others continue to grow it out at a healthy rate So overall the tax revenues are up. Just the sales tax is stagnated right as far as the sales tax though We've increased the sales tax, but yet the revenue is a little bit less than it was before about one percent, right? We haven't we have not increased our sales tax our sales tax rate in the county is 8.5 percent and it stayed the same So we have not other some of the cities around us have increased their sales tax, but we have not that sales tax Is that tied to the gas tax also? Is that different? It's not tied to it, but we do get sales tax on on gas Okay, okay, I want to thank you And I think we still have a lot of work to do to make sure that we Sustain our obligations in the future I don't want to be part of the group that makes it so hard on the future obligations that Somehow it collapses. Okay. I think we're all concerned with that Supervisor Leopold, thank you chair. Thank you both for their presentation I think you it is Great to hear that decisions we've made in the past have had great success here in in the present as Mr. Palacios reminded us we made Some difficult decisions in collaboration with with all who work here to change Some of our pension obligation in our retiree health that hundred and eighty million dollars That we have saved Helps us with our long-term Needs here in the county the ability of our staff to work harder with less with less resources is a real credit to their abilities and You know this budget that that we're going to be reviewing over the next couple days doesn't add lots of new people the fact that we have over less than the 250 and Employees less than we did at the start of the great recession. I don't see that coming back as part of county government We have to get used to it and just to give some sense that would be maybe a third of all the employees at the City of Santa Cruz and maybe I don't know half the employees at the city of Watsonville So that those are the real people Who did real work? here and Which we're asking our staff to shoulder a little bit heavier burden So I really appreciate the work that all of our our staff the county staff the county family is doing to help meet the needs of people in the community and I think that this fiscal report Which shows that because we've been able to triple the reserves reduce our pension obligations and and and hold the line on The growth of the organization To see these credit ratings come in strongly Which means we pay less money when we have to borrow money I think is very helpful for again for our long-term sustainability So I want to express my appreciation to the to the management and the staff of the county of Santa Cruz for the great work that they do Okay, Mr. Boss yes, okay, and in closing I just wanted to thank all of the county staff who worked on the budget It's a very significant Undertaking and this year we've also continued to modify the budget document which is trying to make it more user-friendly. It's been a significant change and So I want to thank all of the staff In each of the departments who work on the budget from the department adds on to the financial staff and other Program staff who have worked on the budget. I think they've done a great job And I in particular wanted to point out Christina Maori our budget manager for her leadership in this area as well as Nicole Coburn our assistant County Administrative Officer and Melody Serino our deputy City manager for their work on the budget as well as all the CAO staff Supervisor Cundey. Yeah, I just want to add my kudos and then a quick question Do we have a census to what our health care costs? our trending In addition to the pension cost everyone talks about but but how to health care costs look I haven't let you know Christina. I'm sorry. I'm not Aware of that the microphone They've been trending higher just like Perz We have built an escalator into the budget based on our averages So it ranges anywhere from three to four to five to six percent depending So we'll get that information regarding I know personnel is here today But we'll be getting those rates for the following year coming up on the next month or so. Okay Great. Thanks Since this was a presentation it's a non-action item. We still will open it up to the community There's nobody I'd like to address us briefly on just the general presentation here And if not, we will move into the consent agenda items Okay, see none. We will move on to the consent agenda. This is item 7 through 21 Is there anybody from the board that would like to either pull or comment on one of these items on consent? Supervisor McPherson, I'd just like to On the elections office Situation I know we're in need of some updates there I just want to get a general overall picture of What are our needs? I know there might be a bond and the state level and so forth for this purpose I know if gail our county clerk is here. She might just say what are our needs and if that's all right Just to skip to one of those Because I know it's been a pressing problem and it just didn't happen this year I can remember it was the problem 12 years ago Not for just this county, but throughout Hello gail Pellerin County clerk and There's some money in the state budget that help was approved that would be a shared Cost so the county we have a hundred thousand dollars in our budget that's before you today That would be for a lease purchase of a new voting system So we certainly hope that that would happen now that we got the state Monday It's not enough money in the state to cover the whole state of California, but it's a good start Well, how about your knee our counties needs is it? It'll get us Up to where we want to be or there's gonna be additional needs Well, I believe so we're gonna have a voter advisory committee that we want to set up for the public and do some Strategic planning for what kind of vote system we want to go move toward that would include either moving toward a vote center model in 2020 or keeping our polling place model and if we do go vote center I mean wouldn't matter what we're gonna need to purchase a new voting system or lease one is what we're looking at doing and of Course voting systems continue to get certified and approved and you know, we have to see what's out there so we hope to do our research this summer working with the public and do some Demonstrations and that get their feedback and then hopefully hopefully enter into a purchase or at least purchase with the company Okay, well, thank you for another safe and accurate Not over until it's over, but no, that's very much recognized and appreciated People feel comfortable that who's in office or what pastor failed is the way that people want it So definitely takes an army and we're very appreciative of our county family that helped us out on election day And all the extra help and full-time staff that we have is tremendous work. Thank you Thank you. Are there any other? Resurrect your cap it miss power and I wouldn't quite leave yet because I think he's interested in how many extra votes you're counting right now Please mr. Caput As far as the staffing of the polling places and all that I was reading It was difficult to get enough people. I guess did we finally get enough people did it County wide? We did and again, thanks to our county family because I had a call on a number of departments to provide us with staff to help us on election day and It it did work out as well We did have a lot of cancellations at the last minute June elections are always hard to staff because of that And we had illnesses and people who were in the hospital at the last minute So we had a few little crises, but we did manage to pull it off Thanks to our amazing poll workers in the community and our County family Years ago. I did work at the polling place Probably about 15 years ago, and it was a wonderful experience I just wanted to make that clear to people out there that you know, it's a great thing to do Yeah, we definitely appreciate the community service And I think if we move to a vote center model where we have Everybody gets a ballot by mail and then we set up these vote centers ten days prior to the election And we increased the number for the four days prior to the election We would staff those with more extra help fully trained staff who would be out in those polling sites It would be a little more consistent versus what we're doing now because we're recruiting people up until 6 a.m. Election morning, so Thank You chair You know when we changed our budget hearing process to go through so many Budgets on consent that we missed the opportunity to hear from each of the departments I appreciate that that everyone was able to answer many questions that our office had About aspects of the budget There's a lot of incredible work that gets that gets approved Here with just a simple vote and it doesn't reflect the hours of work that you put into Preparing your budget documents and of course the hours of work that you do Performing all these tasks. There are a couple of departments that I just wanted to Just say a little bit extra about the CAO's office has been Has been very helpful on a number of different pieces, but I just want to point out that Ms. Coburn and Has been very involved in the the justice and gender task force, which has been very very helpful along with mr. Stafford And I really appreciate their work and there will be a presentation to our board in December about that work But we're making some good progress there The Office of Economic Development has been very helpful in working with businesses in my district And they've been very good about communicating with me about different issues And I really appreciate that and their ongoing advocacy for especially for small business here in Santa Cruz County Council's office. We depend on them so thoroughly For their expertise You know when someone doesn't agree with us they always said well, you don't have to listen to your lawyer But I've found that when we actually listen that we actually It actually serves us well, and I appreciate the work that you and your staff do all the time our information services department is Is a Incredibly critical part of county Government it's the way in which most people interact with the county these days is they go to our websites And they use our apps and everything else. I just want to appreciate Them and even those days where I yell at my computer because it's taking too long To access the internet I won't take your name in vain But but I just appreciate the work to keep that system going and making sure that we're not attacked every day by by different viruses The general services department has been as was mentioned earlier in Doing all the solar panels on the county facilities. That was a huge undertaking this year I also want to recognize that they've added to our electric car charging Network, which I think is very important as we try to reduce our greenhouse gas emissions and ensure that we have The infrastructure to be able to support people who are helping make those changes Lastly the personnel department Was very helpful to this board last year in the selection of our new CAO And continues to be very helpful In providing expertise and help and help with other recruitments that are going on that the other responsibilities of County government, but don't actually fall in the county family. So thank you Ajita for your help and With some of those other recruitments as well. Your experience is greatly appreciated with that Surveys McPherson you had another comment today. Yeah, I'm Wanted about economic development, and I know mr. Constable could answer this but we had sales tax Levelling out I guess you'd call it as is in the state. We have plenty of projects going on here. Do you have Any estimate of if some of these things come out on or how many jobs might be added in this county I Doubt that you could say well, this would have an impact on sales tax revenue But just we're at where you're being very active and proactive, and I appreciate that and throughout the county Appreciate that we don't actually have hard numbers as yet until we get the projects I think closer to the finish line. We won't be able to really make a accurate Number count as far as the job generation and and also sales tax and just to kind of address one thing the sales tax decline I think is as Carlos mentioned a Indication of two things one It's the ever-changing kind of persnicketing angel of the consumer Which has gone directly towards online sales as an alternative and the other is there is a wholesale change That's occurring within the retail industry that is kind of fleshing out What not only the consumer wants but also what is sustainable in a longer-term basis because a lot of the retailers have gone through a Major expansions and now they're looking at hey is this really serving our customers? It's not so they're pulling back Thank you. Thanks for getting persnickety into the budget discussion two points Supervisor Coonerty Jeff something to add on this I'll just briefly add a few things on Personnel I just wanted to thank your work on the employee wellness program I know it's also done in conjunction with health But it's something that supervisor Leopold and I brought forward a couple years ago, and I think it really does bring a lot For the employees, so I appreciate that as well as the leadership and training academies that you've been doing We've received a lot of feedback that employees are appreciating that and the degree that those can be expanded They are very little cost but offer a lot to maintain that the high-quality employees that we have as it as was noted by Mr. Plosios we may not be necessarily hiring more people But the one thing we definitely want to do is retain our top talent and anything that we can do to ensure that people Can stay here and we recognize it's one of the highest costs of living in the United States And it's not the only reason why people are here is the pay But there are other things that we can do for them on the training side and the employee wellness side to ensure That they're here, and so please do continue that work in any way that it can be expanded. We appreciate In regards to information technology We receive a lot of positive feedback on the mobile app and we appreciate the work of your staff on that Obviously anything we can do is a entire county family to ensure that we're as responsive as possible Department by department to those requests that come through the app would be great In any way that it can be expanded to even more online services as the world moves That is definitely the way that people would like to be able to Interact with our government as Supervisor Leopold did note one thing I don't think people really do realize is that all government sites and services are constantly under a barrage and attack from an Information technology and security standpoint and our small but mighty team there Has done an amazing job keeping those sites up and I blame that neutrality not them and the slowness of the websites At least effective last Monday, but I but I appreciate The work that your entire team does as we sit here in the shadow of the Silicon Valley And we know that it's tough to retain town, especially within your field. You really have put together a great collection of people Translating that over also to County Council You have put together an outstanding team It's difficult to recruit mid-level people especially in this world with these kinds of costs But you have people that I think are committed not just to the law But to the community in a way that's very unique And I think that that's a great reflection of your management leadership style in that department. So I appreciate Your work on that Would now open it up to all of you if any of you would like either like to pull an item or come up to speak about any of These departments now would be your opportunity Morning welcome. Thank you for waiting Good morning. My name is Olivia Martinez. I'm the SCIU staff representative for the County I want to thank you for mentioning labor as part of the to help the county with budgets I really appreciate that acknowledgement My only concern and something that I'm asking the board and the CEO is to consider hiring more facility maintenance workers Either limited term or permanent There's currently 10 for 64 buildings that they have to maintain I just found that found about that two weeks ago So I thought it was important for you guys to know that they're very short-stop But besides that I enjoy working with personnel in all the departments. Thank you Thank you. Is anybody else like to address this on any of these items? Okay, see none. We'll bring it back to the board for action on the consent agenda move the recommended action So I can have a motion from Supervisor Coonerty a second from Supervisor Caput all those in favor. I Opposed it passes unanimously. Thank you all for your amazing work on this We'll move on to oral communications This is an opportunity for members of the community to address this and items that are not on today's agenda We're within the purview of the board of supervisors anybody like to address us on this on anything Okay, see none. We will open up the regular agenda We have item 22 which is to consider the 2018-19 proposed budget for the cannabis licensing office including any supplemental budget materials Is provided in the reference budget documents? We have The proposed budget the line item detail the supplemental budget the supplemental budget schedules a a 1 a 2 a 3 the supplemental the unified fee schedule supplemental budget and The errata as well we have a presentation. I appreciate you guys waiting. Good morning and welcome. Good morning We're gonna tag team you this morning I'm melody serino deputy county administrative officer and of course Robin bolster grant our cannabis licensing manager And we're gonna present our budget briefly and of course answer any questions that you may have So first I want to just give you a quick review of the current fiscal year As you can see while we've saved money in our expenses primarily due to staff vacancies We did not meet our fee revenue projections and general fund dollars will be needed to fill this gap When the 2017 18 budget was made three assumptions were made in building that budget That there would be a registration process for manufacturers similar to the one that we did for cultivators That we would be issuing licenses for cultivators and manufacturers by March of this year and that Approximately 10% of the licensees would require more than one inspection So the revenues were not realized because it was determined that the registration process for the manufacturers would interfere with the then-in-process Environmental impact study by changing the baseline data. So we did not go forward with that process In addition the licensing process as you know Was not approved until May and we just started opening the licensing process about a week ago So the collection of any potential licensing revenues that we had projected for earlier did not were not realized and However, we did want to say that the some of the licensing revenue was replaced by Pre-inspections Pre-licensing inspections that we did so we did we were able to support some of that additional revenue So we highlighted our goals and accomplishments from this last fiscal year in our cover letter And we will present them briefly again here for the public It has been a busy and I think productive year for our office One important goal was to complete the pre-license inspections that Melody mentioned for all the non Anonymous registered cultivators As you can see we went out to nearly a hundred sites around the county Performing these inspections and these really gave us a sense of what the cultivation process looked like on the ground And the inspections and our subsequent feedback also helped prepare these cultivators for what the licensing process would look like in many cases This was their introduction to regulation So that was important The inspections also helped to inform the EIR Which was completed While it was not formally certified the EIR did give us a framework for the licensing and permitting process and was Incorporated into the ordinance adopted by your board on May 8th We also successfully licensed all 12 of our dispensaries and completed the renewal and inspection process With the passage of the ordinance the main focus of our work going forward shifts to implementation and enforcement Once the non-retail commercial cannabis ordinances became effective We began soliciting pre-application appointments to begin the actual licensing and permitting process We created a module in the Hansen software platform used by the planning department for tracking and reporting all cannabis activities Hansen allows us to link licenses permits and enforcement action and the information is also accessible through our GIS mapping system In keeping with the goals of the community of community outreach and education We have conducted eight workshops to align the regulatory environment with our community goals and values in addition to helping the industry Develop best practices. We have honored our commitment to the community regarding enforcement Responding to more than 35 complaints over the past year We also wanted to give you just a quick update on cannabis business taxes Though these funds of course go directly to the general fund and support a variety of community needs We want you to be aware of their contribution So we started collecting taxes in 1415 from the dispensaries and that year brought in about 978 thousand dollars in 1516 that number increased to about 2.5 million and it's pretty much held steady at about that for the last few years in 2016-17 we also began to collect taxes from the non-retail cannabis business And so we've so far this year received about a total of about two point eight million Dollars from the cannabis business taxes. We've projected a larger percent 4.4 million for the upcoming fiscal year and we believe that that represents a full licensing process As you can see most of the growth is going to come from the non-retail sector So this is our budget overview For this fiscal year So you can see that our budget has doubled And while we will not increase the staff in the cannabis licensing office This increase includes funding for six new positions across three other departments Planning the sheriff's office and the district attorney's office the purchase of additional vehicles and other sorts of equipment Is also included the six new positions are intended primarily to beef up our enforcement capabilities And then of course to prepare for the development side of the cannabis licensing process That the planning department will have to have will have to handle Several one-time expenses such as infrastructure setup costs are also included in this budget Revenue assumptions are based on a new fee structure, which is primarily at cost fees for most licensing activities We will maintain flat fees for the dispensary renewal licenses and the pre-application appointments and the revenue assumptions anticipate about 225 licenses being issued in the new fiscal year So the work of the cannabis licensing office in the upcoming fiscal year will be primarily focused on licensing and enforcement efforts This will inevitably include a substantial amount of outreach and educational efforts Both for the industry and the general public within the next few months We expect to conduct six to eight outreach events to assist with folks Their understanding of our licensing program and the steps that are required to obtain a license We have already begun our licensing appointments with some of those in the industry who completed the pre inspections of pre licensing inspections We've also been working closely with the sheriff's office to prepare for enhanced enforcement efforts We've obtained space here at 701 Ocean and the sheriff anticipates safe that staff will be on board by August 1st Cannabis licensing and sheriff staff will be in constant communication to assist in transition for our registrants and to help eliminate unlicensed activity as Requested by the board at an earlier meeting We are to return annually at budget hearings with a detailed annual report Including data on a variety of performance measures regarding licensing Enforcement and compliance issues the cannabis licensing staff has demonstrated their commitment professionalism and Their ability to respond to community needs and concerns this year We have no doubt they will continue to perform at exceptional levels in the upcoming year And we would like to acknowledge their hard work and dedication and thank them for a job. Well done That concludes our presentation We're happy to answer any questions and we request that you approve the proposed budget for the cannabis licensing office Including any supplemental materials as recommended by the county administrative officer. Thank you for the presentation Supervisor Coonerty. Yeah, thank you for your work It's been I know you're sort of charting new new ground and doing it was both Both well and strategically has been appreciated. Can you give me a sense as to what you're seeing in our local market? We're seeing reports around the state and other states of a glut which is causing prices to fall and That on one hand could Reduce the number of potential grows and on the other hand it could also reduce the amount of tax we collect If the prices fall, so what are you seeing locally in this regard? What do you expect? That's that trend Definitely has been something we've been hearing about from all sectors of the industry that there is a Lot more cannabis than is being consumed. That's been true. I think Data has shown for quite some time But with the drop in in the cost That's shifting things that but there's also there are numerous shifts as folks Sort of get their arms around The regulations that are being imposed on them. I'm not sure that we can Tell where the industry is going to end up. I think that we're seeing a growth in manufacturing And to some extent I guess distribution although a lot of this is transitional So I it's hard to say where it's going to end up But certainly the price of cannabis has gone down statewide and in other states where it's been legalized So we anticipate that there might be some stagnation With Cultivation but again possibly making up for that in terms of manufacturing. We have some Interesting folks making some interesting. Yeah, so I guess the follow-up question that is Presumably if the price falls that reduces the black market Production because it's just not worth as much anymore And do are we seeing? Less growth less complaints less calls fewer complaints than I anticipated for sure and Anecdotally and this comes from folks who sell Hydroponic gear and such that they have seen a drop-off in in purchases of equipment Particularly in some of the outlying areas some of the the mountain areas So this could reflect a shift of folks coming out of the mountains, which is something we've been talking about for a long time into CA land in South County, and so maybe it's again sort of a Settling out Not everybody is going to want to stick around If the price continues to fall it won't it won't be worth it for everyone And then this team and this is probably not for you to answer But I mean that team we're setting up to do enforcement Presumably can be some occasionally people just don't grow and go away occasionally people shift to other drugs that are even more dangerous and destructive and whether this team will be able to be deployed Against meth houses and other other sorts of impactful activity So I can answer that the sheriff's office the team Frank Gambos's team that has Been kind of the drug enforcement team is not going away We're simply supplementing these additional two deputies to work specifically for Cannabis activities, but the sheriff's other team that works on drug enforcement activities will continue to operate Okay Thank you. Suvarsha Leopold. Thank you chair. Thank you for the presentation You have both a really interesting job and a very difficult one because trying to forecast what the future hold has proven to be somewhat elusive Not too bad planning on an art part or lack of effort. It's just that this is a very fast evolving industry and trying to keep up with it is I Can imagine could be challenging. I have in the conversations. I've had with people in the industry they've appreciated the cannabis licensing office the The support that they've got and the ability to answer questions the sort of straightforward nature of what they hear Which I think is very helpful and establishes a trust necessary to get people to come in and become legal in your presentation you The second the last slide you Pointed out to a hundred and fifty cultivation licenses and seventy-five Maneu or distribute or manufacturing licenses Given that we had 750 registrants What is it, you know, that's that there's a big difference there so What might people expect and what would should we expect to hear in the next year about that So the reason that we picked those numbers is that because this is the transition year Where people have to really get used to what it means and all of the forms They're gonna have to file and all of the pieces of paper. They're gonna have to do and we really were trying to Base our budget on a small number a fraction of people getting through the entire process We anticipate in future years that that will you know speed up But this first year we we figured there's going to be a lot of outreach and education And so we wanted to make sure that the budget projections were somewhat as best as best could be you know assumed in in a the world of reality and We recently had sort of our first deadline of people coming into file paperwork Was either last Friday the Friday before when the ordinance went into effect and so out of those 750 Has that number shrunk? I mean it did it did shrink a little about a hundred people did who were an anonymous Did not manage to meet the deadline a number I would say about 10% of those people formally withdrew From the process either because they've decided to do something else or move out of the county And so we but we had about a hundred people who did not Managed to transition from anonymous to non-anonymous. So that's 600. So there's still about six hundred and fifty registrants that are out there. Yes, and And So they're gonna I would imagine that a bunch of them are gonna all come in at the same time Trying to get their licensure Right with the state or local one, you know, how does They would like to sure there's still again that the theme of transition Many of the registrants are on properties that don't comply with so they will need some time to Collocate and we're seeing a lot of interest in the co-location So so folks are to some degree still on the move The regulations are daunting for a lot of folks and again given that the these folks have not had to go through anything like this For the most part It's not I don't see a huge You know wave of folks It I think it's a trickle that will start to pick up as As information gets disseminated and they get better prepared for what this looks like Yeah, well, I'll be curious is how this all works out There's a book to be written about the our Cannabis experience in terms of the additional items on the budget I support the inclusion of these new pieces I think it's important to have a robust Enforcement process for everyone involved and for the environment and for neighborhoods and for those who are seeking licensure all those reason that makes sense the But with new staff coming on August 1st What's gonna be or are we gonna try to signal to people that that? Wow, it's been relatively quiet so far that we are gonna be Upping that enforcement. I think it's I think it's to our benefit to let people know that it's happening because We want them to go away on their own But but it shouldn't it shouldn't be a surprise that we're doing it. I agree and do you have a? Strategy for outreach to let people know that this is coming. Yes, so First off, they'll be the next phase of the process for all the people who made it to the non anonymous Will be for them to inform us where they're currently cultivating so that we Can make sure that when we get complaints we can check it against our database and say okay This is somebody who's a registrant. They're currently cultivating. We're not you know We'll respond to the complaint, but we're not going to do an enforcement activity against them And then of course as Robin mentioned in the next month We're going to be doing several outreach workshops where we will be informing people and of course we'll work with all the Groups that we have been working with green trade, especially Who's really good about getting the work word out about these kinds of things great? Well, I just encourage that outreach to happen. I think it has proven to be very successful over time on this issue In terms of these items and the unified fee schedule You know This is going to be the first year in which we're going to do renewals for dispensaries No, actually we renewed them in 2000 for 2018 okay, so So the but we're raising the fees for renewals with no changes and I'm trying to I'm trying to get a sense of what that a Renewal with no no changes does that mean not a change in ownership? That's correct So no change in ownership no change in anything that they're doing with their businesses Absolutely nothing changed Product selection I wouldn't fall into that category or would it it would not okay and then This question about or this fee For local authorization letters of eight hundred dollars could you say a little bit more about what that is and why it's Why that cost that so the local authorization letters came about after January 1st and when the state enacted their licensing program a Lot of our businesses were in a precarious position where they could not sell their product without having a license We obviously didn't have a licensing program for the first six months So the local authorization letters were simply a statement of facts that we could give to folks They could then turn that into the state and get a temporary license But we didn't want to give those letters out without at least having a health and safety inspection of the facilities that we were giving this Sort of authorization So we have given out I think given out provided 10 or so letters that allowed existing businesses to to stay in business and keep functioning and sell their product Well, I think that's I think that's helpful and At least for people in the industry that I've talked to have appreciated. They've been able to get the letters I haven't talked to anybody about knowing this now. It's gonna cost eight hundred dollars before it was didn't cost anything No, no, it's it's been eight hundred dollars. Oh, it's been it. Yes. Yes, and that change one less call. I'll receive Anyway, thank you for the ongoing work. I'm sure this will be a big year and trying to Forecast what the future looks like here in Santa Cruz County And What kind of taxes we might expect and what kind of enforcement we're gonna see So I wish you good luck in the coming year. Thank you Any other questions supervisor Caput? Yeah, I quickly want to thank you for the work you're putting in this and also that the You know the revenue that it's gonna bring in is important, of course, but the Actual enforcement is gonna be a key to what I consider very important and that's protecting our environment It's an interesting fact that a lot of people including myself before I considered like the rain forest Being the biggest and most important ecosystem in the world But actually we're living in part of it right here bigger than the Amazon and bigger than the rain forest is the Small area where redwood Trees grow and that's part of California in the southern part of Oregon They actually clean the air take out carbon and you know produce more oxygen and whatever Than anywhere else in the world and that's we're stewards of that we have to protect that and The way it was going before I've seen the destruction and I think all of us have in our areas That was totally unacceptable and that's gonna be a key part of this I'm hoping that that is a major improvement on thing on way things were going when cannabis marijuana was Illegal so and technically it is illegal federally, but statewide you know So thank you, and I just want you to know my biggest concern is using that money to protect our environment. Thank you To advise McPherson I a couple of things and they're related to the state as well one is On those products for medical assistance the state had to approve that and it's my understanding They did not do that this legislative session to give them a tax exemption in essence Did you? That way that's the way I've heard from sales tax medical Sales to medical patients are currently exempt from sales tax. I believe there's another bill pending that may Open up by compassionate use license that is broader than that. I'm not sure the status of that bill Yeah, okay, and then on taxes in general The state was going to try to lower or was there was a bill to lower that from 15 I think to 11 and that didn't happen some other states have lowered their tax structure Is there any? Impact any feedback from those states? I think Washington and Colorado in particular maybe a white Oregon too But that when they did that it Resulted in that much less revenue or did they say did more people get in the program or is there was there any impact on that? To date it's pretty recent. I know but I'm not sure that there's data If there is I'm not aware of the actual impact of lowering taxes in terms of Revenue in terms of how many folks You know stayed in or got into the licensed universe. I'm just not sure at this point. Thank you Well now open it up to the community. Is there anybody would like to address us on this budget item? See none will bring it back to the board for consideration I would move their recommended actions for the cannabis licensing office We have a motion from Supervisor Leopold a second from Supervisor Coonerty all those in favor. I Opposed it passes unanimously. Thank you both for that The board will recess until seven o'clock We have a zone of zone seven board of directors meeting in Watsonville at the Watsonville City Council chambers Then we will continue to a 730 item for continued budget hearings at the Watsonville City Council chambers. See you tonight