 We are now live on YouTube All right, and I do see John as an attendee. So let's go ahead and pull him on over Hey John. Hey Chris. Hey Tom. Hey John Long time no see All right, well I do recognize the quorum let's go ahead and call the roll just to establish that Chair Rogers here member Schwedhelm here member Sawyer here Let the order reflect that all sub subcommittee members are present All right, let's start with public comments for non agenda items If you have a comment that's within this committee's purview hit the raise hand feature on your zoom and Confirming that I don't see any Go to our approval for minutes. We have special meeting minutes from April 28th John or Tom. Did either of you have any changes to the minutes? No changes John did a wonderful job sharing that meeting Thanks Tom Go ahead go to public comment to see if there's any changes on the minutes And I don't see any there either. So I'll bring it back without objection. We'll show those minutes adopted as presented Let's move on to item 4.1 Allen if you want to take it away Chair, thank you chair Rogers and members of the committee I'll Saw a little bit as we're getting the presentation up. This is our only agenda item that we have today Really, this is a kind of a pretty mood to our Meeting at the end of October which will be the mid-year fiscal performance mid-year budget performance for the the general fund and That will Take up a good amount of our time but for today What I wanted to do was to to go over kind of an overview of The budget process kind of what you know what we're doing now Where we are going forward in that in the budget cycle And As I'm drawing this out Victoria that the thing still isn't up. I think they're having yet. We're trying to get it up I'm not sure just one second. Yeah, no problem. I can I can ban as long as you need so anyway, we You know it kind of gets into a little bit of What goes into what you finally see in May when we come to the study session and all that just thought we would kind of Pull the curtain back and and let you see what what goes on there at a high level and then Then there's a couple of things on the horizon that that we want to bring to the committee's Attention again just a a high level thing But as we look out a number of years we start seeing things that that made pull us from having a balanced budget So we just want to start illuminating those as quickly as possible. So on with the first slide So what I'm calling here internal budget development. So The basic things that we do is We we have a base budget we have what we call Additional needs those are all of those things that that are requested by department outside of the the regular normal business operations, so whether that's positions or a New contract service or capital equipment or whatever it may be That's what goes into the budget that you see in there and Normally the way we would work this is that come January We would go and have all of the we would let the departments know how we were doing from a budget standpoint And we would say we would give them guidelines So you need to have a flat budget or you could grow by X number percent and At that time we would request that all the additional needs would come in and we would get a whole slew of You know 20 million dollars worth of the additional needs that we of course couldn't afford to pay for So we go through a sifting process there So last year What we did was we we bumped the additional needs process up a little bit earlier Just so we would have more time to Go through the vetting process with The city manager who that was her first budget here and then this year we did something even more different in that we as we took notes as we went through our Budget reviews that we really needed more time to go through position requests to make sure that we that that one that that human resources had the Staff and time available to do any type of reclassifications or anything like that and then also time for us to be able to bet and and really drill down with the department on Just flat out new position request. So this year we began that process in September So those were due the early part of September. We just continue or we just finished our our initial round of Betting we That really just involves some high-level questions just to kind of make sure that we understood exactly what was being asked We compiled all of that put it into a large spreadsheet and and sent those to Maratisha and Jason and Dariel and and then And HR as well, so then we will get together in a few weeks and Take the first real step of going through those those positions to understand the basis behind the request You know if it makes sense and then what what we can afford to do and I'll pause for a second John Thanks mayor. Um, so Allen if there were Concerns that the council had about the Maybe light staffing in a particular department and they were hoping to bolster that a bit When would when would that conversation take place if the position requests are inside of the staff Responsibilities When would when would the council what's the earliest the council would be able to weigh in as far as trying to plan for the for a potential for some potential positions so I I would I would suspect it would it would still be in that May timeframe when we bring the full budget to the May study session. That's when the time when the council gets to have a deep dive into Each department we all give a presentation to the council what you know what we had asked for what our Challenges are going forward in the next year by that time we will have been able to Understand what's available in terms of funding to add ongoing position and What what works with where the priorities are in terms of council goals and Priorities of the city manager moving forward so and of course As has happened in the past we we Take the comments from the council and if there are changes that need to be made After the May buddy budget study session we include those in the budget Adoption in in June and call those out and go through that one Okay, so it stays internal until that point and I just you know, it will be you know In the sooner the council starts to understand the limitations, I guess of the of the budget And how their potential requests may Further complicate Available funds if they were to say they want X some increases in an X department and They those funds were not At least not articulated in a way that they were that they were readily readily available May would be the first time that they would be having a conversation Well, and let me let me qualify that that may is the first time you're going to see that that they didn't budget but remember that there is the we have a public hearing in February that deals with budget priorities and that's primarily made for The the public to weigh in on the budget we have our council goal setting You know, we have opportunities within that before the May for that message to come in and it's in and especially if those Items are are are towards the work plan that we're trying to move forward with You know, there is those opportunities to get that in the budget but in You know, one of the things that that we just felt that we needed to do was to allow more time for the departments to Put in these requests and to allow us to try to figure out how to get them to fit into the budget if they could do it or You know what we need to do going forward. Maybe it gets phased in over a multi-year plan however it is Okay, and there's a good chance that those internal requests could very well mirror the the Potential requests that the council's already I Well, I would assume maybe thinking about already, but they typically do. Yeah That's good, thanks Alan So we so then the other big thing that we do and and it's usually You know around this time, but mostly in November and December is we start developing all of our What we call our our internal cost. So We're we look at all of our existing employee we and we we Collect all of our salary and benefit information for that So that's going to be your health care all of your other benefits to go in and we develop basically what a cost per employee and and it really does get down to that level It's a it's very cumbersome In time-consuming and believe me we are trying to figure out a way to make it less cumbersome in time consuming but Have have yet to be able to find that But that is where we where we have all of our salary and benefit cost information We also develop our overhead rates. We develop our IT rates, which is actually done by the same consultant that does our overhead rate and Some of the same methodology is used and our fleet rates are Developed so so at that point you have all of the internal service funds have developed the rates that they need to do to Charge out to all the departments as part of the budget you have And then the overhead allocation that goes out to the non-general fund department so that they have all of that When it comes into So that's also part of the budget and they're all interlink Because you need to have all of the salary and benefit cost information to have your correct overhead rates and your correct IT rates because they're they're also personnel driven or at least it's harder that so all of that during that period leading into January is is one where We are actually probably From a finance department and some of the other departments are are most Actually even more so than than when we start bringing the budget together We also do revenue forecasting and like I mentioned earlier We have our guidelines that we put out to the department in order for them to know At what level they can build that base budget and then we have there are additional needs that are the non Personnel related those tend to not take as much time To that and so those come in at that at that point and then we go through a process With the city manager who is active in the review of the budgets and Department heads and staff go in and and present the budget to her and she asked questions And the rest of us will also ask questions that we try to get to where by the time you see the budget in its in its at least Draft form that it is as vetted and as something as Firm as that we can be able to stand behind it next like this So there I mentioned that earlier that there are some external input that because the business do have our public hearing that Allows the public to provide input for budget priorities While we do have a public hearing that's in February we do have a way for the public at any point to put in their input online to the budget Group and we do monitor that regularly There's the goal-setting process that happens in in February as well Where we you know a firm is existing goals that new ones we develop the work plants and and do that we talked a lot about the budget workshop in May and then we have the budget adoption in June and usually the budget adoption in June is different from the one in May and that it is more high level The departments aren't giving presentations there is the idea is that we're really focused on on any changes that have happened between May and June and Just kind of this is the reminder of everything that that's going into that adoption Next slide, please so we have General guidance that we that we provide or that we have and we're we're formulating in in finance And and some of this is stuff that has kind of evolved over the years except that that Veronica and I are We are There they're Things that we want to move forward with and I know our teacher does as well Our goal is to have a balanced budget revenues and expenditures and Transfers in and out all of those to be Equal especially in the general fund. This is something that we did in the last year. It's something that we wanted you moving forward Non-general fund department to me spent down the research General fund can't as well. It's something that we don't want to do And that's that's not as we're building a budget. We're building toward a balanced budget. There are some times where an enterprise Fund will need to to go into reserves for a particular reason as long as they Still stay within policy limits Then then that's that's fine and they typically have the way to pay for that In order to come in with a balanced budget one of the things that I that we need to do and what what we're working really hard In the finance department is to come up with realistic revenue estimates And expenditure Costs as well. So starting with the revenue estimates, you'll you'll note that that last year and mid-year we Upped our our general fund revenue estimates by about nine and a half million dollars This is because we looked at Where we were and again, it was coming out of a pandemic So our we had been holding our revenues flat because we didn't know what was going to happen but we realized that that our Revenues were just artificially low. So we needed to bump those up which we did and We are still in the process of closing our books but we came very close at least on a revenue standpoint very close to I Think what our what our estimates were so bumping those up work was a good thing and really what we're doing is is putting Again not getting Reckless with our revenue estimates, but being as as aggressive as we can be That allows for more but budget flexibility in the front end of the budget. I Think that's important because that allows more flexibility for council and the department to be able to program things instead of Coming in overly conservative and then at the end of the year We find that we have a huge surplus Well, we could have been spending that money early around in the process so we're trying to kind of flip the script to go into more of that realistic base budgeting and Hopefully it doesn't it doesn't buy this Going through but this is you know where we are we do work with we have sales tax consultants that we work with and and who they are inherently conservative And so we try to kind of find that buffer of what what is what we're really seeing locally and in Santa Rosa and We monitor Economic webinars constantly yesterday I was on the UCLA Anderson webinar talking about You know potential for recession and and all of that and so these are all things that we take into Consideration as we start coming up with forecast and developing our longer-term forecast And then on the expenditure size we're a little bit limited in our flexibility there due to the high percentage of of our expenditures being salary and benefit that said We do know that that while we budget a hundred percent of our salaries or of our positions of salaries there We know that we're not fully Those there we're not fully filled There are vacancies there are always they can see so we do put in what we call a vacancy credit It's a basically a turn back credit which is a negative amount that's in there what that does is it keeps us from overstating our our expenditure budget on the front end so so we're trying to have realistic revenue and we're trying to have realistic expenditures Even though we're we're budgeting for a hundred percent of positions We are backing off some of that because we know that that's not going to be our total cost So that again gives us a little bit more flexibility to be able to Quit for a program next slide please so Even though we have all of all of that we we do look into the future. So what I've done here I Said of a forecast I wanted to kind of keep things at a high level But it's some of the stuff that that we know in the back of our head Are things that we are going to have to deal with in the next say and I just picked ten years here And you know some of these things more than others keep me up at night, but We'll we'll go through them now so We know that in Our current labor agreements in June 30th of 2024 You know, I don't know what the impact of that is going to be on any of the funds it's going to have an impact to them though We know that we know that that In addition to normal cost of living increases that that we would Be looking at we're also doing a team or at least for the I believe just for the miscellaneous groups doing a Classification and and compensation study. So there's the potential for Even more than just cost of living increases there. So again, it's something that is out in the future We're not sure we'll probably start running some models on just what we think the impact might might be but these are That's in that you know, the reality of looking at the Bennett Valley golf course is The reality of it is that we There will be additional Funds that are going to need to come out of the general fund To help with with that fund again, this isn't a Reflection on the operations part of it There's a distinct difference between the two there's golf course operations which Touchstone is handling and they're doing that very well my staff meets with them and They're developing budget and capital needs requests and all of that going through That is working out very well In addition though This is a fun and out the fun There are costs that go to that fund that are outside of what is part of golf course operation That includes some remaining debt service from overhead costs some Personnel costs that get charged in there for staff that maybe parts Employees need to do on behalf of the golf course those types of things that They go in and plus we need to also maintain a reserve requirement. So That is why just looking at and this is before seeing The next budget that touchstone will give us You know, my estimation is and it may be a little bit conservative But I would I would guess that we probably have at least two or three more years of Providing some sort doesn't need to be the same amount as it is Obviously if revenues come in a lot better than what they're thinking and our expenditures are lower Then that's going to decrease the need for funds coming in from the general fund But I think that to think that there wouldn't be any funds coming in from the general fund right now I Don't see that as being realistic. So that's something that we need to plan for In 2026 and actually in 2024, but at least fully in 2026 all of our ARPA Expenditures need to be complete and for those things where we had ongoing programs that we shifted over to ARPA During this period they are going to come back into the general fund that could be You know anywhere from three and a half four million dollars. It kind of depends on what we are able to Get other funding for In other words, let's say if we were able to find Other federal grants for say in response that takes it away from the general fund Well, then that's just gonna that's going to ease the burden that will come to the general fund at that point But assuming that that they do come in we need to be able to plan for that going out in the future we know that and 2029 the agreement that we have with Sonoma County for The money that they give us for Rosalind Which is about six hundred and sixty five thousand dollars a year that will Expire so that those costs are are going to be more burdened on the general fund as opposed to Coming in from there and then finally in March of 3031 our what measure Q which was we if you recall we had two quarter cent general Sales taxes we combine them into one half cent sales tax And for a ten year measure and that will expire there. I have it down at about 20 million Actually, I think we've got about 23 million dollars This past year so anywhere from 20 to at that point maybe 20 25 million dollars worth of general fund revenue coming in potentially would expire So I'll pause there for a second. I think John may have had a question I do Thanks Alan two questions actually first of all on the Rosalind Figure there was an amount and this looks vaguely familiar that this county was going to be paying us in perpetuity And nothing that is that a different payment and then and you know how much that is because there was one that That effort and I negotiated that they were going to pay until until Rosalind was so fiscally strong that the county could start to reduce that But it wasn't perpetuity Okay. Well, um, I Have to go back and take a look at that and the only payment that I'm aware of that we get in from the county for Rosalind 665 And I'm so I think that You know, that's when I And it was my thought that it went away at this point if it lasts longer all the better And so we'll definitely look into that and And factor that in okay, I appreciate that it's not a goldmine, but I remember it was it felt like a bit of a coup And that we were able to get it You know forever and They actually I think the county actually came up with the idea when we were in the in those negotiations So I'll let you check that out. The other question is how how are you accounting for measure H? That is the public safety So that's right. Yeah, so that's going to be outside of the general fund. I'm just looking at general fund impact Okay, sorry. Yeah, no problem You know, obviously if that one fails Then you're looking at a bunch of costs that will probably need to go on because their programs The So we would have to be looking at we where we are going to If we had to absorb that into the general fund Because there's a lot of public safety positions there and the life but Fingers crossed that that passes and we don't have to deal with that and what I'm looking at here is that Thank you to Veronica who is Johnny on the spot as usual We do get five hundred thousand dollars annually in perpetuity however, this The that that's a different payment to 662 For preventive or for pavement maintenance that expires in 2029 that makes sense. I appreciate that. Thanks, Veronica and so Next slide so and then the other thing that I wanted to To just throw out there and just these are high level numbers but again, there's things that that we Are looking at and trying to be creative around to find ways of dealing with We do have some infrastructure needs out there. You're you'll We do have city facilities that need a lot of work at the hundred million dollars is Is an older number, but I think it gives you a good ballpark of about what we're looking at Um We have uh, there's we're still determining what the what the final project costs and how How much funding we have that can go into the total? Her community has projects So The amount that what we have that i'm showing here is a deficit Uh to get smaller or larger Uh at any point, this is just kind of a point in time looking at it and going yeah Well, we probably have About a 20 million Dollar thing here again. It's just things that we're trying to get in our minds as we're looking at at more of a global needs There is uh when Um The golf course consultant and I apologize. I'm forgetting their name Um, uh came up with their doing their initial assessment of the golf course And and what's needed? I think that there was about seven-ish million dollar Price tag is some of the things that would be needed to fix drainage and to do those types of things or irrigation um And then of course there's the there's the uh the existing Uh debt service so we would kind of roll all that in there So you're probably looking at about a 10-ish million dollar Amount there and then we have some infrastructure projects that we've been trying to get grant funding for for a long time and just are Are struggling to get that over the uh The finish line from that standpoint um So, you know, we need to start looking at well, what the plan be if we needed to To go and and to do something on either from a financing standpoint or from a facility district standpoint or Any other type of funding that comes into it that it would be able to help Obviously some of the challenge that we had I mentioned it at the study session the other day was was that You know asset of revenue streams Taking on additional debt service is a difficult thing to do because You know, we we uh, we don't have that much flexibility of where we are You know, um, but uh There these are things that we look at and and and try to utilize all of the tools that we have Uh available to us. Um I work closely with financial advisor Municipal advisor that we have that helps us with our bonds and to do that that's pfm that works with that We have an arrangement to them for them to help us with that and I think we have a meeting uh to walk through some of that with myself and the acms and uh marcia to just kind of what tools are out there in our toolbox beyond getting uh grant funding in or other types Things like that. So what what can we what can we realistically do? So then when we come back to you and I'm not sitting there in front of you saying well, we can't afford to do this and we can't afford to do that and So have a nice night, you know, we need we're trying to you know be creative and still understanding what we can afford to do but to leverage uh funding from outside sources as much as possible to be creative with financing And if that means setting up districts or doing things like that that we'll try to work through those those plans. So And with that that's the end of my my presentation kind of give you an overview like I said we have The fiscal year-end performance will happen October 27th, that's the one where we will have closed the books We will know You know, even though we we upped our revenue estimates I'm pretty sure we we have a surplus Um, you know with as many vacancies even if we hit the revenues right on the head Uh, we were going to have some term back coming in we have Uh, I looked at it today Just because sometimes I get nerdy like this, but I looked at it and out of our We have 1278 budgeted FTE and 1119 bills That's about 159 vacancies that we have citywide Which is significant and there are quite a few of them in the general fund So you know that that's going to come back again like I said earlier. We try to Uh, um account for that with the vacancy credit I think that where we are right now is that the amount of turnback that comes from that Seeds that So there'll be something we need to tie that down. We're online to uh, uh To go into Our field auditing work in october Um To our financial statements will go out to our auditor. I believe it's supposed to be by the end of this month So next week we'll go out there And that so we'll have all that tied up Veronica will put it into a nice Pretty bow of a presentation for you and we'll go through that and I'm sure there'll be a lot of questions there And then we we'll also talk a little bit more about our assumptions that we're looking at in terms of of forecasting With our revenues or general fund revenues, especially our major one So that's that's all I got. Sorry end of report Just making sure alan yeah, all right john tom do either of you have any additional questions for alan I don't have any questions. That's a comment. Thanks for keeping an eye on the balance budget I mean it's it's going to be tricky and and difficult and at times painful but it's the prudent is the prudent way to go whenever possible and Not with you know, not kind of notwithstanding the unexpected But I I like going into the process with it with that Firm desire to have a balanced budget because I I think that will that will serve the city well in the future So alan I do I do have a question with your estimates. We just established that 115 trust Will you be able to estimate if we will ever be able to actually Play some funds in there and if so, what would that look like? Yeah, so we actually did we we took So we had our initial investment of 10 million that is being slowly put in dollar cost averaging to try to Maintain as much principle in a volatile you know market our Existing pension obligation bonds Will retire I believe in 2024 may even be a little bit sooner than that if we're able to do it And then the the The payments that we would make on the general fund to that Service and in the water funds to that that their portion of that Are going to go into the trust so you're looking at you know a couple million dollars a year with zero impact to operational budgets of either water or general fund that that that go in so It's it's a really unique situation that we had that we were able to Put in a pretty sizable Initial payment and then to be able to have a regular payment that goes in that outside of Whatever we have at the end of the year What I think this allows you to do is that focus on like I said, we have all these facility needs Is to focus on those types of things to put those dollars into Taking true one-time dollars and putting them into one-time project is really a A good way to go and to be able to put to just have a continued constant stream of investment into the 115 and what that's going to do is As the market is volatile as our pension costs become volatile What that 115 is going to allow us to do is to mitigate the the spikes that might come from our UAL payment going up And so instead of going and having to reduce general fund budget Because our costs are going up We can mitigate those spikes by by taking money for the 115 And sending that that little bit extra over to purrs to maintain that cost So that way it's still our our what our overall payment is It's just part of it is coming from outside the general fund And so it allows general fund operations to keep moving with with relatively little to no impact based off of Whatever impacts are coming in from from purse Great. Thanks What one other thing just before before we move on that I do want to mention and it's part of What we're doing and we actually had our first meeting today Well, we're so I'll be meeting with with all of the labor groups and and to go over to to You know, basically establish a dialogue with them moving forward My hope is is that it's a regular and ongoing dialogue I want to be open of where we are And and to be able to explain things as much as possible. There's a lot of questions that come out about our finances and and Especially when our financial statements come out at the end of the year And they don't quite line up with what we were saying at the beginning of the year There are reasons for that and they're they're You know reasonable reasons that we want to be able to explain those as much as possible We met with the with uh unit two today We were supposed to meet with teachers today, but we had to Post phone that to a later date. Hopefully that'll happen next week or the week after but uh what I've Told to the one group today and what I'll tell all of them is that that the goal is to is is to absolutely before our Any major budget presentation to the council is that we're able to reach out to them and to Have the conversation so they know what what's coming but to actually have more Uh discussions even if they're informal and just the question and answer type of thing Uh, I think the meeting went well today. They there were a lot of questions And you know, honestly You know, we may on some points have to agree to disagree But at least, you know, we're open and transparent about how we are developing our estimates and Setting up a budget and what makes sense going forward and all of that so That that's something that um martisha and I have been talking about for a while and really to try to To you know be more open With the groups and uh, so we we started that process today Any other questions? Let's go to public comments then and see if anybody has comment on this item Go ahead hit the raise hand feature on the zoom All right. I'm not seeing anybody Alan, I just want to thank you for the presentation I think it helps tee things up very well for our next conversations and I do get A lot of questions from people in the public about how early do you start next year's budget and the answer is we already have Uh, it's it's good to have a little bit of insight for for folks on when department heads get involved Uh, what opportunities they have to to give their feedback and when council members are really going to start to make some of these decisions and So I just appreciate the the presentation. I look forward to the next one All right with that Uh, it's the only item that we had on our meeting today. So we'll go ahead and adjourn Tom and john. I'll see you guys on tuesday for our special council meeting won't see me but enjoy We'll see we'll see john See you. Thanks. Bye everybody