 Chair, do you happen to see a quorum? Yes. Thank you. All right, we'll see an a quorum. Chair, can you please call the roll? Chair Rogers. Present. Member Stapp. Present. Member McDonald. Here. Let the order reflect that all subcommittee members are present. Thank you. We will... Oh. Chair, would you like to do some housekeeping or should we go to public comment? I believe the chair items are for you, Mayor Rogers. Oh, I'm sorry. So housekeeping. That's okay. I'm like, wait a minute. All right, so subcommittee members need to keep their audio on mute unless they are speaking. Staff will remain unmuted until needing to speak. As members of the public join the meeting, you will be participating as an attendee. Your microphone and camera will be muted. Only today's panelists will be viewed during the meeting. If you are calling in from a telephone and choose to speak during the public, comments portion of today's agenda for privacy concerns, the host will be renaming your viewable phone number to resident and the last four digits of your phone number. Can you please explain how public comment will be heard at today's meeting? At each agenda item, the item is presented. The chair will ask for subcommittee members' comments and then open it up for public comment. The host and Zoom will be lowering all hands until public comment is open for the agenda item. Once the chair has called for public comment, the chair will announce for the public to raise their hand if they wish to speak on the specific agenda item. If you are calling in to listen to the meeting audibly, you can dial star nine to raise your hand. The host will then call on the public who have raised their hands. Public comment will be limited to three minutes and a timer will appear on the screen for the subcommittee members and public to see. Once all live public comments have been heard, the meeting host will read email submitted. If you provide a live public comment on an agenda item but also submitted an email, your email comment will not be read during the meeting. Additionally, there was one public comment period on today's agenda to speak on non-agenda matters, which is item two. This is the time when any person may address the subcommittee on members not listed on this agenda. Thank you. We will now go to item two, non-agenda matters. Again, this is a time that you may address the subcommittee on matter to not listed on the agenda. If you wish to make a comment via Zoom, please raise your hand. If you're dialing in via telephone, please dial nine to raise your hand. Are there any public comments? We have received no emails and I see no hands raised. Perfect, thank you. Moving on to item three, 3.1, which will be a 2023 quarterly budget review for the second quarter and Mr. Allen Alton, Chief Financial Officer will be presenting. Thank you, Chair Rogers and members of the committee. Welcome to our long-term financial policy and audit subcommittee. I would, if we decide that we want to shorten that name, we would be all for that. But for right now, we just call it the finance subcommittee and anyway, welcome. This is our first meeting together and I think we may have a time constraint at five o'clock. So my comments, I will go through this pretty quickly. I only have about eight or nine slides and I think we can get through this and enough time to have some questions and answers should there be any. So with that, let's move on to the next slide. So this is our quarterly budget review. We'll do a quick overview, go through the general fund revenues and expenditures and then we'll do a thing called dialing, I like to call it looking ahead. We'll kind of update the community on where we are in the next stage of our budget cycle, what we're working on, what we're seeing that may have effects on the budget as we move forward and then open it up for questions. So with that, let's go to the next slide. So we actually do three quarterly reviews. We do the one for the second quarter or mid-year that we're doing right now at the end of January. We'll do one at the end of April and then we do a fiscal year end review at the end of October. We tend to not do a first quarter review because there's not a lot of activity that happens in the first quarter of the year. So and with the timing of our closing the books we're usually have the fiscal year in numbers right around October. So we just use that as end of year review. What we do is we, this is a pretty high level review. We'll go through, we focus on the general fund. We can discuss other funds should the committee want that the general fund is the one that provides the council with the most discretionary funding. So that's the one that we tend to focus on. Basically this is part of the finance department's effort to provide more transparency in the budget numbers to work with this committee to go into a deeper dive into those should we want to do that. It allows the subcommittee to see if we're on track or if there are threats that are happening to that year's budget that we need to alert them up. And again, as a part of the transparency that we want to have, we, I have shared this with our labor groups. We are trying to have an open line of communication and dialogue with things that are going on with city finances. And I think sharing this with them and being open for questions is a way to do this. We did not have a meeting prior to this meeting. I just sent them the presentation with a rather long email of the context of each slide, which is what I'll go through with you. So they have all the same information. Some may actually be on this call as well. However, it's, we're always open that if they have specific questions, we're here to answer those. Next slide, please. So this slide is a visual representation of how we started our year with our adopted budget and with revenues in the general fund. We show it this way mainly so you can see that the lion's share of general fund revenue that comes in is from property tax and sales tax. And then we have other ones there. We, so these are adopted revenues and they're also recurring operations and they're also recurring operational revenues. So what we try to do is pull out those revenues that are one time or tied with grants. The reason why we do that is that they tend to have expenditures that are tied to those. And they're not the things that you would wanna do to build a recurring budget going forward, right? So we wanna focus on what our operational revenues, that's typically what we call them. And at the same point, we look at our operational expenditures. So we'll go into the detail now in the next slide. So as I mentioned, we have property tax and sales tax makes up the largest percent of our budget. What I would say is that we where we are at the current year is actually pretty good. We are on track. You'll notice that it says that we are at 43%. We're at 50% of the year for the month ending December. And we're showing 43%. Some of the revenues that we get sales tax is a great example of that. Come in at a lap. So what we're looking at are prior trends and where we tend to meet up at this time. And what we're seeing is that we are close to being on where we wanna be at that part. We're at least very close in the ballpark. So in going down the list, property tax, we received two installments of those, one in December and one in April. We're usually right around 55% of that revenue coming in at this time. So that's where we wanna be with sales tax. As I mentioned, it's a two month lag. So from a year to date standpoint, we've only received four months. So being at 33, almost 34% is right about where we are. We are a little bit low. We're right now, all things staying equal. We project to be maybe $500,000 off of our revenue estimate, but that's not something that's gonna harm operations. So I'm not too worried about that. And I'll go into sales tax towards the end of the presentation and things that we're looking at. On a statewide level and some trends that we're noticing there. With utility users tax, that also is on a lab. So we're actually trending a little bit high than what we would normally be right now. So that's good. Other taxes is a broader category that we will be looking at. The category that we will, on the next slide, I'll go into more detail about those. License and permits are, those are revenues that mostly come in through planning and economic development. So they're permitting fees and building permits and those types of things. This is a revenue stream that can be seasonal. I'll be honest, what we are trying to do is work with that department to better understand not only the seasonality of those revenues that come in, when the building permits are being pulled, when are those, but also in terms of the larger scale projects that go through where they are in paying their fees on that. And are there other projects that are coming in behind it? So we wanna make sure that we're not seeing something that looks like it's an ongoing trend of revenue when it's really just a spike and it's about to drop off. So that's something that we look closely and we work with the planning department to try to nail those revenues down to the best that we can. Charges for services has a great deal of those are in our recreation department, those where those revenues are. It also has some plan review fees and others that go into it. We are trending pretty much where we wanna be there. Intergovernmental revenue is where we get revenue from the county and other sources. So some revenue that comes in from Roseland, their annexation payment, a lot of those we get at the beginning of the year. So it shows that we have a lot more now and then that will flatten out as we get into the year. But right now we look like we're where we need to be. Binds and forfeiture is coming in a little bit lower. This is largely parking violation revenue and right now we're just, we're low on that. So it's something that we watch, but again, it's not where we're too worried about impacts to the general fund as it's not a major revenue source there. And transfers in are just where we bring transfers and most of those are on a monthly basis anywhere. So we're where we wanna be. And those are from other funds that pay on a monthly basis that will come into the general fund. So it's just a transfer that comes in to cover the general fund share or the operating for other funds. Next slide, please. So as I mentioned, we have other taxes. There's a couple of them that I think we need to take a look at real property transfer tax is one of those. It is coming in lower than budget. We figured that it could and we're seeing that. So real property transfer tax is a tax that goes on the value of a real estate transaction. So typically with the house. And so what that is is I believe it's $2 per thousand of transaction cost. So it is a function of what the, what the real estate sold for and how many of those that we're seeing. So in general, at least as of November, the last time I checked, what we're seeing is that we're having an increase in home prices in Santa Rosa. Those continue to go up. But what we're seeing a pretty rapid decline was at least for that year over year period was in the volume of home sales. So the number of sales was way down. So this is something that we were afraid of because there could be a factor of higher interest rates. And so we kind of had it in the back of our mind that this is one that we may come in low on. And right now it seems to be going in that direction. Our BLS swap, that is, that was a, it's property tax that comes in in lieu of vehicle license fees. So that's why it's called the BLS swap. It ties along with our property tax. So it's where it should be franchise fees. There is a substantial amount that comes in from PG&E in April. So in the fourth quarter is when we start seeing that. So even though it shows that we're behind right now, we know that that's gonna come later on in the year. The small amount of true motor vehicle license fees that we get that's not a part of the BLS swap, we received that in March. So that'll be in the next quarter, we'll get those. Cannabis is we, in prior years, we had budgeted that up to where we thought the peak was gonna be at 2 million. I think we hit that one year. Last year we started seeing that maybe we leveled off at about 1.8 million. And that's around where we came into last year. So we budgeted it at this year and it looks like we're on target for there. So that we may have hit that plateau of what we can expect from our cannabis industry tax coming in. Business tax, we are just now in the business tax filing period that happens from January through, I believe, March. So that is, we'll get that revenue, we'll start showing up later in the year. I mentioned real property transfer tax. The one bright note on this is the occupancy tax, which is transient occupancy tax, so TRT. This is something that we're seeing coming in strong and that is probably a factor of a number of things. One, the tourism industry is continuing to rebound and we're seeing that in Snow County in general. We heard this morning how well the arrivals at the airport is. And so that's all tracking along with that. Plus, in addition, we're receiving more TRT as a result of short-term rentals. So because of our permitting program that we have going on now, those that had short-term rentals but were not paying TRT are now doing it because of the condition of their permit. So either way, that benefits the city and that our occupancy tax is well-rebounding from the COVID years. Next slide, please. So moving on to expenditures, we're about where we wanna be at this point of the year. So the departments are coming in. And again, this is recurring and operational spending so we don't have projects in here that could go over multiple fiscal years. These are your basic operating budget and expenditures for the general fund. And I don't think that we need to go into each department where we can, we will, if you'd like. But for the most part, departments are trending where they should be. It's not even a little bit low. And we are anticipating that we'll end up at the end of the year online or on track with budget and probably have some vacancy turnover coming back at the end of the year. Alan, it's Mark. Just a quick question about the water expenditure. Yeah. Is that typically higher at this point in the year than the rest of the budget? I believe so. This is a very small part of that. It has to do with storm drain or storm water. And yeah, you know what? I don't have in my notes exactly why we are a little bit up. My guess is that it is more seasonal. However, I will get back to you at the next meeting with a better answer for that one. No worries. Like you say, it's a small part of the budget. I would just curious. Yeah. No, it is possible that there was some project that may have caused them to run more over time or something to it. And we should know that. So I will get back to you with that. Thank you. And council member, sorry about that. It looks like council member don't have that question, but are we able to let Mr. Alton finish his presentation and then we can do it in true fashion and ask questions? Thank you. It's on this slide. So just keep that in mind. But I'm fine to wait till the end. Thank you. Next slide, please. So this is the looking ahead portion. So where we are right now is we are we are loading our budget. I believe we finished our salary and benefits programming. So we are ready to open budget screens next week. And then now we'll give us the opportunity to take that information and start from a budget staff to start developing our long range forecast. And we have part of it already with our revenue estimates for next year. We're still betting some of those. We're looking at our expenditure, what we're expecting in expenditures and the general fund going forward for the next fiscal year and on and we start building that. We should have that ready to be reviewed by the committee possibly in March, definitely in April, but we'll shoot for the March meeting to have that. I will, I mentioned, yeah, sales tax is the most, that's the one that we are, we're a little bit concerned about. And I'll get into that in a minute, but in fact, actually, we'll start it up next slide, please. So what we have, we use a revenue consultant that's avenue consulting. They are the ones that help us with our sales tax, but I also sit on the webinars that are done through the other major revenue consultant, HDL. And they show statewide trends of where they are, what their current forecasting is and where they're seeing things. And both of those groups have said that on a statewide basis that they're seeing sales tax start to flatten out for the 2023 calendar year. So right where we're heading into it. They're seeing large growth still for the fourth quarter. So that would be October through December. And like I said, we're on a lag, so we will have that data for another few months. But what they're seeing is that we're showing good growth for that quarter of the year. And then we start to get into either basically flat there on out. Now, what I want to caution though, is that this is on a statewide, they're looking at it from a statewide level, looking at just cash receipts coming out of the state. What we've found is that Santa Rosa tends to buck those trends a little bit. We're fortunate in that way, we have several areas that generate our strong sales tax producers. So I'm a little bit hesitant to go down the ultra-conservative route that those folks are. But it's something that we watch and it's something that I just want to put out to you all that it is. That's where we're looking at in the years. And we'll decide if we're gonna grow or not, but I don't think that the level of growth that we've had over the past couple of years is something that we'll probably continue to go with. And part of that is that we've been looking at the sales tax coming from auto sales that that bubble was gonna burst at some point it never seemed to. Well, we have interest rates are a little bit higher and that may slow that down a little bit. So those are the things that we're kind of looking at that the actual, the normal consumption we get we're still doing well with construction, sales tax is doing well with it also. We have not had our third quarter meeting with Avenue yet we'll be scheduling that a little bit into February and then we'll be able to kind of set out where they are. I've seen the reports, but we'll wanna talk a little bit more and kind of fine tune where we're going and then that will go into our forecast and then we'll bring that to the committee. We do looking beyond just the next fiscal year we are looking at things down the road a couple of years down the road. We know that that at the end of next fiscal year our labor contracts will be up. So we'll begin the negotiating hopefully this calendar year going into it to try to get going there. But I don't know what those contracts are gonna look like but they're obviously gonna have an impact on the general fund and all funds, honestly. And then we also in 2026 we know that the period of performance for our co will be over and that some programs may transition we know one definitely will because it was in the general fund before and that's our homeless services programs. But any other ones that are gonna transition into the general fund should the council continue those on those will be impacts as well. So these are things that we're kind of looking out in the future of what may be out there that could affect whether we're able to balance budget or not. So with that, that's the end of my presentation. I know member McDonald had a question about the expenditure. So we wanna go back to that. I could build those. Council member McDonald. Thank you. I had a couple of different questions as far as this presentation goes will this be similar to what we see in mid-year budget revision which I'm assuming is coming to us next month. And then along the same lines as council member staff but he noticed a higher expenditure in water but I saw a much higher one in transfers but it wasn't clear to me what transfers were or is that you transferring money around where at 88% so if you could just clarify those two things. Sure. So when we transfer out we're transferring out to other programs outside of the general fund. So they're general fund supportive programs but they're located in other funds. So we move the money out of the general fund and into those funds. And we tend to do that a lot more in the first part of the year. So you're seeing a high trend there and then that will move off. It's not a monthly transfer like we do with the transfers in that we're going right on that 50% trend line. Honestly, we do not have a mid-year we're not planning on doing a mid-year budget adjustment this year or having a mid-year item at council. Like I said, our revenues are where we think that they should be. So there's not a need for us to go in and adjust revenues from where the other sometimes we would go in and do one time dollars and put those into programs. We are not doing that this year. We needed to move the funds that would have been our flexibility to do that into the current interchange. So should that we get the grants that we're hoping that we're going to get and then that freeze that money back up to the general fund then we can have that discussion about the one time dollars for right now. We simply don't have any to put out. So we're just not going to do one of those items. Are there any additional questions from the subcommittee members? All right. Chief Financial Officer Alton, thank you very much. This is definitely in your lane and I know why I'm not anything finance. So we're going to go to a public comment Natalie, can I just throw a quick note? Yes. Alan, I just wanted to say that that was a really nicely laid out presentation. I like the way that you kept on that you you repeatedly emphasize the sales and property tax situation. That's obviously the huge wild card as well as the longer term fiscal issues that we're going to have to face. Your message came through loud and clear. Thank you for a very succinct presentation. Thank you. Looks like we're back into questions and comments. And I did have one and it was about the water. Is the water at 60% because we are not seeing the revenue from people paying their bills as a result of COVID? Does that have anything to do with it? No, no, that's an enterprise. Right. That's going to be more on the enterprise fund side. Perfect. Thank you. So no additional questions or comments of committee members. Now we will go to public comment for 3.1. If you wish to make public comment, please raise your hand. If you're on Zoom and if you're calling in by telephone, please dial nine to raise your hand. Seeing no hands raised. We will now go to item four where we will discuss agenda items for upcoming meetings if any of the council members have suggestions or things that they would like to see in the long term financial policy and audit subcommittee. And yes, we probably should shorten that name, Alan. I'll come up with a good one. Thank you. Yes, Vice Mayor McDonald. Thank you. I'd like to have some information brought to us on an average of a decade of unfunded liabilities so that we have a wider understanding of what those tend to trend to be. I know sometimes they run high, but even five years, I think, would be acceptable. But I think over a course of 10 years would be acceptable. And I know it's something I've mentioned in open session twice around looking at contracts. I think we're going to have to start to drill down some fiscal information on how much it would cost us to start bringing folks back to build workforce. So I'm not sure if it should start here or start somewhere else, but I believe that either way, it's something long term financial is going to need to look at for those type of trends and those are the only two I have off the top of my head right now. So absolutely, we can do that. And we've presented Perce, UAL presentation here before. We actually did one. I think it was December was the one that we did the last one. So we can do that. I would say that we have that information. There are a number of factors that go into the cost of UAL. I don't think what you're going to see is a particular trend line that's going to go. It's got a factor on just for let's just take the last couple of years as we're talking about. I think we would need to agendize that since I brought it up as a future agenda item since it's not listed on the agenda right now. We could. Yeah, sure. So we're careful on that. Yeah, that's what I'm going to say right now. OK, thanks. Yeah, no problem. And also a suggestion, maybe if you wanted to go back and look at the presentation that we just had to see if that answers any of your questions. So we're not being duplicative of the information that they're providing about the unfunded liability. And then we can help. When was that presentation then? So it was December 8th, I believe. And this year? Yeah, it was in this committee. So I can send it to the committee. OK, I'll send it to the committee. That'll be thank you. That'd be easy. And then Vice Mayor McDonald, if you continue to have questions or you want us to address something else that wasn't answered, then we can go ahead and get it on an agenda. Perfect, thank you. I think Chief Officer Alton is probably pretty busy. So we'll try not to add too much onto his plate. I can't remember. Snap. Oh, I was going to just make the joking suggestion that we have a separate agenda item for quarterly speculations about the direction of interest rates and their impact on the housing market. But that's that's just a joke, although I will enjoy them. I'll enjoy the sidebar comments. And I guess it's not technically an agenda item. But at one request, if it's not too much hassle, would be in the financial in the financial summaries would be possible to have a comparison to the year prior. You were alluding so that just in terms of the percentages of revenue or expenses realized that we can compare to the year prior, if that data is usually at hand. Yeah, it is. We can work on that. All right, if it sucks up a lot of time, don't worry about it, but that's sometimes helpful. It's more formatting than anything, and we can work through that. One thing I would suggest, Chair Rogers, is we have a short turnaround for the February meeting. So February meeting is normally scheduled for February 9. That's what, two weeks away, a week and a half away. My suggestion, it's up to you. We can come back and I don't really have anything to prepare for that particular one. My suggestion would be to cancel that one. We'll have one in March where we can talk about hopefully by that time, we'll have our long-range forecast in a way that we can talk about that in that particular forecast. Member McDonald, there is a line item for UAL. We do do a five-year look back on it, so that's going to give you some additional information there that I think you're looking for. We could do that. The regular meeting for March is scheduled for March 9. We have goal-setting at that point, so we should move that a week or so after the 9th, so I'm not sure what date that would be, and probably the 16th or the 23rd, if that works out. Then we can have that and then in April, toward the end of April, we will do our third quarter review, and we will try to have that with some better comparative data on there. If that makes sense, I would lay us up for the next couple of meetings, do you think? OK, so we'll work with staff to notice appropriately and cancel the meeting and also what would be at the day to move the March meeting. And we'll get back to everyone in a timely manner so that we can all plan accordingly. Totally agree we need to be very efficient and use our staff time wisely and not just meet to meet. Are there any other suggestions for upcoming meetings or questions or comments before we go ahead and adjourn the meeting? Seeing none, I will see some of you in just a little bit, and thank you very much for your time. The meeting is adjourned. Bye-bye.