 Everybody ready? Yeah. Go ahead, call to order and do a roll call, please. Chair Rogers. Here. Member Schwedhelm. Member Sawyer. Here. Let the order reflected also, committee members are present with the exception of Member Schwedhelm. All right. Thank you. Council Member Schwedhelm will be absent from the entirety of the meeting today. Let's start our day with public comment for non-agenda item. If you have a comment that falls within the committee's jurisdiction, but it's not on the agenda, go ahead and hit the raise hand feature on your Zoom. I don't see any. And if you have any pre-recorded voicemails. We do not. All right, let's go into item number three, special meeting minutes for September 22nd. Council Member Sawyer, did you have any amendments to those minutes? No, I did review them. No adjustments. Okay, let's go to public comment and see if anybody has any changes to them. And again, I don't see any hands, so we'll show those adopted without objection. And let's move on to item 4.1, our general fund review for fiscal year 2021, 2022. Veronica, good to see you. Excuse me, I've got a covering from the cold here, so I apologize for the voice. But thank you for meeting today, And I'm just going to wait a minute for our slides to pop up and I will be taking everyone through our fiscal year and 21 22 general fund review. We are working on getting the presentation up. I apologize. Just one moment. Thank you. So sorry, working on it, please. So good. We just get to start John awkwardly until the presentation in place. Everything went fine with me today. No, no, no IT issues at all. Just hit and miss. Well, you know, they say, John, you really master this right at the end. I figured I even got my iPad to function properly. You know, these, when they have to do it's telling you that you need to redo your password and you have like 15 passwords and can't find the right one but I managed to persevere and found it. Everything's functioning as in or for in normal parameters. Except maybe me. There it is. All right, thank you, Victoria. So again, my name is Veronica Connor, the budget and financial analysis manager, and I'm going to be taking you through the general fund review today for fiscal year and 21 22. Next slide, please. So in this presentation, we're going to start with a look at the overall surplus in the general fund for fiscal year 21 22. We will dive in a little deeper to both general fund revenues and expenditures. We're going to take a look at where our reserves are as of June 30 2022. And then finally, we'll just have a few comments on where we expect revenues in the general fund to be heading in the near future. Please. So our operational year end results for the general fund have resulted in an operational surplus of about $736,000. So you can see here, our general fund revenues and transfers in came out to be about 4 million. And when we do take out and conferences, which are commitments that we've made from this current year's budget for purchases. We have about 736,000 a note about these numbers. These are not audited. So they may change slightly. We don't expect them to change substantially. And we also use what we call recurring or operational numbers. We have backed out a number of things, such as in revenue, we've backed out interest earnings, things that we can't really count on to pay our operational bills, so to speak. And grant revenues, CIP transfers. Government works a little different than other organizations. So in things like CIP, sometimes we appropriate expenditures in previous years and then we see the actual expenditure happen this year. So we back out those one time things to really truly get a picture of what our operational revenues and expenditures are. And here we see they're just about balanced. So next slide, please. And as a reminder, for the fiscal year 2021-22, this budget was passed back in June of 2021 and it was passed with an $11 million deficit. This budget was put together in the midst of the pandemic. The economic outlook was not certain. So we had some pretty conservative revenue estimates in there. Where we came in was a surplus of about $730,000, as I mentioned. So as we look deeper into the revenues and expenditures, I just want to point out here at the beginning that when we see revenues come in high and expenditures come in low, that's not going to equal a large surplus. What it's really doing is just closing that deficit gap. So we knew as the year went on that our revenue estimates and our revenue projections were pretty low. They were too conservative. So as you may recall, we came to the subcommittee and went to council back in January and February and did appropriate our revenues. We added an additional I think nine and a half million to try to meet what we saw was happening when we saw revenues coming in stronger than expected. So next slide. Next slide, please. I'm taking a look at what makes up the general fund revenues. We have our major categories here. The very bottom line, you'll see our total adopted plus changes budget was about 185 million, and we came in $12 million over that. That is after we came back and appropriated additional revenues, we still came in quite high. And narrowing down where that happened, we could start up at the top. Property taxes and sales taxes are the primary revenue sources for the general fund. This is really where over 50% of our resources come in. We hit property taxes right about on target sales taxes, even after we appropriated more revenues and seen that they were coming in high, we still came in about $2.7 million over what we projected. Going down the line, we will talk about other taxes more in detail in the next slide that one comprises a lot of different categories. Licenses and permits and charges for services. The overages in both of these categories can be attributed to pet revenues. These are our permit and planning revenues and fees. Both categories of these had a very good year and came in high. And next slide please. So as I mentioned on the previous slide, we have a category called other taxes that makes up a lot of different things. The pie chart on the left shows these visually. The VLF swap and franchise fees are the largest part, but we do have cannabis tax in here, which we budgeted 1.8 million and it came in a little shy. We're starting to see that the cannabis tax market might be kind of reaching a saturation point and we're thinking this is maybe where we're going to see it level off at about anywhere between 1.6 to 1.8 million. RPTT is our real property transfer tax. This is one of those categories we're at mid-year. We added an additional 2 million when we saw this one coming in high. It's based off of both, it's based off of home sales. So both volume of home sales and prices of home sales will really make this one fluctuate. And as we all know, Santa Rosa had a good year for home sales in year 21-22. So this one came in higher than expected and we were able to budget accordingly. And occupancy tax also came in high at 1.3 million dollars over budget. The main driver here is just the tourism industry recovering as well as those short-term rentals. We have revenue coming in for that. This was the first year and we weren't really sure what we were going to see and we got some good surplus in for that one. So overall, this category came in at about 106 percent or 2.6 million dollars over what was budgeted. Next slide please. So we just want to give everybody kind of a look back as some of our major fund, major general fund revenue categories have done in the last 5 years or so. That top line, the red line, that sales tax. And we see that one continuing to grow pretty steadily through the pandemic and in recent years. The next line down, the green line, that's other taxes, which we just looked at and we know it is made up of a lot of different components. That one leveled off during the pandemic, primarily due to a few different things happening. We saw TOT and we saw RPTT kind of start to plummet, but that was right at the time that cannabis was starting to take off. So, both those factors cost it to sort of straight line for a year and now we see it growing. The orange line, the yellow orange line that's charges for services. This one dove during the pandemic as well, although it kind of started out artificially high. This one has a lot of head revenues in it. So coming out of the pan out of the, excuse me, the wildfire years we had a big rebuild effort going on. So a lot of those permitting and planning revenues were very high started to decrease into the pandemic and that was when we lost a lot of recreation revenues that happened when our programs closed temporarily. So that one we also see starting to recover in 21 22. And then the final blue line is property taxes. This one shows slow and sustained with steady growth, which is what we expect. Property taxes are strong in Santa Rosa, but they don't increase with as much volatility as RPTT does. And next slide please. So moving on from our discussion of revenues, we're going to switch gears and talk about our general fund expenditure performance. We have talked in the past before about how in the general fund salaries and benefits are our primary expenditure here we're very people heavy in the general fund with services like police and fire and administration. It makes up about 70 75 to 80% of our expenditures. So when we compare our adopted budget plus changes to what we actually spent, we turn back about four and a half million dollars in salaries and benefits this represents positions that were not filled and salaries that were not spent. We do not budget for 100% staffing in the general fund. We did budget and 21 22 a about a 1% vacancy credit in there. We obviously turned back more than that and just to know in years going forward we did increase that vacancy credit. Just to reflect the current hiring market there's been a lot of hiring challenges across the board and yeah it's just just the nature of the beast here we've seen we have not been able to keep our positions filled at a higher rate. Services and supplies. When considering and conferences the general turn fund turned back very little. So all of that budget that those departments needed for their services supplies was just essentially spent. Overall, that on the bottom line when we see the total the variance of 4.7 million that represents about 2.3% of the total general fund expenditures that were not spent or turned back. So it's pretty close. And next slide please. So just continuing a word about salaries and benefits in the general fund I mentioned there are biggest portion of the general fund for sure. We just want to show what they've been doing over the last few years from 1920 up to 21 22 we can see in this bar graph that unsurprisingly costs for salaries and benefits have been growing. But what might be surprising is that our FTE count in the general fund has actually gone down in 1920 we had 798.75 FTE's and in 21 22 we were down to 790.5 FTE's so we are actually decreasing our headcount, but our costs are still increasing. And that's just indicative of our unfunded liability rising costs of living increases. So salaries and benefits we are, you know, trying to find creative ways to maintain the general fund stability and maintain a balanced budget, but they are definitely just the costs that are going to continue to increase in the future. And next slide please. So overall reserves for the general fund reserves that are taken as a snapshot in time as of June 30 2022. We had about 106 million and the general fund reserve balance. And one of that was already accounted for of PG and funds for the Rosalind library, our 115 trust, we put $2.7 million into fire and fire equipment replacement fund and council also designated 27.3 million for fiscal stability and the general fund. So when we back out that 50 million that was already earmarked. And we also back out our 17% mandated reserve policy. This brings us down to about $24 million in the general fund reserves over that policy. And just to note that total that 55.655 million of total unassigned reserves that does equal about 29% of our operating expenditures excuse me. Next slide please. So going forward, looking ahead at our revenues we've seen in the previous slides that our revenues are doing very well. They did much better than predicted through the pandemic so the question is what's going to happen in the future we've been making a big effort here in the finance department to truly build a budget that's representative of what's happening we want our budget to match our actual revenues as closely as possible. So with property tax we do see that moderate growth, the housing market does seem to be slowing a bit, but we do continue to see any homeowner out there will know their property taxes do continue to increase by about 2% every year. So we do expect the property taxes that we collect from the city to continue to grow, but at a moderate rate. With sales tax we do work closely with some consultants to help predict where our sales taxes are going and they're seeing modest growth in the next couple years, about 1.1% in fiscal year 2324, and about 3% and 2425. And then in the out years, continuing to grow. We've had a few recent quarters of just very high growth in sales tax and with inflation and the uncertain times we know that that just can't really be sustained. So while we're not expecting any kind of downturn, we do see the growth maybe starting to slow. Our PED revenues are permit and planning fees that is a fee study and process right now and I believe they have a draft of it that we will be looking at next month. So we're not sure when that fee study is going to be completed and it will of course have to be approved by council and when it will be in effect, but that will also definitely change some of the revenues we see coming in for the planning and economic development department. Next slide. Our recreation revenues are very optimistic post COVID we had a great year for recreation revenues ending in fiscal year 22. So we think in the next few years they're going to continue to grow. Our real property transfer tax we saw in previous slides that had done very well in the last year, but with the slowing housing market this is one that's very volatile and reactive. As I mentioned it's based on both volume and home prices so as the market slows we do anticipate this one to drop. And then transient occupancy tax we expect this one to grow as well with covering travel as well as that short term rental activity that we mentioned before we do see this one continuing to be to have steady growth. And that concludes the presentation so I know I went through that pretty quick and I'm happy to take any questions it was a lot of information so happy to answer any questions anyone may have. All right thank you so much Veronica. Council Member Sawyer. Do you have any questions. No questions at this point. Okay. So I just want to make sure that I'm really clear so we've got 50 million that has been pre allocated into the reserves. And it sounded like you said some of that was dollars that we had specifically earmarked from the PG me funds for the fiscal stability. And I guess I'm having a harder time wrapping my head around why we have that one segregated. If we've got our reserves then we have funds that we've allocated for the reserves. Shouldn't we show the total reserves, even with that in that as potential sources of revenue for us for emergencies or other things that we might need it for. When council appropriated all of these PG and funds they did want to note those to specifically be for fiscal stability and it was initially 40 million. And 10 of that did go to the 115 trust 2.7 of it did go to the fire equipment replacement so that remaining 27.3 I do see your point that sure it could be lumped in with everything else. But since it had been discussed specifically by council we do want to have that earmarked and flag just to show we still have it there we still are counting it it's not just getting lost in in the larger bucket of numbers. Okay, yeah, now I appreciate that I just wanted to make sure I understood better. What it can potentially be used for where it's actually located how much is left all of that sort of thing. So, I appreciate that. We'll go ahead go to public comments and see if anybody has any comments on this. And I see no hands. So bring it back. Is there any additional direction that you're looking from council member Sawyer and I on or is it just hoping for an update to council. No, this is just to share where the year ended there's no additional action needed at this point. This is part of our this is part of our quarterly, you know, recording out of the performance in the general fund. So we'll do another one in January and hopefully Veronica's voice will be better by then. And, and so on, but this is yep. Well, I just want to say thank you to you, Alan and Veronica and your entire team. I think that the, the tightening up particularly around sales tax and having a more realistic picture of where we were headed allows us to have some honest conversations and it's good to see that our assumptions are tracking a little bit. But our adopted budget was. Councilor or any additional comments. Yes, I do. Thank you. So, I tend to look at and this looks great. I know I've seen bleak, you know, fairly bleak numbers in the past and this is actually even though you accounted for more income than we are accounted for for an increase in revenue, it still didn't quite match how much we got which is a good thing I mean that's that's a good that's a good picture although there's a tendency for some in our organization to kind of suggest that we underestimate certain things and only, you know, when you were estimating can only get so close. But I am. So what I'm concerned about is not what we have here in this in these documents but you know with the 115 trust and the unfunded, which of course, you know, can deal with unfunded liability etc. How can, how can we in, we can't really encumber the future council. Except mayor you're going to be still on and being able to caution the council on not being spin thrifts. There are there are lots of unknowns out there I guess with the economy that does concern me and the having these having the these extra funds could can tend to burn a hole in council's pocket. So, and if we go to use the 115 trust of those monies are locked in. So I'm wondering, are we able to do a mid year. Well, this is not quite mid year or a dedicate it with this council. Putting funds into the 115 trust before the new council takes takes over and I'm not that I don't trust them to make good financial decisions, but we have seen ourselves, the ability to the value in putting funds into a protected bucket. And so, that's kind of where I come from, you know, as a former retailer, I, and, and having gone through a number of ups and downs. We're trying to lean toward trying to kind of assume some downside and and protect ourselves with extra funds, whether we keep them liquid, or put them into the 115 trust which is fairly restrictive, very restrictive. How do we can we do that if we chose to now before we go into budget talks, before the next council goes into budget talks to be able to kind of take advantage of these better numbers and leave leave funds available for for important projects in the future. And at the same time, take advantage of this these resources and revenues that that outpaced our projections and put it away. So what can and can we not do with these funds as they stand right now. If I may. So, number Sawyer. So there's a, there's a couple of things there. So you mentioned that the 115 is restrictive it is very restrictive can only go to purse. We do have a plan budgetarily for future years to redirect pension obligation bond payments when that when our existing pension obligation bonds are paid off to go into the 115 trust. This is, this is, there's a direct nexus between debt service going to pension bond, and then redirecting that that that amount that we've been paying for all these years to go into the trust and we have that plan for both the general fund trust and the water fund trust. And this allows us to do something. You know, those weren't really part of our operational budget that that was coming out of, you know, the where we where we pay all of our debt service, which, which we don't really put into what our operational budgets are. So it's a really good unique opportunity that we have to where we can continue to fund that trust as we go without affecting general fund or water fund operation. Yeah, can I can I stop you just for a second. Do we have a, and you have to refresh by memory. Chris or Alan, do we have a set percentage of excess revenues that we are using as a guide to how much to put into our 115 trust on an annual basis. Because it just kind of we come up with it. We look at the numbers and decide what's a comfortable figure to, to put into that bucket. I don't really remember what the what our philosophy was in that regard. Right. So, you know, when we were originally talking about putting excess turn back into buckets, if you will. This was before we had the PG and E settlement and quite frankly before the the earmarking, if you will, the $40 million for general funds stability. So what that allowed us to do so. So when we put the money into the 115 and putting the money into the the fire equipment replacement fund, we didn't do that by a by a percentage we did, what would make sense as a first initial investment into the 115 in talking with our, our financial advisors and what what what was a good initial part that still allowed you to have money in the in the fiscal capability. Reserves. And when we, when we set that money there for $40 million of fiscal stability, what it was meant to do was to be able to allow the city to general fund to have some wiggle room of time if you will, in case we had a downturn, we were still at that point looking at that deficit budgets and things. So, so it was, it was allowing us time to write our shift. So what I would say is we've done a very good job of writing our shift in the last year and a half. And I will also say if you remember back to our last meeting, where I kind of showed that, hey, there's some things out in the horizon that we need to, we need to be concerned about. That $27 million is there to serve as a buffer, so that when those those headwinds hit us that we don't make a knee jerk reaction that we have a little bit of time to be able to make a an informed decision on how we need to rebalance our budget. So we're going as as a balanced budget as as things impact us from an expenditure standpoint, it's going to, it's going to bring us into imbalance. And we need that little bit of time where we may pull out of those those fiscal facility funds in order to bring us up into balance and develop our plan for being long term and balance. So I think that those funds and the way that we have it set up as they are assigned in the general fund and not part of the unassigned pot means that only the council can say we're going to use these but it puts greater restriction on it. Without it being really policy based, but it just puts a you can only use it for fiscal stability now we didn't completely define what that was, but but you know it kind of put some guard rails there, and I think that that's important. I would say that that in our in our December meeting for the committee. And we'll talk about this in the next section. We want to talk about purse rates, and what we're seeing in some of the analysis that we're going through right now. And I think that that sort of informs the discussion going forward, both in terms of using the 115 as a pension stabilization fund which is what we're going to do, but just why that 27 million of this facility may be still important in the near term, even though we we we've done a good job of balancing our budget and our revenue seem to look pretty well right now. So I'm curious with the fiscal stability bucket and that that delineation. Does it require do I do we have it set where it requires, for instance, a super majority or is it pretty, is it pretty available, pretty easily available to the council. Because I, you know, I think it's one thing to say this is for fiscal stability. And at the same time, the council understanding its flexibility. Is are there any added cautions or added hoops that one has to jump through to, if you will invade that fund. I would need to come to you with a to the council with the staff report that draws the nexus between the use of those funds and, and how that relates to the general funds. So now it doesn't require a super majority, it's for for both we do it. But it does require that extra step of drawing that line of why and why I'm asking the council to approve the use of those specific funds versus just normal general fund research. And it gives you an opportunity at that time, as it would Chris and anyone else that sits on this on this body to afford the council, the, the requisite cautions about using these funds for projects that that are not necessarily that that could start to lessen our ability to respond to a fiscal emergency. In the future that's really what I'm talking about is the is the unknown. And it's, but we can, you know, there are, there are times when we see funds available, and there's pressure on those funds, and then all of a sudden, you know, you get they whittle away and then our cushion is diminished. And that's really what I love having the cushion I mean it's it flattens our, it flattens those peaks and valleys if you will, in of funding and, you know, take some of the pressure off it takes some of the worry out of our, out of our funding and our budget and our budget. What process. So, I love having the extra. I mean, it's, I think that probably, you know, the council would agree that it's nice having that these numbers are good. I just, you know, want to, I'm just hopeful that there is that those cautions are in place. So, it does not appear to be a slush fund. I believe it at that. And congratulations, by the way, on these numbers. It's interesting that you do your best to try to suggest that we're going to be in a better position than we thought that they were even better than that. And sometimes that can come back and buy this of course. But I think that this this looks good and I have, I have, I appreciate the condition that it that it plays that it puts us in. And her team does a lot of work in going through that forecasting and trying to come up with the best numbers as possible. It only builds the credibility of the budget of the numbers that we're putting forward. And that's that's what we're that is our main focus. Exactly. Good job, Veronica. Thank you. Yeah, and this is our, this current year, 2223 is going to be the first year where we see how we did because the previous year that was my predecessors numbers previous team. So we'll see. Right. Well, good luck with that. Thank you. All right. Thank you guys so much with that. We'll move on to our next item then. And John totally get your point. So next meeting agenda item. So, if it's at all possible, we'd like to, to not meet in November. I'm going to be out of town and we're still doing some analysis on the first rate. We'd like to so cancel that meeting. And then our regular December meeting would be December 8. And what we plan to come back with there is, is an analysis of both the, the highs and the lows of purse rates from the, the, the games that they had two years ago to the losses that they had last year. How that's going to impact our, our rates going forward. And what options that we, that we have available to, to the committee and to the, to the council, and, and that will want to put in place. So that's just going forward, but I think that, that that'll be the good, and it'll bring up this, this discussion about stability and some of the other things that are, that are out there, but it is, it is timely. We've been analyzing just how that's going to impact and, and coming up with some solid options for us going forward. So that's what we would like to talk about in December. Well, that'll be, it'll be a good last meeting for me on, on this particular, in this particular committee, dealing with purrs. Go out with the bank, John. Yeah, we're certainly not letting John just slide off into obscurity. He's going to have to work for it. All right, let's go ahead and open it up for public comment. See if there are any comments on next meeting agenda item. All right, then we'll go ahead and adjourn. Thank you, everybody. Thank you all. Thank you. Thanks, Mayor.