[00:00:01]
WELL, WE'RE AT 6:30. LET'S CALL THE MEETING TO ORDER.
[A. CALL MEETING TO ORDER]
MEETING OF THE REDONDO BEACH BUDGET AND FINANCE COMMISSION.COULD WE HAVE A ROLL CALL, PLEASE? COMMISSIONER MARIN? HERE. COMMISSIONER JESTE? HERE. COMMISSIONER ALLEN? PRESENT. COMMISSIONER RAMCHARAN? ABSENT. COMMISSIONER SHERBIN? HERE. COMMISSIONER TURNER? HERE. CHAIR WOODHAM? HERE. STAND AND SALUTE THE FLAG. 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.
[D. APPROVE ORDER OF AGENDA]
COULD I HAVE A MOTION TO APPROVE THE ORDER OF AGENDA? MOTION TO APPROVE. SECOND. ALL IN FAVOR? AYE.[E. BLUE FOLDER ITEMS - ADDITIONAL BACK UP MATERIALS]
BLUE FOLDER ITEMS. I'M NOT SURE WHAT WE'RE SUPPOSED TO DO HERE, EXCEPT ACKNOWLEDGE THE BLUE FOLDER ITEMS. WE'VE SENT, WHAT? YOU'VE SENT THREE. YES, THERE ARE THREE BLUE FOLDER ITEMS ALL FOR ITEM J.2.OKAY, GOOD. AND WE'LL NEED A MOTION TO RECEIVE AND FILE.
A MOTION TO RECEIVE AND FILE THE BLUE FOLDER ITEMS? MOTION TO RECEIVE AND FILE. SECOND. ALL IN FAVOR? AYE. OKAY. AND THE CONSENT CALENDAR.
[F. CONSENT CALENDAR]
THE TWO ITEMS. DOES ANYONE WANT TO SEPARATE THAT AND DISCUSS EITHER OF THOSE ITEMS? ONE COMMENT THAT I'D HAVE AT THE BEGINNING. THE MINUTES, IT'S VERY NEAT, GOOD TO HAVE THE MINUTES SENT TO US BEFORE THE MEETING, BECAUSE A LOT OF THE DISCUSSION THAT WE HAD LAST MEETING WAS LONG AND INVOLVED.AND IT'S GOOD TO SEE THOSE NOTES BEFORE THIS MEETING.
SO, WE APPRECIATE THAT. DO I HAVE A MOTION TO APPROVE THE CONSENT CALENDAR? MOTION TO APPROVE. SECOND. ALL IN FAVOR? AYE.
OKAY. MOTION CARRIED. AND THE POSTING FOR THE REGULAR BUDGET FINANCE COMMISSION MEETING.
WE NEED A MOTION TO APPROVE THE POSTING. MOTION TO APPROVE.
NO, I'M SORRY, THOSE ARE THE TWO ITEMS THAT WE'VE ALREADY APPROVED.
BUT I DON'T THINK THERE'S ANYTHING TO DISCUSS UNDER G.
H, PUBLIC PARTICIPATION ON NON-AGENDA ITEMS. DO WE HAVE ANYONE PRESENT WHO WANTS TO SPEAK OR ANYONE ONLINE? HEARING NONE.
OKAY. ITEMS CONTINUED FROM PREVIOUS AGENDA. THERE ARE A COUPLE OF ITEMS UNDER THE, UNDER ITEM J, FROM PREVIOUS AGENDAS THAT WE AGREED TO CONTINUE, SO WE'LL ADDRESS THOSE AS WE GET TO THEM.
[J. ITEMS FOR DISCUSSION PRIOR TO ACTION]
ITEMS FOR DISCUSSION PRIOR TO ACTION. FIRST IS THE CITY TREASURER'S REPORT.EUGENE, THE FLOOR IS YOURS. THANK YOU, CHAIR WOODHAM.
GOOD EVENING. MEMBERS OF THE COMMISSION. EUGENE SOLOMON.
DOES NILESH MEHTA. I DON'T KNOW IF YOU CAN HEAR ME.
YES, WE CAN. OKAY, GREAT. I'M ONLINE.
OKAY. SO HERE WE HAVE FOR YOU TONIGHT THE TREASURER'S REPORT FOR REDONDO BEACH.
THE TREASURER'S PORTFOLIO SUMMARY, INVESTMENT REPORTING GUIDELINES, AND REPORT BY MEEDER INVESTMENTS ARE INCLUDED WITHIN YOUR PACKET, THAT INCLUDE THE PORTFOLIO SUMMARY, OUR COMPLIANCE WITH OUR INVESTMENT POLICY, OUR ACTIVITY AND AN ECONOMIC AND MARKET UPDATE.
[00:05:07]
WE REVIEW WITH YOU THE INVESTMENT POLICY REPORTING OBJECTIVES AND GUIDELINES, POLICY COMPLIANCE, OUR QUARTERLY PERFORMANCE, CASH FLOW ANALYSIS, MATURITY DISTRIBUTION, TRADING ACTIVITY, AND THE FISCAL IMPACTS.THE KEY INVESTMENT OBJECTIVES FOR EVERYONE TO REMEMBER IS THAT SAFETY IS OUR NUMBER ONE PRIORITY TO PROTECT THE PRINCIPAL, FOLLOWED BY LIQUIDITY TO PROVIDE NECESSARY LIQUIDITY TO COVER BOTH ONGOING AND UNEXPECTED CASH NEEDS.
AND LASTLY, OUR PRIORITY OF YIELD TO MAXIMIZE EARNINGS.
RECOGNIZING THE NEED FOR SAFETY AND LIQUIDITY, SUBJECT TO THE RESTRICTIONS SPECIFIED BY STATE STATUTES AND OUR LOCAL GOVERNING BODY, WHICH IS OUR CITY INVESTMENT POLICY. ALWAYS REMEMBER WHOSE MONEY IT IS.
OUR INVESTMENT OBJECTIVE IS TO EARN A REASONABLE RATE OF RETURN OF THE CITY'S INVESTMENTS, WHILE PRESERVING CAPITAL IN THE OVERALL PORTFOLIO.
IT SHOULD NEVER BE AN INVESTMENT MANAGERS GOAL TO EARN MAXIMUM RETURNS ON THE CITY'S PORTFOLIO, AS THIS WOULD EXPOSE THE CITY TO AN UNACCEPTABLE LEVEL OF RISK.
SO FAILURES OCCUR IN PUBLIC INVESTING. WHEN POLICIES ARE NOT CLEAR, POLICIES ARE INAPPROPRIATE, POLICIES ARE NOT FOLLOWED, OR OVERSIGHT IS INADEQUATE.
THE QUESTIONS THAT ONE WOULD ASK, DID YOU REVIEW THE INVESTMENT POLICY? DID YOU UNDERSTAND THE CITY INVESTMENT PROGRAM? DO YOU RECEIVE AND REVIEW PERIODIC INVESTMENT REPORTS? WE ARE HOPEFUL. WE ARE PROVIDING MONTHLY INVESTMENT REPORTS TO ALL OF YOU VIA YOUR CITY EMAIL.
SO IF ANY OF YOU ARE NOT RECEIVING THOSE, PLEASE LET ME KNOW OR HAVING TROUBLE ACCESS THEM AND WE'LL COORDINATE WITH THE CITY CLERK TO HAVE YOU ACCESS THOSE. BUT WE DO SEND THEM TO YOUR CITY EMAIL EACH AND EVERY MONTH IN ADDITION TO THESE QUARTERLY REPORTS.
FOLLOWING ALONG. ARE THESE GUIDELINES CLEAR? ARE THEY CONCISE? ARE THEY READABLE? AND DO YOU FULLY UNDERSTAND THEM? IF YOU CAN'T, IT'S MORE LIKELY BECAUSE THEY HAVE BEEN PRESENTED POORLY AND MAY IN FACT REFLECT PROBLEMS THAT ARE TECHNICAL WITH YOUR ABILITY TO UNDERSTAND BECAUSE IT'S TOO COMPLEX. IT'S THE JOB OF THE STAFF TO MAKE THEM MORE READABLE, UNDERSTANDABLE.
AND THE CITY'S PORTFOLIO IS GENUINELY, IS THAT COMPLEX, PERHAPS IT SHOULDN'T BE.
YOU'LL SEE OUR POLICY COMPLIANCE MATRIX. I WOULD POINT TO THE CORPORATE ISSUER CONCENTRATION WHERE YOU SEE THE NON-COMPLIANT SEGMENT SECTION.
THIS IS STILL, WE SPOKE ABOUT IT IN OUR LAST MEETING.
WE REVIEWED THE TREASURER'S REPORT. THIS IS A GLITCH I WOULD CALL IT, OR A FEATURE OF CLEARWATER.
COMMISSIONER ALLEN IS VERY FAMILIAR WITH CLEARWATER. WHERE IT'S NOT RECOGNIZING THAT OUR COMPLIANCE WAS BASED UPON THE CONCENTRATION AT THE TIME THE SECURITIES WERE PURCHASED, RATHER THAN IN THE PRESENT DAY, WHICH IS WHY YOU SEE THAT NON-COMPLIANT.
YOU'LL LIKELY SEE THAT CHANGE IN OUR NEXT QUARTER AS AS OUR INVESTMENTS CHANGE.
DOES ANYONE HAVE ANY QUESTIONS ABOUT THAT PARTICULAR PART OF THE COMPLIANCE REPORT? SO THAT BOND MATURES BETWEEN NOW AND. THAT BOND WILL MATURE THIS SPRING.
BUT WITH THE CASH FLOW CHANGES, WE'LL ALSO SEE A CHANGE IN THE AMOUNT WE HAVE THERE.
THAT PARTICULAR SECURITY I BELIEVE IS UP HERE IN JUNE OF 2026.
OKAY. I'LL MOVE ALONG THEN TO OUR PERFORMANCE AND OUR SECOND QUARTER.
HIGHLIGHTING SOME OF THE AREAS WE HAVE CASH, $10,424,000 IN BANKS.
07,800,000 IN OUR MONEY MARKET. 12 MILLION IN CAMP.
15 MILLION IN LAIF, THE LAIF RETURNS HAVE IMPROVED OVER CAMP, SO WE ARE REALLOCATING SOME OF OUR RESOURCES TOWARDS CAMP. WE MAINTAIN THE SAFETY AND LIQUIDITY THERE, BUT WE ARE ABLE TO EARN A HIGHER YIELD, SO WE'RE REALLOCATING SOME RESOURCES THERE. AGENCY ISSUES, 24 MILLION.
MEDIUM TERM NOTES, 10 MILLION. 8 MILLION IN TREASURIES.
WITH A TOTAL INVESTMENT PORTFOLIO, UP FROM THE FIRST QUARTER OF $79,848,030.
[00:10:01]
THE PORTFOLIO EFFECTIVE RATE OF RETURN AT 3.28, AND THE YIELD OF 3.97, THE BENCHMARK BEING 4.25.QUESTION ON THE EFFECTIVE RATE OF RETURN. THAT IS, JUST FROM MY OWN UNDERSTANDING THAT IS COUPON INCOME VERSUS BOOK VALUE, RIGHT? CORRECT. OKAY. AND DO YOU ALL CALCULATE OR DOES IT MATTER? DO YOU EVER HAVE A HUGE DIFFERENCE BETWEEN THAT AND THE ACTUAL THE RATE OF RETURN BASED ON MARKET VALUE? WITH OUR SHORT-TERM SECURITIES, IT IS DOUBTFUL THAT THAT EVER CHANGES THAT MUCH, BUT, DO YOU FOLLOW THAT? AS WE'RE SHORTER, WE DO ANALYZE THAT WHEN WE'RE REVIEWING THE, OUR POLICY AND OUR DECISION MAKING AND PURCHASING SECURITIES OR INVESTMENTS.
WE FOCUS ON THE BOOK VALUE, BUT WE DO ANALYZE THAT AS A COMPONENT.
YES. AS WE CONTINUE FORWARD, THEN THE INTEREST EARNED YEAR TO DATE IS 01,074,643. OUR TARGET GENERAL FUND CONTRIBUTION FOR THE YEAR FOR ALL FOUR QUARTERS IS 1.5 MILLION.
YEAR TO DATE, BETWEEN THE FIRST QUARTER AND THE SECOND QUARTER, WE ARE $990,000 OF THAT GOAL.
THESE ARE SOME OF OUR HISTORICAL VALUES. IF YOU LOOK BACK TO THE 24-25 SECOND QUARTER, OUR TOTAL INVESTMENT PORTFOLIO IS SLIGHTLY HIGHER ABOUT ON PAR WITH WHERE WE WERE AS FAR AS OUR INTEREST EARNED YEAR TO DATE AND OUR GENERAL FUND CONTRIBUTION.
OUR SECTOR ALLOCATION. OUR MATURITY DISTRIBUTION.
AND THE FISCAL IMPACT. SO OUR INTEREST EARNED YEAR TO DATE 1,074,634.
THE OTHER 40% GOES INTO POOLED CASH. AND OUR BUDGETED CONTRIBUTION, AS I JUST MENTIONED, TO THE GENERAL FUND FOR THE ENTIRE FISCAL YEAR, IS 1.5 MILLION. QUESTION, QUESTION ON THE 60% TO THE GENERAL FUND.
WE'VE DISCUSSED THIS BEFORE. THAT'S AN APPROXIMATE FIGURE, RIGHT? THAT FIGURE HAS TO VARY FROM TIME TO TIME. IT'S NOT EXACTLY 60%.
CORRECT, IT'S APPROXIMATELY 60%. AND THE QUESTION I'VE HAD THAT WE'VE RAISED IT BEFORE IS, WHO OWNS THE OTHER 40%? I WOULD THINK THAT THAT IN YOUR OFFICE, YOU'VE GOT A SPREADSHEET SHOWING WHO OWNS ACTUAL, THE ACTUAL DOLLAR AMOUNT OF THAT $80 MILLION OF INVESTMENT FUNDS.
WE DO. WE'VE PRESENTED A BREAKDOWN OF THAT IN THE PAST IN THIS REPORT, AND WE COULD DO THAT AGAIN.
LAST YEAR, YOU REMEMBER, OFF THE TOP OF YOUR HEAD, THE POOLED CASH FUNDS.
IT'S, IT IS CORRECT. SO, IT'S 40% THAT'S ALLOCATED TO THE VARIOUS OTHER FUNDS.
SO 60% IS TOWARDS THE GENERAL FUND. AND SO WHAT WE DO IS WE BASE IT ON THE GENERAL FUND, BECAUSE WHEN WE BUDGET, WE'RE BUDGETING THE 1.5 MILLION OF OUR INVESTMENT ACTIVITY.
SO WE WANT TO MAKE SURE WE'RE ALIGNED WITH THAT.
BUT. YEAH, SO THE OTHER FUNDS THAT ARE IN OUR POOLED CASH THAT WOULD GET SOME OF THIS INVESTMENT INCOME ARE LIKE OUR ENTERPRISE FUNDS, LIKE THE TIDELANDS, UPLANDS, TRANSIT, WASTEWATER, INTERNAL SERVICE FUNDS.
SO, WE WOULD ALLOCATE A PORTION OF THE INTEREST EARNINGS TO THOSE FUNDS BASED ON THEIR BALANCES.
WELL, THAT'S MY QUESTION, THOUGH. IT THIS REPORT ALWAYS STATES 60% AND 40%.
AND MY GUESS IS IT'S NEVER EXACTLY 60%. THAT'S TRUE, SO.
30%. YEP. SO WHEN WE DO THE INTEREST ALLOCATION, I MEAN, WE DO IT BASED ON THAT ACTUAL BALANCE.
SO WE WOULD BE ABLE TO GET YOU AT ANY TIME WHAT THE ACTUAL PERCENTAGE IS.
BUT IT'S, THAT'S ROUGHLY CORRECT. AND I IMAGINE THEY PRESENT IT LIKE THAT FOR SIMPLICITY.
IT WOULD JUST BE INTERESTING OCCASIONALLY TO SEE MAYBE ON AN ANNUAL BASIS WHAT THAT OTHER 40, WHAT THE ACTUAL OWNERSHIP IS. I UNDERSTAND THE ENTERPRISE FUNDS AND HOW THOSE BALANCES INCREASE AND DECREASE, BUT IT WOULD BE INTERESTING TO KNOW WHO THE WHO THE OWNERS OF THAT OTHER 40% ARE OTHER THAN THE GENERAL FUND.
WE CAN PROVIDE THAT TO YOU IN OUR NEXT PRESENTATION.
OKAY. THANKS. CAN I THINK OUT LOUD FOR A MOMENT?
[00:15:01]
SO THE OTHER 40%, IT GOES, FOR EXAMPLE, SOME OF THAT GOES TO ENTERPRISE FUND.ENTERPRISE FUND IS FUNDS THAT WE RECEIVE FOR SERVICES WE PROVIDE FROM OUR CUSTOMERS, RIGHT? YES? IS THAT? I'M THINKING OUT LOUD ABOUT SOMETHING.
I'M GOING TO GET SOMEWHERE, I PROMISE. SORRY.
OUR TIDELANDS AND UPLANDS FUNDS, WE MANAGE THOSE AS ENTERPRISE FUNDS, BUT THEY'RE PRIMARILY FUNDED THROUGH LEASE REVENUE BECAUSE THOSE ARE THE BASED ON THE PROPERTIES THE CITY OWNS IN THOSE AREAS, AND THEN TRANSIT IS BASED ON.
AND THOSE FUNDS ARE THERE THROUGH OUR, THE CUSTOMERS? THROUGH, IT'S WHEN WE PAY. RATEPAYERS, THROUGH THE LESSEES AND THROUGH.
YES. THE TRANSIT GETS A BUNCH OF EXTERNAL FUNDING, BUT YEAH.
THE CITY DOES NOT SUBSIDIZE ANY OF THAT? THE CITY DOES NOT REGULARLY SUBSIDIZE ANY OF THOSE FUNDS.
OUR TIDELANDS AND UPLANDS FUNDS, WE OR THE CITY DOES SOMETIMES SUBSIDIZE THESE ON KIND OF LIKE A ONE-TIME BASIS, BUT REGULARLY NO. SO GENERALLY SPEAKING, THE CITY DOES NOT SUBSIDIZE ANY OF THESE OTHER FUNDS BECAUSE THEY'RE PAID BY CUSTOMERS. EXACTLY. AND THEN THERE'S ANOTHER TYPE OF FUNDS.
AND THERE ARE SPECIAL REVENUE FUNDS. THOSE ARE FUNDED BY GRANTS AND OTHER SOURCES.
IN THOSE CASES, IN THAT CASE, THOSE FUNDS COME EXTERNALLY AND DEPENDING ON THE RULES AROUND INTEREST EARNING THAT EITHER STAYS HAS TO BE SPENT WITH THE PROJECT OR BELONGS TO THE CITY. OKAY. SO THAT'S ANOTHER FUNDING SOURCE IN THERE.
THANK YOU. SO WHAT I'M THINKING OUT LOUD IS IF THOSE ARE FUNDS THAT ARE NOT SUBSIDIZED BY THE CITY, THEN WHY ARE WE PUTTING 40% TO THOSE FUNDS AND NOT LEAVING THOSE FUNDS INTO GENERAL FUNDS.
SO THAT GENERAL FUND WILL HAVE AN EXTRA, I DON'T KNOW, 400,000.
300,000. DO YOU SEE WHAT I'M TRYING, WHAT I'M TRYING TO GET AT, WHAT I'M THINKING.
BECAUSE THE OTHER FUNDS THAT 40%, THEY'RE NOT SUBSIDIZED BY THE CITY.
THOSE ARE ALL FUNDS THAT WERE RECEIVED THROUGH BILLING.
THE CUSTOMER. SO WHY ARE WE PUTTING OUR. I DON'T KNOW, AND I CAN BE WRONG.
I'M JUST AGAIN, I'M THINKING OUT LOUD. SO, I WOULD HAVE TO LOOK AT THE.
DOES THAT MAKE SENSE? WHAT I'M SAYING. I SEE WHAT YOU'RE SAYING. I THINK I'D HAVE TO LOOK AT THE RULES SURROUNDING THE REVENUE IN OUR ENTERPRISE FUNDS SPECIFICALLY BECAUSE GENERALLY, YOU KNOW, THOSE REVENUE GENERATED FROM THOSE FUNDS CAN ONLY BE USED FOR THOSE FUNDS.
SO I THINK WE CONSIDER THAT THE INTEREST EARNED ON THE FUNDS THERE BELONG TO THAT FUND.
GOT IT. OKAY, OKAY. AND THEN FOR OUR SPECIAL REVENUE, IT JUST DEPENDS ON THE GRANTING AGENCY.
GOT IT. OKAY. OKAY. THANK YOU. OKAY. I KNEW THAT WE DO HAVE SOME SPECIAL REVENUE FUNDS WHERE THE, YOU KNOW, EXTERNAL AGENCY DOES NOT REQUIRE THE CITY TO TRACK AND TO TRACK INTEREST.
YEAH, I GOT IT. THE CONCEPT, KEEP IN MIND, IS THIS THIS INVESTMENT PORTFOLIO THAT EUGENE MANAGES IS A COMBINATION OF THE EXCESS FUNDS FROM SEVERAL DIFFERENT ENTITIES. THERE ARE SEVERAL DIFFERENT OWNERS OF THAT.
THAT WAS THE LINK THAT I WASN'T THINKING ABOUT.
OKAY. OKAY, OKAY. THE CASH FLOW ANALYSIS. YES.
SO I'M JUST KIND OF, AGAIN, LOOKING AT THE INS AND OUTS THROUGH DECEMBER. WHERE DO YOU THINK OR I GUESS, WHERE ARE YOU PROJECTING OUR END BALANCE TO BE THE FOURTH QUARTER IN TERMS OF THE TOTAL PORTFOLIO BALANCE? FROM A CASH FLOW ANALYSIS LOOKS LIKE WE'RE UP MAYBE 1 OR 2 MILLION OVER THE NEXT SIX MONTHS.
THAT DEPENDS ON A LOT OF FACTORS THAT WE CAN PROJECT, BUT I DON'T I COULDN'T SAY WITH CERTAINTY THAT THE FLUCTUATIONS, YOU SEE, SOMETIMES YOU'LL SEE IN NOVEMBER, EXCUSE ME, IN DECEMBER, FOR EXAMPLE, COMES IN FROM PROPERTY TAXES.
SO THOSE CYCLES WHERE WE GET PAID OUR PROPERTY TAXES OR WE GET PAID OUR SALES TAX ON A MONTHLY BASIS, THERE WILL BE FLUCTUATIONS DEPENDING UPON THE TIME OF YEAR FOR TRANSIT OCCUPANCY TAX.
I'LL GET BACK TO YOU ON. WHAT YOUR PROJECTION WOULD BE, KIND OF PROJECTED THE INS AND OUTS.
[00:20:04]
I JUST DIDN'T KNOW IF YOU KNEW WHERE IT WAS GOING TO LAND FOR THE END OF THE YEAR. JUST BECAUSE I KNOW, LIKE LAST QUARTER, WE'RE WELL BELOW THIS QUARTER WE'RE TRACKING ABOVE, BUT IT LOOKS LIKE BY THE END OF THE YEAR, WE'RE GOING TO STILL BE, YOU KNOW, 10 TO 12 MILLION OFF.I THINK WE'RE GOING TO TRACK PRETTY CLOSE TO OUR HISTORICAL.
THERE ARE SOME THINGS THAT WE'RE STARTING TO GET BACK. WE'RE STARTING. THIS LAST MONTH, FOR EXAMPLE, THERE WAS A REIMBURSEMENT THAT WE RECEIVED. OKAY, SO SOME OF THE OUTFLOWS THAT WE'VE SEEN THAT WE EXPECTED TO GET BACK, WE'RE STARTING TO SEE SOME OF THOSE START TO COME IN.
OKAY. SO IT LOOKS LIKE THERE IS YOU'RE NOT GOING TO HAVE ANY FUNDS TO INVEST THROUGH DECEMBER.
WE DID JUST INVEST SOME FUNDS OUTWARD THAT WE RECOVERED.
SO THERE WAS A REIMBURSEMENT FROM A LAWSUIT THAT CAME IN AND SOME OTHER FUNDS THAT CAME IN, AND WE JUST INVESTED OUT SOME OF THOSE. WE DID PURCHASE TWO SECURITIES THIS PAST MONTH.
BUT FROM JULY ON, YOU'RE NOT GOING TO HAVE IT.
IT DOESN'T LOOK LIKE YOU'RE GOING TO HAVE ANY. THERE'S A BOND YOU SAID IN JUNE, RIGHT? THERE'S A THERE'S SEVERAL DIFFERENT OPPORTUNITIES THAT WILL COME UP FOR US TO REINVEST OR INVEST OUT IN THE NEXT SEVERAL MONTHS.
THERE'S ONE IN JUNE, AND IT'S PART OF OUR PACKET.
I CAN SHOW YOU WHERE SOME OF THESE OTHERS ARE.
SO THOSE ARE NOT INCLUDED IN THOSE FIGURES? THE, BY INCLUDED YOU MEAN.
CALCULATED. YEAH. THE CASH FLOW, I THINK IS JUST FOR THE INCIDENT.
NO, IT WAS IN THIS QUARTER. GOT IT. AND BASICALLY MOST OF IT LOOKS LIKE MOST OF THE NEW FUNDS THAT CAME IN FOR SECOND QUARTER ALL WENT INTO LAIF JUST BECAUSE OF THE. SO, YOU SEE HERE, YOU'LL HAVE SOME US TREASURIES MATURING AT THE END OF MAY OF 2026, END OF JULY, MIDDLE OF AUGUST, END OF AUGUST.
AND WE HAVE THESE SOME CORPORATES THAT ARE COMING UP.
AND DO YOU ANTICIPATE GIVING A DECENT AMOUNT OF MONEY IN LIFE GOING FORWARD AS WELL? IF THE IF THE YIELD CONTINUES, IF IT CONTINUES NOW VERSUS CAMP, WE DO LOOK AT THAT ON A REGULAR BASIS. SO FOR THOSE FUNDS THAT WE'RE HOLDING SHORTER, I COULD SEE IT BEING MORE FOCUSED RIGHT NOW CONSIDERING THE INVERSE, THE INVERSION THAT HAPPENED BETWEEN CAMP RATES AND LIFE RATES.
GOT IT. DO WE HAVE GREG WITH US TONIGHT? WE DON'T HAVE GREG, SO WE'LL GO AHEAD AND WORK THROUGH THE INVESTMENT REPORT. SOME OF THE OBSERVATIONS AND EXPECTATIONS THAT WE HAVE FOR THE PAST YEAR.
I'LL GO THROUGH THIS BRIEFLY WITH YOU ALL. SO INTEREST RATES ALONG THE YIELD CURVE FOR 2025 WERE LOWER, EXCEPT FOR THE 30-YEAR TREASURY BOND. SO WE'RE SEEING SOFTENING IN SOME OF THE LABOR MARKETS, WHICH IS A CATALYST FOR LOWER RATES. THE GDP CONTINUE TO BE STRONG POSTED IN THAT Q3 WITH A 4.3% RATE.
THE FUTURES MARKET IS PREDICTING THE FED FUNDS RATE TO REMAIN OR BOTTOM OUT AROUND 3% IN 2027.
THE CHAIRMAN FEDERAL RESERVE CAME OUT. AND THE PREDICTION MARKETS ARE LOOKING AND TALKING ABOUT PERHAPS 225 BASIS POINT CUTS IN 2026. THERE IS GOING TO BE THE EXPIRATION OF THE CHAIRMAN'S CURRENT TERM, AND A NEW NOMINEE HAS BEEN SELECTED FOR THE CHAIRMAN OF THE FEDERAL RESERVE. IT WOULD GO THROUGH A PROCESS OF BEING APPROVED.
LOOKING HERE AT WHAT BLOOMBERG'S THINKING ABOUT FOR A SLOWING OF GDP FOR Q4 OF 25.
AND YOU SEE WHAT SOME OF THE PERFORMANCE HAS BEEN FOR GDP.
AND YOU'LL SEE THE YIELD CURVE RATE FLATTENING OUT BETWEEN 23 AND 25 THERE WITH 25 JUST A LITTLE BIT AHEAD OF WHERE 24 WAS. WE'RE STILL RUNNING A LITTLE BIT SHORT BUT ARE STARTING TO OR HAD THE
[00:25:03]
OPPORTUNITY TO INVEST A LITTLE BIT LONGER. THE SECURITIES THAT WE PURCHASED WERE OUT JUST OVER TWO YEARS.WE ARE BY INVESTMENT POLICY AND GOVERNMENT CODE RESTRICTED ON WHAT WE CAN BUY.
WITH REGARD TO OUR PREFERENCE, WE LOOK FOR DOUBLE A OR BETTER RATED SECURITIES, WHICH IS WHY WE TEND TO FOCUS ON TREASURIES AND AGENCIES AND CORPORATE DEBT THAT IS AT LEAST DOUBLE AA RATED.
HERE'S A SUMMARY OF OUR HOLDINGS. YOU RECEIVE THESE REPORTS AGAIN ON A MONTHLY BASIS TO BE ABLE TO REVIEW THIS, TO SEE WHERE OUR HOLDINGS ARE, WHAT MATURITIES WE HAVE BECOMING AVAILABLE, WHAT THE COUPON RATES ARE, WHAT THE YIELD TO MATURITY IS, WHAT THE UNREALIZED GAIN OR LOSS MIGHT BE BASED ON BOOK VALUE.
MORE OF OUR POSITIONS WITHIN OUR CORPORATES, WHERE YOU SEE SOME OF THOSE MATURITIES THAT ARE GOING TO BE COMING UP WITHIN THE NEXT SIX MONTHS TO A YEAR.
AND ANOTHER BREAKDOWN OF OUR PROJECTED CASH FLOWS THAT ARE COMING FROM THE INVESTMENTS THAT WE HAVE.
SO THIS IS THE CONCLUSION OF OUR PRESENTATION FOR YOU TONIGHT.
I'LL FIELD ANY QUESTIONS THAT YOU MIGHT HAVE THAT HAVE RAISED BASED UPON THIS PRESENTATION.
AND I THINK IT CAME UP, YEAH, $21 MILLION. ARE WE EARNING BALANCE, EARNING INTEREST ON THESE BALANCES, OR ARE THEY JUST TRANSACTION BALANCES? FOR SOME OF THESE WE ARE EARNING INTEREST.
WE TOOK SOME OF THE ADVICE FROM THIS COMMISSION AND TALKED ABOUT IT INTERNALLY.
THEN WE ARE HAVING THOSE IN SHORT TERM FUNDS LIKE LAIF OR CAMP.
WE WANT TO MAINTAIN LIQUIDITY OF THOSE FUNDS.
BUT FOR SOME OF THOSE FUNDS, IT'S NOT AVAILABLE TO US TO DO THAT, SUCH AS THE WORK COMP FUND.
HAVE YOU LOOKED AT THE POSSIBILITY OF, I'M NOT SURE WHETHER THIS IS POSSIBLE AT ALL, BUT IT SEEMS TO ME THAT 21 MILLION IS A LARGE BALANCE FOR OUR CITY. ANY WAY TO REDUCE THAT OR TO COMBINE SOME OF THOSE ACCOUNTS SO THAT.
I UNDERSTAND WHY YOU HAVE TO KEEP BALANCES IN A CHECKING ACCOUNT, BUT 21 MILLION JUST SEEMS HIGH.
HAVE YOU LOOKED AT THAT ISSUE? IS THERE ANY WAY TO REDUCE THAT? COMMISSIONER. CAN I? JUST ONE THING REAL QUICK? SO THIS SERVES. IT'S A TWO PART. ONE IS TO OFFSET THE ACCOUNT ANALYSIS FEES FOR OUR BANK OF AMERICA SERVICES THAT WE'RE RECEIVING. SO BANK OF AMERICA CHARGES A VERY HEFTY MONTHLY ACCOUNT ANALYSIS FEE FOR HAVING THESE ACCOUNTS. SO WHAT WE'VE DONE IS WE'VE TAKEN A PORTION OF THESE MONEYS TO OFFSET THE FEES.
AND THEN THE REMAINING PORTION WE'RE EARNING ABOUT 3%.
SO WHAT WE'RE DOING IS WE'RE MAXIMIZING WHERE WE CAN.
AT THE SAME TIME FOR CASH FLOW PURPOSES IT IS OUR RECOMMENDATION TO KEEP AROUND $9 MILLION IN THE CHECKING ACCOUNT JUST FOR CASH FLOW PURPOSES.
WE HAVE INFLOWS AND OUTFLOWS ON A WEEKLY BASIS.
[00:30:02]
SO KEEPING THAT KIND OF BALANCE IS NECESSARY.WITH THE OTHER ACCOUNTS, WE DEFINITELY TOOK INTO ACCOUNT YOUR RECOMMENDATION.
AND WE DID DO SOME TRANSFERS INTO LAIF, WHICH IS DEFINITELY EARNING A HIGHER YIELD.
BUT WHAT WE WERE ABLE TO DO IS WITH THE REMAINING BALANCES, WE'RE ABLE TO OFFSET THE BANK OF AMERICA FEES, WHICH ACCOUNT FOR ABOUT 90 TO 100,000 ANNUALLY, WHICH WE'RE CURRENTLY NOT PAYING BECAUSE WE'RE ABLE TO UTILIZE THESE BALANCES.
SO THAT'S A BIG BENEFIT TO OUR FINANCE DEPARTMENT, WHICH ISN'T SEEING THAT AS AN EXPENSE.
OKAY. AND THE SECOND QUESTION IS A QUESTION ABOUT OVERALL PORTFOLIO RISK.
WHAT ABOUT THE, HOW DO I TERM THIS, THE HANDLING RISK WITHIN THE CITY.
HOW ARE FUNDS REDEEMED FROM THESE ACCOUNTS? HOW ARE THEY SPENT? WHAT CONTROLS DO WE HAVE OVER MAKING SURE THAT THE ONLY MONEY THAT THAT LEAVES THE INVESTMENT PORTFOLIO IS MONEY THAT EITHER STEPHANIE OR SOMEONE WITH IN CHARGE OF THOSE ACCOUNTS HAS SAID WE NEED TO PAY BILLS? IF YOU GET MY DRIFT. WHAT CONTROLS DO WE HAVE TO MAKE SURE THAT NONE OF THAT MONEY LEAVES AND GOES WITH THE PERSON TO MEXICO? WE HAVE A SERIES OF INTERNAL CONTROLS FOR THAT.
AND WE HAVE TWO SIGNATORIES FOR LOTS OF THESE.
LOTS OF THESE AS PART OF OUR INTERNAL PROTOCOLS.
NOT LOTS OF THEM, ALL OF THEM AS PART OF OUR INTERNAL PROTOCOLS.
TYPICALLY, IF THERE'S NECESSARY AP, LET'S SAY, TO PAY AN INSURANCE PREMIUM, WE WOULD RECEIVE NOTIFICATION FROM THE FINANCE DEPARTMENT ALONG WITH THE INVOICING OR BILLING, THAT X NUMBER OF DOLLARS IS DUE FOR A WORKER'S COMPENSATION POLICY PREMIUM.
IT WOULD COME OVER TO OUR DEPARTMENT, IT WOULD BE REVIEWED, THAT WOULD BE APPROVED AND THE MONEY TRANSFERRED INTO AN ACCOUNT TO PAY THAT. AND THERE WOULD BE AN INTERNAL CONTROL GOING BACK TO FINANCE TO MAKE CERTAIN THAT THOSE FUNDS WERE ALLOCATED TOWARDS THAT AP.
CORRECT. OKAY. THAT'S A FAIR ASSESSMENT. ANY OTHER QUESTIONS? NO. ACTUALLY, I HAVE A QUESTION ABOUT, EXCUSE ME, ABOUT THE PROCESS OF BENCHMARKING THE BANK THAT WE ARE PARTNERING WITH.
SO AGAIN, MY LIGHT, JUST EVERYONE KNOWS MY LACK OF EXPERIENCE IN PUBLIC SECTOR AND PRIVATE SECTOR.
BANK OF AMERICA AND CHASE BANK FOR THAT MATTER, ARE CONSIDERED OR KNOWN TO BE VERY FEE HEAVY.
SO I'M JUST CURIOUS, WHAT IS OUR PROCESS IN BENCHMARKING WHICH BANK WE'RE USING? IF THEY'RE REQUIRING US TO MAINTAIN A HIGH BALANCE TO OFFSET THEIR FEES, DO WE GO OUT AND GET COMPETITIVE BIDS FROM BANKS TO MAKE SURE THAT WE'RE REMAINING COMPETITIVE IN THAT? YES, WE DO. THANK YOU FOR THE QUESTION, COMMISSIONER TURNER.
WHEN EVERY COUPLE OF YEARS, EVERY 2 TO 3 YEARS, WE GO THROUGH A REQUEST FOR INFORMATION PROCESS, WHERE WE GO OUT TO A VARIETY OF DIFFERENT BANKS.
WE PROVIDE THEM WITH A LIST OF OUR SERVICES THAT ARE NECESSARY, AND WE ASK THEM TO COME BACK WITH THEIR BEST AVAILABLE THEIR BEST AVAILABLE PRICING FOR THOSE SERVICES. WE DID THAT A COUPLE OF YEARS AGO.
WE HAD, I WANT TO SAY, 4 OR 5 DIFFERENT VENDORS THAT APPROACHED US TO BE OF SERVICE TO THE CITY OF REDONDO BEACH AS PART OF THAT PROCESS. WHAT YOU HEARD MR. MEHTA MENTIONED EARLIER THAT OFFSET IS CALLED AN EARNED CREDIT RATE.
SO THAT EARNED CREDIT RATE. PREVIOUSLY, WE HAD AT 1.75.
BY GOING OUT THROUGH THE BIDDING PROCESS, WE WERE ABLE TO INCREASE IT TO 3.75 FOR THOSE FUNDS THAT WERE IN THERE IN THE WAY OF FOR US TO BE ABLE TO OFFSET THOSE CHARGES, THOSE BANKING CHARGES. SO THOSE FEES THAT YOU'RE TALKING ABOUT, THAT OFFSET THAT YOU'RE HEARING ARE FOR ALL THOSE DIFFERENT TYPES OF OR MANY OF THOSE DIFFERENT TYPES OF TRANSACTION FEES THAT I THINK THAT YOU'RE ASKING ABOUT.
AND THE PROCESS THAT WE WENT THROUGH WAS TO HAVE SEVERAL DIFFERENT VENDORS.
THIS THIS BODY HAS DISCUSSED PROFESSIONAL SERVICE CONTRACTING QUITE A BIT AND HASN'T TAKEN AN INTEREST IN IT, WHICH I THINK IS GREAT. THAT'S THE WAY IN WHICH OUR DEPARTMENT APPROACHED THE BANKING SERVICES.
[00:35:03]
MOTION TO RECEIVE AND FILE. THE MOTION. ARE THERE ANY COMMENTS ONLINE? THERE ARE NO ECOMMENTS AND NO ONE ON ZOOM. OKAY.WE HAD A MOTION TO RECEIVE AND FILE. DO YOU HAVE A SECOND? SECOND. ALL IN FAVOR? AYE. THANK YOU, COMMISSIONERS.
THANKS, EUGENE. THANK YOU. THANK YOU. ITEM G.2, FISCAL YEAR 24-25 YEAR-END REPORT.
OKAY. OKAY. GOOD EVENING, CHAIR WOODHAM AND COMMISSIONERS.
SO AS A BRIEF OVERVIEW, WE BRING THESE NUMBERS TO YOU EVERY YEAR PRIOR TO OUR FINAL AUDIT, SO THERE ARE PRELIMINARY NUMBERS. WE BRING THIS TO YOU FOR YOUR INPUT AND COMMENT BEFORE WE SHARE WITH COUNCIL AND ASK THEM TO MAKE DECISIONS ON YEAR-END ASSIGNMENTS. THIS IS ALSO A STEP IN OUR 24-25 AUDIT PROCESS, WHICH WILL FEED INTO THAT.
AS A VERY HIGH-LEVEL SUMMARY FOR OUR GENERAL FUND THIS YEAR, OUR REVENUES EXCEEDED ESTIMATES BY ABOUT 3%, AND OUR BUDGET IS ABOUT 2% BELOW BUDGET. ONE TIME, ONE THING I'D ALSO LIKE TO NOTE AS YOU LOOK THROUGH THIS IS OUR USE OF ONE-TIME FUNDS IN 24-25. THINK THIS HAS COME UP IN TREASURER SOLOMON'S PRESENTATION AND OTHER PLACES SO YOU CAN SEE SOME KIND OF LARGER EXPENDITURES.
I THINK THAT'S GOING TO LEVEL OUT OVER THE NEXT FEW YEARS, BUT WANTED TO POINT IT OUT HERE.
AND I WILL JUST MAKE SURE I SHARE WITH YOU WE ARE NOT PUBLISHING OUR AGENDA.
WE HAVE NOT PUBLISHED THE AGENDA, WILL NOT PUBLISH IT TO TOMORROW.
SO JUST A HIGH LEVEL LOOK AT REVENUE. THESE ARE OUR MAJOR CATEGORIES LED, AS YOU CAN SEE, BY OUR TAXES. SO I GUESS YOU CAN TAKE A LOOK AT THIS FOR YOURSELVES.
AGAIN, OUR OUR TAXES AS A WHOLE CAME IN ABOVE BUDGET.
THIS IS EVEN INCLUDING SOME UPWARD ADJUSTMENTS THAT WE MADE TO TAXES AT OUR MID-YEAR REVIEW, WHICH IS GREAT. PROPERTY TAX CAME IN ABOVE, AND WE ALSO HAD SOME KIND OF SURPRISE BETTER THAN EXPECTED PERFORMANCE IN DOCUMENTARY TRANSFER TAX AND UTILITY USERS TAX. WE, TRYING TO THINK OF ANYTHING ELSE THAT REALLY STANDS OUT HERE.
USE OF MONEY AND PROPERTY INCLUDES OUR INVESTMENT RETURNS AND LEASE REVENUE FOR THE CITY.
AGAIN, THAT CAME IN HIGHER THAN PROJECTED. OUR TRANSFERS IN IS BELOW OUR BUDGET, HOWEVER, THAT IN THIS CASE REFLECTS SOME DIFFERENT WAYS.
AND WE HAVE A DETAILED BREAKDOWN OF TAX REVENUE HERE, INCLUDING SOME ADDITIONAL YEARS.
IN A LOT OF OTHER AREAS, YOU'LL SEE OUR NUMBERS ARE FAIRLY FLAT.
WITH A LITTLE BIT OF FLUCTUATION. AGAIN, PROPERTY TRANSFER TAX DID BETTER THAN WE ANTICIPATED.
AND I THINK SO FAR THIS YEAR IS LOOKING BETTER AS WELL.
UTILITY USERS TAX IS COMING BACK UP A LITTLE BIT.
A COUPLE OF AREAS WE'VE NOTICED THAT WE'LL PAY MORE ATTENTION TO, OUR FRANCHISE FEES.
SO WE'LL TAKE A LOOK AT THAT AND MAYBE THINK ABOUT ADJUSTING FOR MID-YEAR.
SO THIS TENDS TO BE AGAIN, A PRETTY STRONG REVENUE SOURCE FOR US.
WE'VE ADDED SOME CHARTS FOR YOU TO LOOK AT OUR TAX REVENUE HERE.
[00:40:02]
AGAIN, I THINK YOU CAN SEE GRAPHICALLY DEMONSTRATED WHAT I JUST MENTIONED.FIRST, PROPERTY TAX IS BY FAR OUR, THE LARGEST SINGLE PIECE OF OUR TAX REVENUE.
I'LL JUST POINT SOMETHING OUT HERE FOR OUR TRANSIENT OCCUPANCY TAX.
I THINK, AS YOU'RE AWARE, THE CITY HAS A SITE SPECIFIC TAX AGREEMENT WITH THREE OF OUR HOTEL PROPERTIES RESIDENTS IN HILTON GARDEN INN AND HOMEWOOD SUITES, WHEREBY IF THEY ARE NOT ABLE TO ESSENTIALLY COVER THEIR DEBT SERVICE AND OPERATING PAYMENTS.
THEY ARE ABLE TO INVOICE THE CITY FOR THE TRANSIENT OCCUPANCY TAX THAT THEY HAVE PAID TO THE CITY.
SO IN THAT CASE, AND THIS CONDITION IS HELD ALMOST CONSISTENTLY SINCE THE MIDDLE OF 2020 AND COVID, THE CITY THEN DOES NOT RETAIN THE TOT THAT THOSE HOTELS CONTRIBUTE.
PRIOR TO 23-24, WE WERE RECORDING THIS AS A NET.
SO YOU CAN KIND OF SEE THERE'S A JUMP BETWEEN 22-23 AND 23-24.
UNFORTUNATELY, THAT'S NOT A REAL JUMP. DURING OUR AUDIT LAST YEAR, OUR AUDITORS RECOMMENDED THAT WE RECORD THIS AS GROSS REVENUE AND GROSS EXPENSE, WHICH IS, YOU KNOW, IS A GREAT IDEA, MAKES MORE SENSE.
SO WHAT YOU'LL SEE HERE IS, IS THE IMPACT OF, OF THAT RECLASSIFICATION.
SO ALTHOUGH WE TOOK IN MORE TOT THAN WE HAD PRIOR YEARS THE CITY DID NOT RETAIN ALL OF THAT, UNFORTUNATELY. WHERE DOES THAT EQUATION STAND? ARE WE GETTING CLOSER TO THE POINT OF? SO THE CITY DID RECEIVE AND WE WERE ABLE TO RETAIN TOT FOR THE FIRST TWO MONTHS OF THIS FISCAL YEAR. AND WE ARE NOW BACK INTO A WE ARE NOW BACK INTO AN INVOICING TOT PHASE WITH THE HOTELS. AND WE, YOU KNOW, WE MEET WITH THEM REGULARLY.
BUT, YOU KNOW, WE WE MEET WITH THEM. I THINK THEY'RE ACTING IN ALL GOOD FAITH.
AND PROBABLY COULD SPICE THIS UP A LITTLE BIT.
THIS IS JUST OUR TOTAL TAX REVENUE TREND LAST FIVE YEARS.
MOVING ON TO EXPENDITURES, AGAIN, INCLUDING TRANSFERS OUT.
WE ARE ALMOST EXACTLY IN BUDGET. IF YOU EXCLUDE OUR TRANSFERS OUT, WE HAD ABOUT 2% SAVINGS IN OUR GENERAL FUND EXPENDITURE. YOU CAN SEE HERE WE HAD PRETTY SIGNIFICANT SAVINGS IN CONTRACTS AND PROFESSIONAL SERVICES THAT OFFSET SOME OVERAGES IN PERSONNEL AND FRINGE. THIS IS SOMETHING THAT IT ISN'T VERY SURPRISING TO ME AS I LOOK AT IT.
WE DID A COUPLE THINGS LAST YEAR. ONE IS WE BUDGETED MUCH LESS GENEROUSLY IN 24-25 THAN WE HAD IN PRIOR YEARS FOR SALARIES AND BENEFITS. I THINK IN SOME YEARS WE'VE HAD, YOU KNOW, 02, 3, 4, 5, $6 MILLION IN SAVINGS.
THAT'S POTENTIALLY FUNDS THAT THE CITY COULD NOT COMMIT AND COULD DO SOMETHING ELSE WITH.
SO THAT FACTOR COMBINED WITH STRONGER THAN, STRONGER HIRING THAN THE CITY HAS HISTORICALLY HAD RESULTED IN FEWER VACANCIES AND HIGHER SPENDING.
SO ALTOGETHER, I THINK THE SLIGHT OVERAGE IN PERSONNEL IS NOT SURPRISING.
THESE ARE SOME THINGS THAT WE WERE AWARE OF AND ADJUSTED FOR OUR 25-26 BUDGET.
WE ALSO WANTED TO PROVIDE YOU OUR EXPENDITURE BY DEPARTMENT.
AGAIN, THIS EXCLUDES TRANSFERS OUT BECAUSE THOSE ARE NOT DEPARTMENTAL EXPENSES.
SO YOU CAN SEE ALL DEPARTMENTS WERE WITHIN BUDGET APART FROM FIRE AND COMMUNITY DEVELOPMENT.
AGAIN. FIRE BECAUSE THEIR SALARIES ARE, THEIR SALARIES ARE HIGH.
[00:45:04]
KNOWING THAT IT FLUCTUATES AND KNOWING WE'RE GOING TO HAVE PERSONNEL SALARY SAVINGS.SO WHAT HAPPENED FOR FIRE THIS YEAR IS THAT OVERTIME WAS, OVERTIME SPENDING WAS UP.
SO YOU CAN SEE POLICE ON THE OTHER HAND, FINISHED THE YEAR WITHIN BUDGET.
THEY ALSO WENT SIGNIFICANTLY OVER THEIR OVERTIME BUDGET, BUT THEY JUST DIDN'T HAVE A STRONG HIRING.
SO WHILE WE CAN'T PROMISE THERE WILL BE NO OVER OVERSPENDING IN FIRE OVERTIME, BUT I THINK WE'RE WE HAVE A BETTER WE HAVE A BETTER PROJECTION OF THAT FOR THIS YEAR. THIS IS THE TOTAL EXPENDITURE JUST BY CATEGORY AGAIN, SO YOU CAN SEE IT BROKEN DOWN AND INCLUDING SOME HISTORICAL TRENDS. AGAIN, YOU CAN SEE THE INCREASE TO PERSONNEL AND FRINGE BENEFITS HERE.
APART FROM THAT, YOU KNOW SPENDING LOOKS RELATIVELY CONSISTENT.
YOU DO START TO SEE A JUMP IN OUR CONTRACTS AND SERVICES IN 23-24 AND 24-25.
HOWEVER, THE THAT'S WITHIN, IT'S WITHIN BUDGET.
AND THEN THE LAST THING I WANT TO POINT OUT IS OUR TRANSFERS OUT, YOU'LL SEE THAT IS A MUCH HIGHER NUMBER. AND THIS REFLECTS SOME OF THE ONE-TIME SPENDING THAT I MENTIONED FOR 24-25. SO WE DID A FEW THINGS.
WE ALLOCATED ONE TIME FUNDS FOR A TRANSFER TO THE SELF-INSURANCE FUND IN 24-25 AND FOR OUR $3.2 MILLION UNFUNDED LIABILITY PAYMENT. WE ALSO TRANSFERRED A LITTLE OVER $3 MILLION FROM OUR GENERAL FUND TO OUR CAPITAL PROJECTS FUND SIMPLY TO MOVE THOSE PROJECTS INTO THE CAPITAL PROJECTS FUND, WHERE IT IS A MORE APPROPRIATE PLACE TO BUDGET FOR THEM.
THAT HAD A NET ZERO IMPACT ON THE GENERAL FUND, BECAUSE WE MOVED THE EXPENSES AND THE FUNDS WITH IT.
AND THEN FINALLY, WE RECORDED THE EXPENSES FOR OUR PAYMENTS TO OUR HOTEL PROPERTIES IN TRANSFERS OUT, BECAUSE IT'S NOT REALLY A DEPARTMENTAL EXPENSES, SO THAT'S WHERE THAT EXPENSE SHOWS UP.
A QUESTION ON THIS SLIDE. $21 MILLION INCREASE FROM FISCAL 24 TO FISCAL 25 IS FAIRLY SUBSTANTIAL. OF THAT, 21, OF ALL OF THE SPENDING OF 134 MILLION, HOW MUCH OF THAT IS.
SALARIES AND SO FORTH, WE'VE GOT TO PAY IT. WE'VE GOT TO PAY CALPERS AMOUNT.
BUT IF PUSH CAME TO SHOVE AND WE DIDN'T HAVE THE MONEY TO FUND THAT, WHAT ARE THE CATEGORIES WHERE WE, WHERE WE COULD HAVE CUT BACK. I ASSUME TRANSFERS OUT.
SO YEAH, I MEAN, AGAIN, THIS DOES INCLUDE ABOUT.
SO EVERY YEAR WE'RE NOT TRANSFERRING $3 MILLION TO THE CAPITAL PROJECTS FUND.
WE'RE NOT TRANSFERRING $3 MILLION TO THE SELF-INSURANCE FUND.
AGAIN, A LOT OF THOSE CAN BE FOR KIND OF ONE TIME PROJECTS.
AND GENERALLY WHAT COUNCIL AND WHAT WE TRY AND ADVISE, WHAT WE TRY AND PRESENT TO COUNCIL AS AN OPTION ARE KEEPING ONE TIME FUNDS FOR ONE TIME ITEMS. SO I THINK THEY'RE I'M NOT SAYING THIS.
WELL, THERE ARE FEWER NUMBER OF KIND OF ONE TIME PROJECTS THAT WE COULD APPROVE.
SO THAT'S SOMETHING THE CITY MANAGER HAS ALREADY ASKED ME TO LOOK AT KIND OF FOR THE PAST FEW YEARS, IS HOW MUCH MONEY THE CITY HAS ALLOCATED TO THESE ONE TIME PROJECTS THAT WE, WE COULD SAY NO TO.
AND I MEAN, IN PERSONNEL, WE, YOU KNOW, WE HAVE CONTRACTS WITH PEOPLE, WE DO NEED TO PAY THEM.
OKAY. THANKS. CAN I ASK ABOUT. CAN YOU TELL US AGAIN WHAT ARE THOSE CONTRACTS AND SERVICES, WHAT TYPE OF CONTRACTS? IT'S ACROSS THE BOARD.
SO WE HAVE WE HAVE CONSULTING SERVICES. I DON'T KNOW.
[00:50:06]
I MEAN, WE CAN DEFINITELY SEND THIS DETAIL TO YOU.I'M TRYING TO THINK OF OTHER EXAMPLES. SO, I CAN TELL YOU, FOR EXAMPLE, FOR OUR OFFICE, WE HIRE WE PAY OUR AUDITORS, WE PAY OUR TAX CONSULTANTS. SO PROFESSIONAL? YEAH, SO A LOT OF IT'S PROFESSIONAL.
AGAIN, WE'RE WORKING ON A BREAKDOWN OF THE CONTRACTUAL VERSUS PROFESSIONAL.
BUT I BELIEVE WE ALSO HAVE FOR EXAMPLE, WELL THAT'S NOT GENERAL FUND, BUT WE MAY HAVE OUR ATHENS CONTRACT IN THERE, RIGHT. WHICH IS A MULTI-MILLION DOLLAR CONTRACT.
AGAIN WE CAN LOOK AT WHAT THESE ARE. BUT I'M TRYING TO THINK FOR FIRE.
YOU KNOW, WE HAVE OH, YEAH, WE HAVE A LOT OF SOFTWARE AGREEMENTS.
SO THE REASON I ASK, BECAUSE EXCLUDING TRANSFERS OUT, THAT'S THE ONE LINE THAT IT, SINCE 2019-2020, IT MOVED. I WANT TO SAY, WHAT IS THAT? YEAH. MORE THAN. AND I CAN TELL YOU EXACTLY WHY THAT IS.
SO THAT IS OUR BOND PAYMENT FOR 2021 BONDS. WHAT PAYMENT? OUR BOND PAYMENT FOR 2021 A LEASE REVENUE BONDS.
SO YOU SEE IN 19-20 2021 WE DON'T HAVE THAT. IN 21-22 IT GOES UP TO 13.5.
WHERE'S THAT 13.5? SORRY IT'S 21-22 ACTUALS, RIGHT HERE.
THE TRANSFER OUT. IN TRANSFER OUT. I WAS TALKING.
WITH A JUMP IN THE TRANSFER OUT IS BASED ON DRIVING.
YES. SO THAT I MEAN THAT'S WHAT DROVE THIS INITIAL LARGE JUMP.
AND THEN THE ITEMS THAT I JUST MENTIONED HERE ARE CAPITAL PROJECTS.
I WAS. YEAH. CONTRACTS AND SERVICES LINE. OH SORRY.
THAT'S THE LINE BECAUSE THAT'S KIND OF WHAT WE WERE TALKING WITH OUR OTHER ITEMS. BUT THAT'S MORE THAN DOUBLE SINCE 19-20. 6 YEARS.
YEAH, IT'S TRUE. SO WE CAN DEFINITELY GET MORE DETAIL ON THAT.
I MEAN, MY GUESS IS THIS JUST GOES ALONG WITH THE CITY KIND OF DOING MORE THINGS AND BECOMING A MORE COMPLEX OPERATION WHERE, YOU KNOW, MAYBE FIVE YEARS AGO WE WERE DOING MORE WITH CITY STAFF AND WE ARE NOW BRINGING ON ADDITIONAL CONTRACTS, BUT I WOULD HAVE TO LOOK AT IT.
OKAY, SO FOR THE, THIS IS KIND OF AN IMPORTANT SLIDE.
SO THAT I DON'T FORGET LATER ON, BUT I WOULD RECOMMEND THAT WE DO ANALYSIS ON CONTRACTS AND SERVICES TO SEE WHY IT DOUBLED FOR THE PAST SIX YEARS. AND LIST THEM OUT WERE THOSE NECESSARY.
AND SAME FOR TRANSFERS OUT, JUST LIST THEM OUT SO THAT IT'S CLEAR WHY THAT NUMBER HAS YOU KNOW, WHAT HAPPENED. MAYBE YOU DO HAVE IT SOMEWHERE IN THAT.
SO IN THE GENERAL FUND REPORT I DID LIST IT FOR THE 24-25 YEAR.
BUT WE'RE HAPPY TO INCLUDE THAT, IT'S EASY TO DO FOR THE TRANSFERS OUT.
FOR CONTRACTS AND SERVICES. I MEAN, I THINK THE, YEAH, WE CAN DO SOME ADDITIONAL ANALYSIS ON THAT BECAUSE I DON'T SEE ANY OTHER ONES THAT REALLY JUMPED THAT MUCH. I THINK THE OTHER THING THAT I WOULD POINT OUT HERE IS THAT ACTUALLY, I MEAN, IF YOU CONSIDER INFLATION AND YOU CONSIDER THAT THE COSTS OF A LOT OF THESE THINGS HAVE REALLY INCREASED OVER FIVE YEARS, I ALMOST THINK IT'S MORE SURPRISING THAT SOME OF OUR OTHER CATEGORIES HAVEN'T INCREASED MORE.
AND I THINK THAT'S A CHALLENGE THAT WE KIND OF HAVE BUDGETING IS THAT WE DON'T REALLY BUILD IN ANY OF THESE ANNUAL INCREASES, APART FROM KIND OF ONE-TIME ITEMS IN THIS CONTRACT LINE, BUT NOT GOOD ENOUGH AT MENTAL MATH TO DO THE PERCENTAGE INCREASE YEAR OVER YEAR.
BUT IT LOOKS PRETTY STEADY IN OUR CONTRACTS AND SERVICES.
MAYBE UNTIL YOU KNOW, I GUESS 22-23 IS A BIGGER JUMP, BUT.
23-24. YEAH. YEAH, DEFINITELY THE LAST TWO YEARS AFTER COVID.
THAT'S WHY I WAS ASKING WHAT TYPE OF CONTRACTS THEY ARE, BECAUSE IF THEY WERE, THEY'RE NOT MAINTENANCE CONTRACTS OR WHATEVER YOU CALL IT, THEY'RE NOT CAPITAL IMPROVEMENTS. THEY'RE NOT CAPITAL IMPROVEMENT. AGAIN, I THINK, YOU KNOW, A LOT OF THESE COULD BE COULD BE SOFTWARE RELATED. THOSE SOFTWARE IS EXPENSIVE. WE'VE REALLY ADDED A LOT OF THESE IN THE PAST SEVERAL YEARS, BUT WE CAN TAKE A LOOK.
BECAUSE THIS DATA IT'S NOT HARD TO GET. YES. QUESTION, YOU POINTED OUT THAT THE TRANSFERS OUT INCLUDED AN INCREASE IN FISCAL 22 FOR THE BOND PAYMENT INTEREST, PRINCIPAL AND INTEREST THAT WE PAID FOR THE FIRST TIME.
[00:55:06]
IF YOU RECALL, WE REPLACED A CALPERS EXPENSE, WHICH WAS ABOUT $4 MILLION PER YEAR HIGHER.WHERE WAS THAT CALPERS PAYMENT IN FISCAL 21? IT'S IN FRINGE.
IT SHOULD HAVE BEEN IN FRINGE. STEPPED DOWN 21 VERSUS 22, WENT FROM 23.9 TO.
FRINGE BENEFITS, OKAY, GOT IT. YES. YES. MAKES SENSE.
YEP. YEAH, BECAUSE YOU CAN SEE THAT'S A PRETTY SIGNIFICANT.
THAT'S A MASSIVE DROP. YEAH. OKAY. AND ACTUALLY YOU CAN SEE THIS EVEN BETTER IN THIS VERSION.
SO I ACTUALLY REALLY LIKE YOU CAN SEE THIS HERE.
IT DROPS DOWN TO HERE BECAUSE WE'RE NO LONGER, THAT'S NO LONGER SHOWING UP IN OUR FRINGE TRANSFERS OUT JUMPS UP IN THE OPPOSITE DIRECTION AS WE START TO INCLUDE THAT IN THE BOND PAYMENT HERE.
NOW THAT. FRINGE BENEFIT WOULD HAVE DROPPED MORE THAN THE BOND INTEREST INCREASED BECAUSE THERE'S A DELTA OF 5 MILLION, 4 MILLION LESS EXPENSE BECAUSE OF THAT BOND ISSUE OR THE REFINANCING OF THE DEBT.
OKAY. AND HERE AGAIN, YOU, YOU KNOW, YOU CAN SEE THE SAME THING.
PERSONNEL IS INCREASING AT A DECENT RATE THE LAST FEW YEARS.
FRINGE BENEFITS, YOU CAN SEE THIS JUMP UP IN.
WELL, YEAH. I MEAN, THIS IS JUST CONSISTENT. THESE OTHER ITEMS DOWN HERE STAY PRETTY STEADY WITH A LITTLE BUMP UP HERE IN OUR CONTRACTS AND SERVICES. THE REST OF THESE REMAIN PRETTY FLAT.
I MAY NEED TO NOT HAVE THIS LINE. THIS IS OUR TOTAL EXPENSES.
AND AGAIN, THE 24-25. AGAIN, SOME OF THAT IS ONE TIME.
SO SHOULD NOT EXPECT THAT TO BE A TREND MOVING FORWARD.
I DID WANT TO DO A LITTLE DETAIL ON OUR PERSONNEL.
I KNOW, CHAIR WOODHAM. THIS IS SOMETHING YOU'D EXPRESSED INTEREST IN SEEING.
I COULD PROBABLY ADD MORE DETAIL TO THIS, BUT.
WHAT WE'VE INCLUDED HERE, HERE'S OUR PERMANENT SALARIES.
I JUST WANTED TO INCLUDE SOME OF THE DRIVERS OF OUR KIND OF PERSONNEL INSURANCE COSTS.
SO I PUT MEDICAL IN HERE BECAUSE THAT'S FREQUENTLY A LARGE EXPENSE.
THIS IS ACTUALLY INCREASED MUCH LESS THAN I WOULD HAVE IMAGINED OVER TIME.
SO WHILE PREMIUMS HAVE INCREASED. SO THIS MAY BE A REFLECTION OF WHAT EMPLOYEES ARE CHOOSING TO, WHAT PLANS EMPLOYEES ARE CHOOSING. BUT AGAIN, YOU CAN SEE, HERE'S OUR ONGOING SO OUR NORMAL COST RETIREMENT CONTRIBUTIONS.
HERE'S OUR UNFUNDED ACCRUED LIABILITY PAYMENTS.
SO YOU CAN SEE WE MADE THIS LARGE PAYMENT 21-22, 22-23, THIS IS HOW CALPERS KIND OF SPREAD IT OUT.
PAID NOTHING IN 23-24. AND WE'RE BACK TO 3.2 IN 24-25.
SO, YOU KNOW, WHILE WE ARE, WE'VE SUBSTITUTED THIS WITH A $13 MILLION BOND PAYMENT.
SO YES, I'VE INCLUDED THIS HERE AND THEN WE HAVE OUR DEBT SERVICE PAYMENT.
I SHOULD HAVE INCLUDED SOMETHING HERE. I MISSED THAT ONE.
SO HERE'S THE TOTAL. AND THEN WE ALSO DID A PERCENT OF THE TOTAL OPERATING EXPENDITURES.
SO THIS JUST THIS. OH, SORRY. AND THESE ARE FOR ALL FUNDS.
JUST TO CLARIFY, THIS IS NO LONGER JUST THE GENERAL FUND.
SO PERSONNEL IS 40% OF ALL THE FUNDS. WHAT PERCENTAGE IS IT OF GENERAL FUNDS? I'D HAVE TO CALCULATE THAT. I WOULD IMAGINE IT'S ABOUT THE SAME.
BUT WE CAN DO MORE WITH THIS, I JUST KNOW THAT THIS COMMISSION IS INTERESTED IN IN THIS AND LOOKING AT KIND OF OUR, OUR PENSION COSTS OVER TIME. WELL, THIS IS INTERESTING.
NORMALLY WE THINK OF PERSONNEL AS BEING A MUCH HIGHER PERCENTAGE OF EXPENSES THAN 40.
SO WHAT AM I MISSING HERE? WHAT YOU'RE MISSING IS WE.
SO IF I INCLUDED ALL OF THAT, THAT'S GOING TO ADD UP TO OUR PERSONNEL COSTS.
[01:00:04]
SO IF I THREW IN OVERTIME AND PART TIME, IT SKEWS THE.SOMEONE IS DOING A GREAT JOB HOLDING DOWN COSTS AND MEDICAL INSURANCE BECAUSE.
THEY REALLY ARE. THAT COST HAS BEEN GOING UP IN DOUBLE DIGITS FOR THE LAST SEVERAL YEARS, SO.
WELL, AND THE PREMIUMS ARE ALSO GOING UP, AS I KNOW, BECAUSE I LOOK AT MINE EVERY YEAR.
SO WE'LL DO SOME MORE LOOKING INTO THIS. AGAIN, MY ONLY IMMEDIATE EXPLANATION IS JUST THE COMPOSITION OF THE CITY EMPLOYEES CHOSEN PLANS ARE CHANGING. IT'S HARD FOR ME TO IMAGINE THERE.
YEAH. SO WE CAN TAKE A LOOK AT THIS, BUT THIS IS WHAT OUR DATA IS SHOWING US.
SO THEN WE GET TO OUR CALCULATION OF ESTIMATED AVAILABLE FUND BALANCE.
SO OUR ESTIMATED BALANCE BEFORE THIS IS ABOUT 16 MILLION FOR OUR GENERAL FUND.
THIS IS ROUNDED DOWN BECAUSE WE HAVE NOT YET FINALIZED OUR AUDIT.
WE HAVE OUR NON SPENDABLE ITEMS. WE HAVE THE POLICY DESIGNATED CONTINGENCY.
AND THEN WE ARE ALSO, PART OF OUR ASSIGNMENTS ARE THESE PROPOSED ASSIGNMENTS.
REALLY, WE, THESE ARE THESE ARE REQUIREMENTS.
SO, I BACKED THESE OUT AS WELL. OUR ENCUMBRANCES, PETTY CASH.
AND THEN WE HAVE AN AMOUNT SET ASIDE FOR COMPENSATED ABSENCES, WHICH IS, REPRESENTS THE VALUE OF ALL CITIES, ALL CITY STAFF LEAVE AS A LIABILITY. SO OUR TOTAL REMAINING AVAILABLE ESTIMATED BALANCE IS ABOUT 5.2 MILLION.
SO HERE ARE OUR RECOMMENDED. BEFORE. SORRY. SO THAT'S, THAT 5 MILLION INCLUDE THE RESERVES, THE 4 MILLION RESERVES THAT WE HAVE? IT DOES NOT, NO.
IT DOES NOT. OKAY. NO, BECAUSE THAT WE, THIS IS 24-25, SO WE WOULDN'T, WE HAVE NOT, WE WOULDN'T BE CONSIDERING THAT AS PART OF THE GENERAL FUND BALANCE BECAUSE COUNCIL APPROVED THAT FOR 25-26.
THIS IS AS OF 6.30.25. BUT BACK THEN THERE WAS, HOW MUCH WAS IT? $16 MILLION RESERVES. WAS IT OR WAS IT 8? WELL, SO THIS IS THE, THIS IS JUST THE GENERAL FUND RESERVE.
SO OUR CALPERS RESERVE, WE ACTUALLY HOLD IT IN A DIFFERENT FUND.
OKAY. SO AND SO IN GENERAL RESERVES WE HAD 4 MILLION OR THE CITY HAD $4 MILLION? THOSE 8, 6 MILLION IN OUR GENERAL FUND. THIS IS OUR ECONOMIC CONTINGENCY RESERVE.
OKAY. I'M GOING TO RESTART MY QUESTION. SURE.
SO THIS DOES THIS 5 MILLION INCLUDE THAT $4 MILLION RESERVES? WHICH $4 MILLION? THE, NOT THE CALPERS ONE. YEAH.
CITIES OR RESERVES. OR CITY HAS $4 MILLION IN RESERVES, RIGHT? THE CITY HAS $8.6 MILLION IN RESERVE, WHICH IS THIS CONTINGENCY.
THAT INCLUDES. COMMITTED. WHICH LINE? SO THIS LINE COMMITTED ITEMS POLICY DESIGN CONTINGENCY, THAT'S THE RESERVES? YES. OKAY. WHY DOESN'T IT JUST SAY THE RESERVES COMMITTED? I'M SORRY, I SHOULD HAVE SAID THAT'S USUALLY WHAT WE CALL IT ON THIS CHART.
I CAN CHANGE IT TO RESERVES. OKAY. SORRY ABOUT THAT.
OKAY. SO THAT'S OKAY. THAT WAS CONFUSING. THANK YOU. SO TO BRING THIS INTO PERSPECTIVE AT THIS POINT, WITH 8.6 MILLION IN THE CONTINGENCY RESERVE, WE STILL HAVE 8 MILLION IN THE CALPERS RESERVE, AT THIS POINT BECAUSE. AS OF 6.30.25, YES. OKAY.
SO, AND I THINK I MAY HAVE ALLUDED THIS TO THIS IN THE REPORT.
SO AND WE DIDN'T OBVIOUSLY HAVE ALL OUR NUMBERS FOR THE FISCAL YEAR.
AND IN LOOKING AT OUR GENERAL FUND BALANCE. SO WITH OUR FINAL AUDIT OUR GENERAL FUND BALANCE WAS A BIT BETTER THAN WE HAD ANTICIPATED, AND WE ENDED UP BRINGING IN MORE REVENUE THAN WE HAD FORECAST WHEN WE WERE LOOKING AT THIS.
SO THE REASON WE HAVE SOME ADDITIONAL FUNDING HERE THAT WE HADN'T THOUGHT OF OR WE HADN'T COUNTED ON DURING BUDGET PREPARATION IS BECAUSE THE ACTUALS TURNED OUT BETTER THAN OUR FORECAST, WHICH IS GREAT.
SO FOR RECOMMENDATIONS TO COUNCIL. WE WERE GOING TO RECOMMEND A FEW THINGS.
[01:05:09]
THERE ARE A FEW OF THESE THAT WE WILL BE RECOMMENDING FOR COUNCIL TO APPROVE.OTHERWISE WE'D LIKE COUNCIL TO ADDRESS KNOWN FUNDING GAPS.
SO WE PUT, WE TOOK $3.5 MILLION OUT OF THE CALPERS RESERVE.
WE WOULD LIKE TO REPLENISH. WE'RE GOING TO RECOMMEND REPLENISHING THAT FUND WITH SOME PORTION.
WE ALSO ARE AWARE OF FUNDING GAP IN THE HARBOR UPLANDS FUND.
THIS IS ONE OF OUR ENTERPRISE FUNDS AND IS RELATED TO THEIR CAPITAL SPENDING AS THEY KIND OF BUILD UP SOME BUILT UP, SOME CAPITAL NEEDS OVER SEVERAL YEARS WHERE THEY WEREN'T ABLE TO DO WORK IN THE HARBOR.
CITY SUBSIDIZED BOTH THE HARBOR TIDELANDS AND UPLANDS FUND IN 23-24.
AND WE KIND OF ANTICIPATED THAT MAY NEED TO HAPPEN AGAIN THIS FISCAL YEAR.
SO WE'RE RECOMMENDING SETTING SOME FUNDING ASIDE FOR THAT BASED ON OUR FINAL AUDITED BALANCES.
AND THEN WE'RE JUST RECOMMENDING THAT COUNCIL DOES NOTHING ELSE WITH THE UNASSIGNED BALANCE.
WE KNOW THAT WE IN 26-27, WE HAVE ANOTHER 4.0-MILLION-DOLLAR UNFUNDED LIABILITY PAYMENT.
AND THESE ARE JUST THESE ARE JUST A FEW OF THE ITEMS WE'RE AWARE OF.
SO WE REALLY WANT TO FOCUS ON REPLENISHING WHERE WE KNOW WE HAVE FUNDING NEEDS AND JUST HOLDING IT ASIDE TO SEE WHAT 25-26 LOOKS LIKE. SO. I GUESS, WHAT ARE YOU RECOMMENDING IN TERMS OF, OR WHAT IS BEING SUBMITTED AS A RECOMMENDATION FOR THE ONE-TIME ITEMS, LIKE HOW BIG OR HOW MUCH MONEY, I GUESS IS. SO CITY MANAGER STILL, WE'RE STILL DISCUSSING THAT, BUT THE PROPOSALS, I THINK THE TOTALS AROUND A MILLION.
OKAY. I'M SORRY. A MILLION FOR WHAT? FOR ONE TIME.
FOR ONE-TIME PRIORITIES, OR SORRY, YEAH, FOR ONE-TIME ITEMS. SO NEXT STEPS IN THIS. WELL, I GUESS THE NEXT STEP IS COUNCIL IS GOING TO LOOK AT THIS ON FRIDAY OR SORRY, NOT FRIDAY. WE'RE GOING TO POST THE ITEM ON FRIDAY.
WE WILL COME TO YOU SHORTLY. I AIM FOR OUR NEXT MEETING TO COME TO PROVIDE YOU WITH MID-YEAR.
AGAIN, THAT'S WE'RE LOOKING AT OUR CURRENT YEAR REVENUE EXPENDITURE AND FUND BALANCE ANALYSIS.
AND LOOK AT ANY NEEDED REVENUE AND EXPENDITURE ADJUSTMENTS.
AND THEN WE, AS I MENTIONED, OUR ACFR IS IN PROGRESS.
AND WE THINK THE ADDITIONAL WORK WE PUT INTO 23-24 WILL HELP SPEED UP THE PROCESS A BIT FOR 24-25.
IN YOUR CHART 2 OR 3 CHARTS BEFORE WHEN YOU WERE TALKING ABOUT THE RESERVE FUNDS, CALPERS IN PARTICULAR, YOU DIDN'T HAVE A, ARE YOU RECOMMENDING THAT WE REPLACE THE ENTIRE AMOUNT AND THE CALPERS RESERVE FUND? NOT, I THINK THE CITY MANAGER IS STILL LOOKING AT THAT.
I MEAN, OUR TOTAL HERE IS 5.2. SO IF WE REPLACED ALL 3.5, IT DOESN'T LEAVE A LOT TO.
SO AGAIN, I THINK THAT'S SOMETHING THAT CITY MANAGER AND I ARE STILL DISCUSSING.
BUT I THINK IT'S MOST LIKELY IT WOULD BE SOME PORTION OF THAT, NOT THE ENTIRE AMOUNT.
NOW, YOU'RE GOING TO PRESENT THIS TO COUNCIL ON TUESDAY? YES. OKAY. SO YOU'RE GOING TO, CAN YOU GO BACK TO SLIDE 15? I THINK IT WAS 15. WELL ONE MORE 16. OH NO. NO, 15.
SORRY. OKAY. SO, THESE ARE THE RECOMMENDATIONS THAT YOU HAVE.
WHAT ARE THE DOLLAR AMOUNTS FOR EACH OF THESE? YOU'RE NOT, THEY'RE NOT DONE YET. YEAH. SO, IT'S HARD TO MAKE A RECOMMENDATION. SO, YOU'RE GOING TO PRESENT IT TO COUNCIL ON TUESDAY.
BUT YOU KNOW SO YOU'RE GOING TO MAKE THOSE DOLLAR AMOUNTS BY TUESDAY.
YES. SO AGAIN, WE'RE STILL DISCUSSING WITH THE CITY MANAGER.
I THINK WHAT WOULD BE VERY HELPFUL EVEN IN POTENTIALLY, YOU KNOW, HIS FINAL CONSIDERATION IS IF YOU WANTED TO SAY, YOU KNOW, THESE ARE THE ITEMS THAT WE'RE LOOKING AT, WHAT DO YOU THINK IS THE MOST IMPORTANT? RIGHT.
[01:10:01]
WHAT DO YOU THINK IS THE MOST IMPORTANT FOR COUNCIL TO ALLOCATE FUNDS TO.SO, THAT WOULD BE AS COMMISSIONERS I THINK THAT'S SOMETHING THAT WE SHOULD PROBABLY.
DO WE HAVE A LIST OF WHAT THE ONE-TIME REQUESTS ARE.
IT'S HARD TO MAKE A RECOMMENDATION WHEN WE DON'T KNOW WHAT'S BEING ASKED FOR. SO, I DON'T.
WE. THERE'S ABOUT $1 MILLION. IS IT LIKE ONE BIG PROJECT? IS IT TEN SMALL? IT IS. IT'S ABOUT TEN SMALL THINGS.
I DON'T THINK THAT WE'D BE ASKING THE COMMISSION TO RECOMMEND YES OR NO ON SPECIFIC ITEMS. I THINK WHAT WOULD BE HELPFUL IS FOR YOU TO SAY, WE DON'T THINK YOU SHOULD DEDICATE ANY MORE THAN $500,000-TO-ONE-TIME REQUESTS, OR WE THINK, YOU KNOW, ALL THE FUNDS SHOULD GO BACK TO THE CALPERS RESERVE FUND, OR WE THINK YOU SHOULD LEAVE MORE UNALLOCATED COMPLETELY, CONSIDERING 25-26. THAT WAS ONE OF THE CONCERNS WHEN THE BUDGET GOT PASSED.
COMMISSIONER JESTE SPECIFICALLY RAISING THE FACT THAT WE WERE SPENDING MORE THAN WE WERE MAKING. AND SO IF WE HAVE ADDITIONAL FUNDS, SHOULD WE BE PUTTING MORE TO OTHER ONE-TIME REQUESTS? BUT AGAIN, WITHOUT KNOWING WHAT THOSE REQUESTS ARE, THEY MAY BE URGENT, I HAVE NO IDEA. SO THEY ARE RELATED TO, AGAIN, THEY'RE ITEMS THAT COUNCIL HAS APPROVED THROUGH DECISION PACKAGES.
FOR PROJECTS AND THAT THE DEPARTMENT JUST HASN'T BEEN ABLE TO SPEND IN A FISCAL YEAR.
THAT'S THE REASON WHY WE THINK IT MAKES SENSE TO CARRY THEM OVER.
SO THESE ARE FUNDS TO HELP THE CITY ATTORNEY'S OFFICE DEAL WITH THAT PROCESS.
AND THAT'S THE LARGEST PIECE OF THAT. SO I GUESS WHAT ARE THE ONES THAT WE MUST HAVE, LIKE THE AES BANKRUPTCY, $400,000. THAT'S, WE MUST PAY THAT RIGHT. WHAT ARE THE FUNDS THAT WE MUST PAY VERSUS IT'S NICE TO HAVE TO DO.
SO I WOULD SAY OUT OF OUT OF ALL THE REQUESTS, THAT'S PROBABLY THE ONE THAT IS THE MOST MUST, THAT IS THE MOST MUST HAVE. THE OTHERS ARE AGAIN SMALLER ITEMS RELATED TO JUST ONE-TIME PROJECTS.
THE VERY LAST LINE, THE 4.2 MILLION. IS THAT NOT BUDGETED? SO THIS IS. THIS YEAR. THIS IS 26-27, SO THIS IS KIND OF LOOKING FORWARD ANOTHER YEAR.
SO ARE YOU THINKING WE'RE NOT GOING TO HAVE THE FUNDS AND WE NEED TO PULL FROM HERE? I AM JUST THINKING THAT THIS IS, SO WHEN WE TALK ABOUT OUR UNFUNDED LIABILITY PAYMENT, IT'S SOMETHING THAT WE NEED TO PLAN FOR.
KNOWING HOW THE BUDGET PROCESS GOES AND HOW INCLINED WE ARE TO SPEND MONEY.
THE THOUGHT OCCURS IF WE DON'T REPLACE THE 3.5 MILLION INTO THE CALPERS RESERVE COME 27 BUDGET, WE'RE GOING TO TAKE THE REST OF THE CALPERS RESERVE AWAY, AND THERE WILL BE A ZERO BALANCE.
SO I AM INCLINED TO IN LINE WITH WHAT STEPHANIE IS SAYING, WE SHOULD DECIDE WHETHER THERE ARE COMMENTS THAT WE WANT TO MAKE TO ATTACH TO THIS REPORT REGARDING SPECIFIC ITEMS. AND I WOULD SAY THAT WE STRONGLY ADVISE I WOULD BE IN FAVOR OF STRONGLY ADVISING THAT CALPERS RESERVE FUND BE REPLENISHED BY THAT WITH A FULL 3.5 MILLION.
I AGREE, I AGREE, AND THEN THE REST THEY CAN.
THE REST SHOULD GO TO WHAT THEY SHOULD HAVE. WHAT'S A MUST, LIKE A YES, IS A MUST.
WE HAVE TO PAY BANKRUPTCY. UNDERSTANDING THAT THAT THIS IS A RECOMMENDATION AND WE HAVE NO, WE CAN'T MAKE THAT DECISION. BUT AGAIN, LOOKING AT A YEAR IN ADVANCE WHEN WE START DOING THE 27 BUDGET.
WE STARTED WITH 8 MILLION. WE TOOK THREE AND A HALF OUT.
SO WE'RE AT 5.5, 4.5. WAS IT 3.5? 3.5. OKAY, SO WE'VE GOT 4.5 LEFT AND THERE'S 4.2.
THAT COULD DISAPPEAR. SO I WOULD OUT OF THAT 5.2, I WOULD PUT 3.5 BACK INTO WHERE WE
[01:15:01]
BORROWED AND THEN THE 400 AES THAT WE MUST PAY, AND THEN THE REST GOES TO UAL PAYMENT. YEAH. SAY THAT AGAIN. SO 3.5 BACK TO THE RESERVES THAT WE HAD BORROWED OR NOT BORROWED, THEY TOOK FROM THE RESERVES. AND THEN THE 400,000 TO THAT ONE-TIME ITEMS LINKED TO COUNCIL PRIORITIES, WHICH STEPHANIE SAID IT WAS THE AES LAWSUIT OR.BANKRUPTCY PROCEEDING, YEAH. WHAT IS THAT FOR AGAIN? EXPLAIN THAT AES. YOU KNOW, I MEAN, I MAY NEED TO PUNT THAT TO OUR NEXT MEETING AND GET A GET A BRIEFING ON WHERE WE ARE IN THAT PROCESS. OKAY.
SO THAT BRINGS US TO 3.9 MILLION, AND THEN 5.2 MINUS 3.9 THAT REMAINING INTO UAL PAYMENT, WHICH IS I DON'T KNOW WHAT. I THINK THE SALES TAX UAL IS REALLY JUST MORE VULNERABILITY.
THAT'S WHAT I WOULD. THE REALITY IS IF WE HAD HAD BEEN ABLE TO GET EXACT INFORMATION ON THE DAY THAT, THE FIRST DAY OF, LAST DAY OF FISCAL 25 AND KNEW THAT WE HAD MORE REVENUE COMING IN.
WE WOULDN'T HAVE. WOULDN'T HAVE BORROWED. NO, WE WOULDN'T HAVE TAKEN DOWN THE CALPERS RESERVE FUND.
THAT IS VERY TRUE. YES. OKAY. SO. SO WHAT I WAS SAYING WAS 3.5 INTO THE RESERVES, AND THEN 400,000 TO THE AES AND THE REMAINING 1.3 TO UAL PAYMENT.
AND WHAT YOU KNOW WHAT CAN BE SAVED. WHAT HOW CAN WE DECREASE THE EXPENSES? HOW CAN WE NOT SPEND SO MUCH? IF WE DON'T HAVE MONEY WE CAN'T SPEND.
YEAH. I MEAN, THAT'S, YOU KNOW, I KNOW WE WANT TO DO A LOT OF THINGS, BUT IF WE DON'T HAVE MONEY, WE CAN'T DO A LOT OF THINGS. YOU CAN'T SPEND MONEY YOU DON'T HAVE.
OKAY. CAN YOU ATTACH OUR COMMENTS TO YOUR REPORT? YES. AND DO WE NEED A MOTION TO APPROVE THAT? I HAVE ONE OTHER. WERE YOU OKAY WITH. OKAY, AND THEN I HAVE A COUPLE MORE OTHER THINGS I WANTED TO I WROTE DOWN.
I WANTED TO INCLUDE. FOR THE BUDGETING. I DO WANT TO RECOMMEND TO DO ZERO BASED BUDGETING, WHICH REQUIRES THE JUSTIFICATION FOR ALL EXPENSES WHEN THEY STARTED BUDGETING.
THE WAY I BELIEVE THEY DO THE BUDGETING NOW IS IT'S A LINE ITEM BUDGETING.
BUT WHEN YOU DO ZERO BASED BUDGETING, THEN YOU START FROM SCRATCH.
THAT WAY THEY'LL, THEY HAVE OPPORTUNITY TO SEE WHERE IT'S, YOU KNOW, WHAT'S NECESSARY, WHAT'S NOT.
WHY ARE WE KEEPING THIS CONTRACT THIS MUCH, IF WE DON'T NEED TO ANYMORE.
IT'S GOING TO BE A HUGE UNDERTAKING BECAUSE IT STARTS WITH A CHANGE OF CULTURE TO BEGIN WITH.
THE WHOLE. WELL, THAT'S HOW YOU SAVE MONEY. BUT DO.
I UNDERSTAND YOUR SUGGESTION, I THINK IT'S A GOOD ONE.
BUT DO WE NEED THAT AS A PART OF THIS REPORT BACK TO THE CITY COUNCIL OR.
I THINK THAT NEEDS TO BE DISCUSSED SEPARATELY.
SEPARATE, OKAY. YEAH, THAT WOULD BE. THAT'S SOMETHING WE NEED TO ADDRESS.
YEAH. THAT'S A CAVEAT OR A RECOMMENDATION FOR THE BUDGETING PROCESS HENCEFORTH.
I THINK IF THE COMMISSION WANTED TO GET TOGETHER, MAYBE FORM A SUBCOMMITTEE OR SOMETHING.
AND I MEAN, WE ARE STARTING BUDGET PREPARATION ACTUALLY BASICALLY NOW, AT LEAST INTERNALLY.
SO I THINK THE EARLIER IF YOU HAVE RECOMMENDATIONS RELATED TO THE BUDGET YOU ALREADY KNOW ABOUT.
IF YOU WANT TO BRING THAT BACK AT THE MARCH MEETING, WE CAN SHARE THAT WITH COUNCIL EARLY ON.
WHY DON'T WE DO THAT? OKAY. THE OTHER ITEM I HAVE IS ANALYSIS.
WHY CONTRACTS HAVE INCREASED SO MUCH. SO WHAT, YOU KNOW, WHAT WAS GOING ON THAT THEY INCREASED SO MUCH? AND THE SAME AND THE SAME FOR TRANSFERS OUT, MORE OF THE DETAILS.
WHAT WAS. I KNOW IT'S IN YOUR REPORT SOMEWHERE IN THAT THOUSAND PAGES.
[01:20:02]
WHICH IS ATTACHED TO THIS ONE. SO, BUT. THAT'S IT.I DIDN'T SEE THAT ONE. IT'S INCLUDED WITH THE BLUE FOLDER ITEMS WE SENT ON TUESDAY.
BUT AGAIN, IT ONLY INCLUDES 24-25, SO WE'RE HAPPY TO DO THE TRANSFERS OUT DETAIL.
YEAH. SO THAT WOULD BE, I GUESS FOR. BUT, YOU KNOW, TO LEARN WHAT IT WAS SO THAT NEXT YEAR WE CAN DO BETTER. OKAY. FOR THIS REPORT, WHAT, YOU'VE YOU MENTIONED THE DOLLAR ITEMS BEFORE. LET'S DECIDE TO INCLUDE THAT. OKAY. IN THE REPORT TO CITY COUNCIL.
AND AGAIN, REMAKE YOUR MOTION WITH JUST THOSE ITEMS. SO I'LL MAKE THE MOTION TO. EXCUSE ME BEFORE YOUR MOTION, JUST PUBLIC COMMENT.
PUBLIC COMMENTS. ALL RIGHT. THERE'S NO ONE ON ZOOM AND NO ECOMMENTS.
NO PUBLIC COMMENTS? NO PUBLIC COMMENTS. OKAY.
MOTION TO ALLOCATE 3.5 MILLION BACK TO THE BORROWED RESERVES.
400,000 TO AES, BECAUSE IT'S A MUST. AND 1.3 MILLION TO 26-27 UAL. AND THAT ADDS UP TO 5.2. OKAY, I HEAR A SECOND? SECOND. ALL IN FAVOR. AYE, AYE.
ANY OPPOSED? MOTION CARRIES. AND I GUESS ALSO LET'S GET A MOTION TO RECEIVE AND FILE THE YEAR-END REPORT.
CAN I HAVE A MOTION FOR THAT? MOTION TO RECEIVE AND FILE.
SECOND. SECOND. ALL IN FAVOR? AYE. AYE. OKAY.
MOVE ON TO ITEM J.3, CIP SUBCOMMITTEE OUTCOME.
SO I KNOW YOU GUYS MET WITH, YOU MET WITH THE DIRECTOR OF PUBLIC WORKS, AND YOU HAD QUESTIONS.
SO THERE'S STILL SOME FOLLOW UP TO BE DONE. THE QUESTIONS WERE MORE SO UNDERSTANDING THE PROCEDURES IN PLACE FOR CHANGE ORDERS TRYING TO UNDERSTAND DISCREPANCIES BETWEEN THE INITIAL ENGINEER ESTIMATES VERSUS THE FINAL COST OF THE PROJECT.
AND WE IDENTIFIED THAT A MAJORITY OF THOSE WERE DONE THROUGH THE CHANGE ORDER.
SO WE HAD SEVERAL QUESTIONS FOR THE PLANNING COMMITTEE AS TO WHAT THE PROCEDURE WAS.
THERE WAS, WE HAD QUESTIONS ABOUT WHAT THE APPROVAL PROCESS WAS AND WHAT WAS IN PLACE FOR THERE.
OVERALL, I WOULD SAY THAT THE PROCEDURE THAT IS IN PLACE DOES SEEM TO BE APPROPRIATE.
THEY HAVE THRESHOLDS IN PLACE TO WHERE, AT WHAT MANNER OR AT WHAT POINT WHEN WILL THINGS GO TO VOTE? RATHER THAN JUST BEING AUTOMATICALLY APPROVED.
AND TO, WHEN WILL THEY BE BROUGHT TO THE CITY COUNCIL'S ATTENTION FOR VOTING AS WELL FOR THAT? WE DID SPEND MOST OF OUR TIME IN ONE SPECIFIC PROJECT.
FORGIVE ME, THE NAME OF IT WAS, IS, I'M FORGETTING IT AT THE MOMENT, BUT AS A FOLLOW UP, WE DECIDED THAT WE WERE GOING TO TAKE A DEEPER DIVE INTO THREE SPECIFIC PROJECTS TO BE DECIDED UPON BY THE SUBCOMMITTEE.
JUST TO TRY AND IDENTIFY A COMMONALITY BETWEEN THE PROCESSES AND JUST MAKING SURE THAT THE SPECIFIC CHANGE ORDERS THAT WE IDENTIFIED AND THE REASONING BEHIND THEM IN THE ONE PROJECT THAT WE WERE KIND OF CONCENTRATING ON IN THAT MEETING WERE, IN FACT CONSISTENT AND NOT JUST ONE-TIME OCCURRENCES.
SO THERE IS STILL WORK TO BE DONE BY THE SUBCOMMITTEE.
WE'RE GOING TO SEPARATE AND ANALYZE A COUPLE DIFFERENT PROJECTS.
AGAIN, JUST TRYING TO IDENTIFY COMMONALITIES FOR THOSE CHANGE ORDER PROCESSES.
AND THEN I THINK WE'LL HAVE A MORE COMPREHENSIVE REPORT TO COME BACK TO THE COMMISSION FOR.
[01:25:03]
OKAY. MAKE SENSE? JUST A QUICK ONE. JUST WONDERED IF THERE WAS AN CATEGORIES THAT YOU'D COME UP WITH THAT THAT COULD SERVE AS BENCHMARKS FOR THE REASONS FOR THE CHANGE ORDERS OR THE.FOR EXAMPLE, I DON'T KNOW IF SINKHOLE IS THE CORRECT TERMINOLOGY, BUT WHEN THEY WERE DIGGING INTO THE ROAD WORK THERE, THEY NOTICED THAT IT CREATED MORE OF A PROBLEM AND THAT, YOU KNOW, BASICALLY THE HOLE GOT MUCH LARGER THAN ANTICIPATED AND REQUIRED MORE WORK THAN ORIGINALLY ANTICIPATED BY THE BY THE ENGINEERS ESTIMATE.
SO MAJORITY OF THESE CHANGE ORDERS SEEM TO BE BASED OUT OF NECESSITY, RATHER THAN ENHANCING THE SCALE OF THE ORIGINAL SCALE OF WORK AND WANTING TO UPGRADE THE LEVEL OF WORK FROM THE ORIGINAL ESTIMATE.
AND THAT WOULD HAVE TO DO WITH A CONTINGENCY THAT OCCURRED IN THE PROCESS OF ACTUALLY EXECUTING THE PROJECT, VERSUS THE FACT THAT THEY'VE JUST LEFT OUT A PORTION OF.
THANK YOU. WELL, I CAME AWAY WITH A SLIGHTLY DIFFERENT OPINION.
I THINK THE WHOLE PLANNING PROCESS NEEDS A MAJOR OVERHAUL.
THIS CHANGE ORDER PROCEDURE WAS ISSUED ON AUGUST 17TH, 1993.
SO THAT IS 33 YEARS OLD, AND LOTS OF THINGS HAVE CHANGED AND HOW THE PROCESSES ARE MANAGED AND HOW THE CHANGES ARE MANAGED, AND THAT HAS NOT BEEN DONE.
AND THE THING THAT I STILL HAVE NOT BEEN ABLE TO GET AN ANSWER ON THE CHANGE ORDER ITSELF IS, IT MAKES SENSE IF YOU HAVE AN UNPLANNED EMERGENCY, BUT I WENT THROUGH ALL THE 15 PROJECTS THAT WERE COMPLETED IN 2025, AND VERY LITTLE MONEY WAS SPENT ON UNPLANNED EMERGENCY.
WHAT HAS HAPPENED IS MOST OF THE PROJECTS, THE SCOPE OF THE PROJECT ITSELF CHANGED CONSIDERABLY BECAUSE SOME FUNDS WERE AVAILABLE, OR BECAUSE SOME OTHER THINGS CROPPED UP, AND THEN IT WAS KIND OF NICE TO JUST LUMP IT IN WITH THE EXISTING PROJECT.
SO HOW DO WE JUSTIFY IT? WE JUST ISSUE A CHANGE ORDER.
THE THING THAT BOTHERS ME EVEN NOW IS THAT BECAUSE THE CHANGE ORDERS NOW, THEY HAVE NO INCENTIVE OR NO REASON TO GO OUT AND GET SOLICIT BIDS. SO THEY GIVE THE CONTRACT TO THE SAME CONTRACTOR WHO HAS BEEN WORKING ON THE INITIAL PHASE. AND WHAT MAKES IT EVEN WORSE IS THAT NOW IN SOME OF THE PROJECTS, THE MAJOR PROJECTS ARE CHECKED, THE SCOPE WAS CHANGED BECAUSE FUNDING WAS AVAILABLE.
NOW THE CONTRACTOR KNOWS THAT THE ADDITIONAL FUNDS ARE AVAILABLE.
SO WHAT INCENTIVE DOES HE HAVE TO GIVE YOU THE BEST POSSIBLE PRICE? BECAUSE HE KNOWS HOW MUCH YOU'RE GOING TO SPEND. AND THIS IS THE PROBLEM THAT HAS CREATED, IN MY OPINION, A HUGE MESS, BECAUSE 80% OF THE MONEY WE ARE SPENDING IS IN THE SO-CALLED CHANGE ORDERS, WHERE WE DO NOT HAVE COMPETITIVE BIDS. AND TO ME, THAT'S THAT JUST DOES NOT MAKE ANY SENSE.
SO THAT WAS THE MAIN ISSUE THAT. AND THAT WAS NEVER ADDRESSED.
BECAUSE. I LOOKED AT SOME OF THE MAJOR PROJECTS WHERE THE TOTAL COST THAT ENDED UP WAS 3, 4 OR 5 TIMES AS HIGH AS WHAT STARTED OUT AT.
AND THE MONEY THAT WAS SPENT ON UNPLANNED EMERGENCIES WAS VERY LITTLE.
IT WAS JUST PLANNING. SO IT SHOWS IT SHOWS TWO PROBLEMS. ONE IS WE DON'T DO ENOUGH GOOD PLANNING TO BEGIN WITH.
AND SECONDLY, WHEN WE REALIZE THAT THERE ARE SOME OTHER THINGS THAT CAN BE DONE OR SHOULD BE DONE BECAUSE FUNDING IS AVAILABLE, THEN WE JUST LUMP THAT INTO A BUNCH OF CHANGE ORDERS.
IN FACT, ONE, THE PROJECT THE MANHATTAN BEACH BOULEVARD AND INGLEWOOD AVENUE INTERSECTION, FIVE CHANGE ORDERS WERE LUMPED TOGETHER. AND THE ENGINEERS AUTHORITY WAS INCREASED FROM SOMETHING LIKE 25,000 TO
[01:30:10]
$125,000. SO NOW HE DOESN'T EVEN HAVE TO GO TO THE CITY COUNCIL TO GET THE APPROVAL.SO, 80% OF THE MONEY ON CIPS WERE SPENDING ON CHANGE ORDERS.
SO IT HAS GONE OUT OF CONTROL. AND THE QUESTION I HAVE ASKED ALMOST FOR A YEAR IS, WHY AREN'T WE GETTING BIDS ON THESE? SO THE MAJOR CHANGES THAT WE ARE MAKING AND I STILL DON'T HAVE AN ANSWER.
LET'S FOCUS ON ONE OF THE THINGS YOU JUST SAID VIJAY.
80% OF THE EXPENDITURES FOR CIP IS CHANGE ORDERS.
IS THAT? YEAH, THAT'S. IS THAT TRUE IN JUST ONE PROJECT OR IS THAT TRUE ACROSS? THIS IS ALL THE COMPLETED PROJECTS IN 2025. AND THIS IS BASED ON WHAT STEPHANIE GAVE US.
SHE DUG THROUGH THE DATA, AND. SORRY, FOR THE FOR THE CALCULATION.
ARE YOU INCLUDING AS CHANGE ORDERS? JUST ALL THE DIFFERENT ALL THE CHANGES IN FUNDING THAT OCCURRED THROUGHOUT? SO ARE YOU COMPARING INITIAL PROJECT COSTS TO FINAL PROJECT COSTS? BECAUSE THOSE AREN'T ALL CHANGE ORDERS. I MEAN, THEY'RE ADDITIONS TO FUNDING, BUT THOSE AREN'T SPECIFICALLY CHANGE ORDERS.
WELL, THEY ARE COMING FROM THE CHANGE ORDERS BECAUSE THERE IS NO ADDITIONAL BIDDING FOR THAT.
THE POINT HE'S MAKING IS THAT ADDITIONAL BIDDING.
THIS IS WHAT THE NUMBERS STEPHANIE GAVE US, INITIAL APPROPRIATED AMOUNT WAS 9,978,000.
SUBSEQUENT APPROPRIATIONS WERE 46,913,000. SO THE SUBSEQUENT APPROPRIATIONS ACCOUNTED FOR 80% OF THE TOTAL COST OF THE PROJECTS THAT WERE COMPLETED.
AND THOSE SUBSEQUENT APPROPRIATIONS CAME FROM THESE CHANGE ORDERS.
I DO NOT SEE ANY PROJECT WHERE WE WENT OUT FOR BIDS TWICE.
WE DID IT FIRST TIME TO GET THE PROJECT STARTED, AND WHEN IT GOT STARTED, THEN WE ADDED, WE KEPT ADDING MORE AND MORE STUFF TO IT AND THAT DID NOT NEED COMPETITIVE BIDS. WE JUST GAVE THE ADDITIONAL WORK TO THE SAME CONTRACTOR AND HE KNEW EXACTLY HOW MUCH FUNDING WAS AVAILABLE. SO THERE IS NOTHING QUESTIONING THE PROCESS OF CHANGE ORDERS.
WE'RE NOT QUESTIONING THE PROCESS OF ANYTHING EXCEPT THAT THE PROJECT, ONCE THEY RECEIVE THE PROJECT, THEY SPENT ANOTHER 80% OF THAT WITHOUT BIDDING.
THAT'S WHAT WE'RE QUESTIONING. SO THERE IS A PART OF THIS IS WHEN THE AWARDED CONTRACTOR PRESENTS HIS BID THAT GETS AWARDED. HE, PART OF THAT PROPOSAL IS THAT HE PRESENTS AN ITEMIZED LIST, A COST PER MATERIAL USED BASED ON SQUARE FOOTAGE, BASED ON DIFFERENT TYPES OF MATERIALS.
RIGHT. SO, FOR EXAMPLE, A SCREW COSTS $0.25, A PIECE OF DRYWALL COSTS A DOLLAR, RIGHT.
AND THEY'RE ALL EACH ITEMIZED AND TOTALED UP.
AND THAT'S WHAT THE CONTRACTOR'S TOTAL BID IS TO BE CONSIDERED AND AWARDED FOR THAT PROJECT.
AS A CHANGE ORDER COMES UP, THEY ARE STILL HELD ACCOUNTABLE TO THAT SAME ITEMIZED LIST.
SO EVEN THOUGH IT MAY SEEM THAT THE CONTRACTOR HAS THE FREE RIGHT AND WILL TO CHARGE WHATEVER HE WANTS BECAUSE IT'S NOT BEING VOTED ON BY CITY COUNCIL. HE'S STILL BEING HELD ACCOUNTABLE TO THAT ORIGINAL PRICE LIST THAT WAS LOW ENOUGH TO GET HIM TO BE AWARDED THE JOB IN THE FIRST PLACE.
SO IT'S NOT LIKE IT'S A FREE FOR ALL. WELL, NOW THAT IT'S A CHANGE ORDER, INSTEAD OF $0.25 PER SCREW, I'M NOW CHARGING $1.25 PER SCREW. THAT'S NOT THE CASE.
THEY'RE STILL BEING HELD ACCOUNTABLE AS WELL.
THAT'S TRUE. THE ONLY PROBLEM IS, IF YOU LOOK AT SOME OF THE CHANGE ORDERS LIKE THESE TWO SPECIFIC PROJECTS, THESE SCOPE CHANGE COMPLETELY. AND THERE IS NO SIMILARITY BETWEEN WHAT THEY STARTED OUT WITH AND WHAT THEY CHANGED WITH.
[01:35:02]
WE SHOULD THEN TAKE THAT ADDITIONAL SCOPE OF WORK OUT TO BIDDING TO MAKE SURE THAT WE'RE GETTING THE MOST COMPETITIVE BID, WHICH I AGREE WITH. AND WE ASKED THAT QUESTION AND THEIR RESPONSE WAS THAT, AGAIN, THEY ARE STILL HELD TO THAT ORIGINAL ITEMIZED PRICE LIST THAT AWARDED THEM THE CONTRACT IN THE FIRST PLACE. AND THERE WAS SOMETHING TO BE SAID FOR THE AMOUNT OF TIME THAT WOULD BE SPENT IN STOPPING THE PROJECT IN MID IN DURING MID PROJECT WHILE WE WENT THROUGH THE BIDDING PROCESS, AND THEN IF ANOTHER CONTRACTOR WAS IN FACT AWARDED TO DO THAT, THE AMOUNT OF TIME AND RESOURCES IT WOULD TAKE TO ULTIMATELY CLEAN UP THAT CONTRACTOR'S CREW AND THAT MESS AND THEN BRING IN ANOTHER ONE, IT WOULD THE OVERALL TIME FRAME OF COMPLETING THESE PROJECTS WOULD THEN BE DRAGGED ON, AND THAT COST WOULD PROBABLY EXCEED THE DIFFERENCE IN WHAT THE BIDDING WOULD BE FOR THE OTHER CONTRACTOR.I WOULD SAY MOST OF THE TIME THE SAME CONTRACTOR IS LIKELY TO CONTINUE BECAUSE IT IS INTEREST, EXCEPT HE WILL BE A LITTLE MORE CAREFUL IN BIDDING THE SECOND TIME.
THAT'S MY UNDERSTANDING. AND WHEN I LOOKED AT SOME OF THE ESPECIALLY THE MANHATTAN BEACH BOULEVARD - INGLEWOOD INTERSECTION, THE SCOPE CHANGED COMPLETELY AND THERE WAS NOTHING THAT WAS EVEN SIMILAR TO WHAT THEY HAD DONE BEFORE.
SO THERE WAS NO REASON WHY THEY COULD NOT GO OUT FOR BIDS.
AND THAT PROJECT LASTED FOR MORE THAN TWO YEARS, SO IT'S NOT THE TIME OF THAT WAS A CONSTRAINT.
BUT IF THE SCOPE, IF THE SCOPE OF THE WORK INCREASES, THAT'S NOT AT THE DECISION OF THE CONTRACTOR, RIGHT? HE'S JUST BEING TOLD WHAT TO DO. SO THAT'S THE GRANTED THE COUNCIL, RIGHT? AND NOTHING IS STOPPING THE CONTRACT FOR NOT BIDDING, NOT PARTICIPATING IN THE BID.
AGAIN, AND THEN THERE IS EVERY LIKELIHOOD THAT HE WILL COME WITH A LOWER PRICE.
SO I JUST WANT TO MAKE SURE THAT I'M UNDERSTOOD.
SO YOU'RE SAYING TO GO AND TAKE IT TO A BIDDING PROCESS JUST TO CREATE LEVERAGE TO RENEGOTIATE THE EXISTING CONTRACTOR? THE CONTRACTOR? THE CONTRACTOR? ABSOLUTELY, ABSOLUTELY.
AND THIS IS WHAT I'VE HEARD FROM YOU KNOW, OUTSIDERS, I THINK JEFF, WHO HAS ATTENDED MEETINGS BEFORE, HE'S VERY WELL VERSED IN HOW THE CONTRACTORS OPERATE.
THE CITY'S NOT GOING OUT FOR COMPETITIVE BIDS.
SO THIS IS THEIR CHANCE TO MAKE MONEY. SO TO ME, THIS WAS AN RFP PROBLEM.
THEY DIDN'T. THERE WAS NO OVERSIGHT. SO IT'S AN RFP PROBLEM AND OVERSIGHT PROBLEM.
THAT'S HOW I SEE IT. BECAUSE IF SOMEONE WAS THINKING AHEAD OF TIME, SOMEONE WAS BEING PROACTIVE, THEY WOULD HAVE SAID, HERE'S THE SCENARIO A, HERE'S A SCENARIO B, BECAUSE WE MIGHT ALSO WANT TO DO THIS, OR IT WOULD MAKE SENSE TO ALSO DO ADD THIS TO THE PROJECT.
SO IN THE ONE SPECIFIC PROJECT THAT WE CONCENTRATED ON THAT THE CASE WAS THAT THE ENGINEER ESTIMATED ON WHAT THE ORIGINAL SCOPE OF WORK WAS, BECAUSE FUNDING FOR THAT WAS AVAILABLE.
BUT THEY SHOULD THE, YOU KNOW, WHOEVER IS LEADING THIS, THEY SHOULD KIND OF FORESEE THAT, HEY, WE ALSO NEED TO DO THIS, ALTHOUGH WE DON'T HAVE FUNDING NOW, BUT LET'S SEE HOW MUCH IT'S GOING TO COST.
SO THAT'S WHY I SAY IT'S A PLANNING ISSUE. I JUST DON'T SEE HOW THE ENGINEER CAN ESTIMATE SOMETHING LIKE FORESEEING INTO THE FUTURE, RIGHT. I MEAN. THEY KNOW WHAT NEEDS TO BE DONE, WHAT NEEDS TO BE FIX.
REALLY. THAT'S NOT THE ENGINEER'S JOB IS NOT TO SEE WHAT NEEDS TO BE DONE IN THE CITY.
THAT'S THE COUNCIL'S JOB. COUNCIL'S WISH LIST.
BUT COUNCIL SHARES THAT INFORMATION WITH THEM DURING THESE STRATEGY MEETINGS.
I THINK THE ENGINEER JUST ESTIMATES WHAT THE ESTIMATE IS FOR THAT SCOPE OF WORK GIVEN TO THEM.
AND THEY'RE VERY, IT'S A VERY NARROW PLAN, AND THAT'S THE ISSUE.
[01:40:01]
THAT'S SPECIFIC AND USING THIS PROCESS AS A PLACEHOLDER.IN OTHER WORDS, TAKE THE THE FIRE AND POLICE BOND THAT WE JUST PASSED.
THAT WAS PASSED WITHOUT ANY SPECIFIC PLANS OR YOU KNOW, A DEFINED OBJECTIVE SPECIFIC AND A DOLLAR AMOUNT WAS PUT IN PLACE AND IT'S SORT OF WELL WE'LL ROLL WITH THIS, WE'LL START WITH THIS, WE'LL START BUILDING, WE'LL START DOING THIS.
AND I THINK UNLESS THAT DISCIPLINE IS IS PUT IN PLACE AT THE VERY BEGINNING AT THE REQUEST FOR PROPOSAL POINT, AND THEN YOU CAN HOLD A CONTRACTOR'S FOOT TO THE FIRE.
OTHERWISE YOU'RE DEALING WITH VARIANCE ANALYSIS WITH ENDING PROJECT COSTS.
AND THEY'RE GOING TO SAY THE SCOPE CHANGED. SO THE DOLLAR AMOUNT CHANGED.
WELL IF THE, WHEN WE'RE DOING COST ANALYSIS ON PROJECTS WE LOOK AT THAT VARIANCE EITHER A MATERIALS MORE MATERIALS OR AN INCREASE IN COST OF MATERIALS. OR ON THE LABOR SIDE, MORE LABOR OR INCREASE IN THE LABOR COST.
AND YOU CAN DO THAT WHEN YOU'VE GOT A DEFINED REQUEST FOR PROPOSAL THAT YOU'RE BIDDING AGAINST.
OTHERWISE IT, YOU CAN'T MAKE THAT ANALYSIS. YOU CAN JUST GIVE IT ON A BID.
GO ANOTHER WHEN YOU'RE IN THE MIDDLE OF A PROJECT TO GO AND GET ANOTHER BID.
YOU HAVE TO PROBABLY WAIT ANOTHER FIVE AT LEAST FIVE MONTHS BECAUSE IT TAKES TIME TO ADVERTISE.
IT TAKES TIME TO HAVE, I THINK THEY HAVE TO HAVE THE COMMUNITY KNOW ABOUT IT.
THEY HAVE TO APPROVE AND THEY HAVE TO GET THE PROPOSALS AND THEN THEY HAVE TO SCORE.
IT'S A, IT'S, I THINK IT'S ABOUT FIVE MONTHS TIMELINE.
WE GIVE CONTRACTORS ABOUT THREE WEEKS TO SUBMIT THE BID.
IN GOVERNMENT THEY HAVE DIFFERENT TIMELINES. THEY HAVE.
THE ONES I HAVE SEEN HERE, THEY WERE GIVEN 3 TO 4 WEEKS TO SUBMIT BIDS.
OKAY. WELL, THAT MEANS FOR, FOR A MONTH YOU'RE HOLDING OFF AND YOU'RE NOT DOING ANYTHING.
AND THEN AFTER THEY SUBMIT THE BID, THEN THEY HAVE A CERTAIN AMOUNT OF TIME TO SCORE AND THE PROPOSALS AND ALL THESE PEOPLE APPROVE, AND THEN THEY HAVE TO WAIT UNTIL SOMEBODY COMPLAINS OR NOT.
IT'S A BIG, A FEW MONTH PROCESS. BUT THIS IS WHY WE NEED TO DO A BETTER JOB OF PLANNING.
WELL, THAT'S EXACTLY WHAT I THINK WE'RE AT THAT STAGE.
IF I CAN JUST, I, THIS MIGHT BE AN APPLICABLE EXAMPLE.
SO IF THE SCOPE OF WORK WAS TO CHANGE OUT OR UPDATE, SAY, TRAFFIC LIGHTS FOR A SPECIFIC INTERSECTION, AND THE ORIGINAL SCOPE OF WORK IS WE'RE JUST GOING TO, WE'RE GOING TO DO THESE THREE BLOCKS, RIGHT. AND THE ENGINEER GOES AND ESTIMATES THOSE THREE BLOCKS.
AND DURING THE CHANGE OF DURING THAT SCOPE OF WORK, MORE FUNDING COMES IN, AND NOW ALL OF A SUDDEN WE SAY, OKAY, WELL, INSTEAD OF JUST DOING THESE THREE, WE'RE GOING TO DO TEN OF THEM, RIGHT.
THAT WOULD BE CONSIDERED A CHANGE ORDER, RIGHT.
AND NOW ALL OF A SUDDEN ON THAT CIP REPORT, IT WOULD SHOW THE ENGINEER'S ESTIMATE WAS $100,000, WHICH IS A BAD EXAMPLE, BUT THAT ONLY COVERS THOSE THREE TRAFFIC LIGHTS.
NOW THE SCOPE OF WORK HAS IMPROVED BECAUSE NOW WE'RE DOING TEN IN TOTAL.
AND ON THE CHANGE ORDERS IT'S GOING TO SHOW A SIGNIFICANT AMOUNT OF MONEY IN CHANGE ORDERS, RIGHT. NOW, AGAIN, THE CONTRACTOR OR WHATEVER IS STILL HELD ACCOUNTABLE TO THAT SAME THAT SAME LIST.
BUT YOU'RE SAYING, YOU KNOW, THE ENGINEER HAS TO HAVE A BETTER UNDERSTANDING OF THE SCOPE OF WORK.
DURING THE PROJECT THEY'RE SAYING, HEY, INSTEAD OF JUST DOING THESE THREE, WE'RE GOING TO NOW DO 10. SO HOW CAN THE ESTIMATOR OR THE ENGINEER ESTIMATE APPROPRIATELY FOR, YOU KNOW, FOR THOSE TEN, WHEN WE DON'T KNOW THAT THE WHOLE END GOAL IS GOING TO BE TEN, HE JUST KNOWS AT THE TIME THAT IT'S GOING TO BE THREE, RIGHT? SO. I DON'T. IN MY, AND AGAIN, THIS IS JUST BASED ON THE ONE PROJECT THAT WE CONSTANTLY.
THAT'S A GOOD EXAMPLE. SO THAT WAS KIND OF THE CASE.
IT'S KIND OF SIMILAR. IT'S NOT SPECIFIC. BUT THAT'S WHAT WE CONCENTRATED ON ON THIS ONE PROJECT.
IN OUR MEETING NOW AS A SUBCOMMITTEE, WE DECIDED WE WERE GOING TO DIVE DEEPER INTO 2 OR 3 ADDITIONAL PROJECTS LOOKING FOR CONSISTENCY IN IT BEING THIS SAME SIMILAR SCENARIO. SO WHEN I SAY WE'RE GOING TO REPORT BACK WITH OUR FINDINGS RIGHT NOW, THAT SEEMS TO BE THE SCENARIO THAT WE FOUND TO AN EXAMPLE SIMILAR TO THAT.
OBVIOUSLY, I'M KIND OF PARAPHRASING AND USING IT, BUT THAT WAS WHAT WE DISCOVERED.
[01:45:01]
I LOOKED AT ABOUT FIVE DIFFERENT PROJECTS, AND THEY WERE ALL COMPLETELY DIFFERENT FROM EACH OTHER.AND SOME OF THEM WERE VERY COMPLICATED AND BUT IN ONE PARTICULAR PROJECT, LIKE THE ONE I MENTIONED BEFORE MANHATTAN BEACH BOULEVARD AND INGLEWOOD INTERSECTION, IT STARTED WITH THE FUNDING OF $5 MILLION FROM THE METRO. SO MONEY WAS NOT THE PROBLEM, AND IT DID NOT CHANGE OVERNIGHT.
SO THIS IS WHERE WE STARTED. THEN THE CHANGE WAS THAT THEY HAD TO ACQUIRE SOME PROPERTY TO WIDEN THE LANES OR WHATEVER. THEN THEY DECIDED TO CHANGE THE SIGNAL EQUIPMENT BECAUSE THEY SAID THE NEW DESIGNS LOOK BETTER. THOSE ARE THE THINGS THAT COULD HAVE BEEN REVIEWED AND STUDIED BY THE ENGINEER BEFORE HE WROTE THE SPECS, BUT THAT DID NOT HAPPEN. SO WE JUST KEPT ADDING AND THEN WHEN WE HAD FIVE CHANGE ORDERS, WE JUST LUMPED THEM TOGETHER.
AND THEN WE SAID, LET'S GIVE IT TO THE SAME CONTRACTOR.
SO I DON'T KNOW IF THE BIDDING WAS DONE AT EVERY STEP OR NOT, BUT THE PROJECT HAS GONE ON FOR ABOUT THREE YEARS, SO THERE IS PLENTY OF TIME. AND THERE ARE SOME OVERLAPPING STEPS BETWEEN ALL THESE SUBPROJECTS.
SO IT'S COMPLICATED, BUT IT NEEDS TO BE STREAMLINED.
IT NEEDS TO BE GIVEN AS MUCH THOUGHT BEFORE WE DIVE INTO IT.
AND WE NEED TO GET AS MUCH PARTICIPATION BY MORE THAN ONE CONTRACTOR.
THAT'S ALL I'M SAYING. AND THIS IS RIGHT NOW.
THEY HAVE NO INCENTIVE TO DO IT. THE ADMINISTRATION DOES NOT HAVE ANY INCENTIVE TO DO IT, BECAUSE CHANGE ORDERS JUST GO THROUGH WITHOUT ANY CHALLENGE OR ANY QUESTIONS, AND WE GET APPROVALS UNANIMOUS APPROVALS FROM THE CITY COUNCIL.
COMMISSIONER JESTE, WOULD YOU SHARE THE PROJECTS THAT YOU LOOKED AT WITH THE SUBCOMMITTEE? SO, SO THEY ADDED TO OR, YOU KNOW, THEY YOU GUYS GOT IT.
YEAH, YEAH. WELL, I WAS GOING TO SAY OUR IDEA WAS TO EXPAND OUR SAMPLE SIZE, RIGHT.
YES. AND THAT PROJECT HE'S TALKING ABOUT SOUNDS LIKE A GREAT ONE TO ADD.
THERE'S ANOTHER ONE THAT WAS BROUGHT UP BY JIM MUELLER.
ARE YOU GOING TO SPEAK ABOUT THAT PROJECT? OKAY, THEN I WON'T SAY ANYTHING ABOUT IT.
OKAY. YEAH, THERE IS ANOTHER ONE THAT YOU GUYS CAN LOOK AT.
GREAT. HE'S GOING TO MENTION, BUT YEAH, PLEASE SHARE.
I HAVE A LIST. YEAH. TWO PROJECTS HERE 41240, WHICH IS ANITA STREET AND PCH IMPROVEMENTS.
OKAY. THAT'S THE ONE YOU HAVE. VIJAY, ARE YOU ON THE SUBCOMMITTEE? NO. YEAH, I WAS. OH, YOU ARE? YEAH. OH, OKAY.
NO, THAT'S, IT SEEMS IMPORTANT TO INCLUDE ALL THOSE PROJECTS.
THE DIFFICULTY I'M HAVING IN THIS WHOLE DISCUSSION IS THERE HAVE TO BE EXAMPLES OF BOTH WHERE THE PROJECT GREW NATURALLY BECAUSE THEY WENT FROM THREE TRAFFIC LIGHTS TO TEN TRAFFIC LIGHTS, AND THERE HAVE TO BE THERE ARE PROBABLY EXAMPLES OF WHERE THE PROPER PROCEDURE WASN'T FOLLOWED. BUT THE DIFFICULTY I'M HAVING IS IN KNOWING WHAT PERCENT OF THE TOTAL PROJECTS FIT INTO EACH CATEGORY.
IF THE ABUSIVE SYSTEM IS ONE OUT OF 50, THEN IT'S LESS IMPORTANT THAN IF IT'S 49 OUT OF 50.
AND WE HAVE TO FIND A WAY TO GET AT THAT. AND I THINK ADDITIONAL WORK OF THE SUBCOMMITTEE TO LOOK AT SPECIFIC PROJECTS AND COME BACK WITH A REPORT OF THIS IS WHAT WE FOUND. WE LOOKED AT FIVE PROJECTS, OR WE LOOKED AT TEN PROJECTS, AND THERE IS OR IS NOT A COMMONALITY OF PROBLEMS HERE.
I DON'T, IT'S HARD FOR ME TO IMAGINE SOMEONE IN PUBLIC WORKS WHO ISN'T CONCERNED ABOUT OVERFLOWING, OVERRUNNING THE BUDGET AND SPENDING MONEY THAT'S NOT THERE.
BUT IF WE FIND ISSUES THAT CAUSE US TO SUGGEST THAT THE PLANNING PROCESS OR THE APPROVAL PROCESS BE CHANGED. THAT'S OUR OBJECTIVE. WE MAKE THAT RECOMMENDATION.
I HAVEN'T SEEN ENOUGH DOCUMENTED EVIDENCE YET OF ABUSE TO SAY WE'VE GOT A REAL PROBLEM, BUT THERE IS A POTENTIAL PROBLEM, OBVIOUSLY. THIS IS AN OPPORTUNITY. IT'S NOT A PROBLEM.
IT'S AN OPPORTUNITY TO SAVE SOME MONEY. THAT'S THE WAY I LOOK AT IT.
AND UNTIL NOW, IT TOOK US MORE THAN A YEAR TO EVEN GET THE DATA THAT WE NOW HAVE.
AND EVEN THAT IS NOT COMPLETE. I THINK. COMMISSIONER WE HAVE TO DIG DEEPER INTO IT.
[01:50:10]
AND I JUST, I CANNOT DO IT BECAUSE THE SIZE OF THE SCREEN I HAVE ON MY COMPUTER, AND THIS IS WHERE I THINK YOU HAVE AI TOOLS AND YOU HAVE FAR MORE RESOURCES AND MORE DATA. AND I THINK THIS IS WHERE WE NEED SOME FEEDBACK FROM THE FINANCE DEPARTMENT.WE MIGHT COME BACK TO THE RECOMMENDATION THAT WE HIRE AN OUTSIDE SOURCE TO LOOK AT THIS.
BUT THE NEXT STEP IS FOR THIS SUBCOMMITTEE TO FINISH THE PROCESS.
LOOK AT THOSE PROJECTS AND THEN LET'S HAVE THE SAME DISCUSSION AFTER THAT REPORT IS FINISHED.
THAT'S THE PLAN. HOW DOES THAT SOUND? SOUNDS GOOD.
BUT AGAIN, WE NEED THE DATA THAT WE CAN AT LEAST START, YOU KNOW.
WELL, DO WE HAVE THE DATA NOW THAT WE IS NECESSARY TO LOOK AT THIS ISSUE? DO YOU WANT TO GO DEEPER? I THINK WHERE WE LEFT THE FOLLOW UP IS WE WERE GOING TO IDENTIFY A FEW ADDITIONAL PROJECTS TO EXTEND OUR SAMPLE SIZE AND SEND THAT INFORMATION TO THE TO THE TEAM THAT WE MET WITH, AND THEY WERE GOING TO PROVIDE US THEN THE NECESSARY INFORMATION FOR THOSE SPECIFIC PROJECTS.
OKAY. DO WE WANT TO DO PUBLIC COMMENT BECAUSE WE HAVE A GENTLEMAN WHO HAS. ABSOLUTELY. FOR US. YEAH. ARE THERE PUBLIC COMMENTS ON THIS ISSUE? I THINK THE REAL ISSUE IS WHO CONTROLS THE EXPENDITURE OF MONEY IN THE CITY? THAT'S THE REAL ISSUE. NOW, I HAD A DIALOG WITH ANDY WINJE, AND I HAVE TO SAY, I ADMIRE HIM BECAUSE HE IS MAKING USE OF THE EXISTING CONTROLS AND MANAGEMENT OF MONEY TO GET HIS JOB DONE IN THE WAY HE SEES FIT. OKAY. NOW, THIS PARTICULAR PROJECT, I LOOKED AT THE ANITA STREET PROJECT.
HE HAD A BACKSTOP THERE OF A GRANT FROM METRO OF $2.5 MILLION.
SO HE HAD A LOT OF MONEY TO SPEND. THE ORIGINAL ESTIMATE FOR THAT PROJECT WAS $230,000.
SO HE, THIS IS WHAT HE TOLD ME. HE GOT IN THERE, AND THEY KEPT SEEING THINGS THAT THEY COULD DO, YOU KNOW, AT THAT PARTICULAR INTERSECTION THAT WOULD BE BETTER.
AND I HAVE NO DOUBT THAT HE IS ACTING IN THE BEST INTERESTS OF THE CITY.
BUT THE PROBLEM IS THAT HE WENT, HE HAD FOUR CHANGE ORDERS ON THAT PROJECT.
ONE OF THEM WENT TO THE COUNCIL. THREE OF THEM WERE INITIATED INTERNALLY.
AND THEY WERE DONE IN ACCORDING TO THE REGULATIONS, THE PROCUREMENT REGULATIONS OF THE CITY.
OKAY. THAT PROJECT ENDED UP COSTING OVER $700,000.
THE ENGINEERING ESTIMATE STARTS OUT AT X AND THE END RESULT IS X PLUS Z AND ABC AS WELL. SO YOU KNOW IT'S NOT AN ISSUE OF ANYBODY DOING ANYTHING WRONG.
BECAUSE WHEN YOU START OUT WITH A CIP BUDGET OF X AND THE EXPENDITURE TURNS OUT TO BE X PLUS A WHOLE BUNCH, I THINK YOU HAVE A BUDGET PROBLEM THERE. AND HE WAS LUCKY HE GOT THIS GRANT, WHICH GRANT MONEY SEEMS TO BE THE GREAT SAVIOR OF THIS CITY.
SO TO ME, THAT'S THE ISSUE YOU HAVE TO ADDRESS.
WHO IS GOING TO MAKE THE DECISION ON HOW TO SPEND THE THE CITY'S MONEY? THANK YOU. THANKS. THANK YOU. I WOULD CERTAINLY AGREE WITH MR. MUELLER. LET'S AGAIN, I THINK THE PROCESS IS TO HAVE THE SUBCOMMITTEE COMPLETE ITS WORK AS QUICKLY AS POSSIBLE.
AND IF THERE ARE RECOMMENDATIONS THAT WE HAVE TO CHANGE THE PROCESS, IMPROVE THE PROCESS,
[01:55:07]
TWEAK THE PROCESS, WE MAKE THOSE TO CITY COUNCIL.ARE YOU ON A SUBCOMMITTEE? YEAH. SO YOU WENT AND MET WITH THE.
THREE OF US WERE ON THE SUBCOMMITTEE. TWO OF US ARE HERE TODAY.
A THIRD MEMBER. RANDY. NO, NO, NO. OKAY. NO, RANDY.
AND DID YOU ALSO MEET WITH THE PUBLIC WORKS DIRECTOR, WERE YOU NOT? YEAH. OKAY. YEAH, THEY WERE THERE. OKAY. OKAY, GOOD.
THEN I WOULD ENTERTAIN A MOTION TO CONTINUE THIS.
SORRY, JUST FOR THE RECORD, THERE'S NO ONE ON ZOOM AND NO ECOMMENTS.
I WOULD ENTERTAIN A MOTION TO CONTINUE THIS SUBJECT TO THE NEXT MEETING.
SO MOVED. SECOND. ALL IN FAVOR? AYE, AYE. GOOD.
NOW TO THE NEXT IMPORTANT TOPIC, PROFESSIONAL SERVICES.
SO FOR THIS ITEM, THIS IS ONE THAT WE HAD JUST SAID THAT WE WOULD BRING BACK UP ON THE AGENDA.
WE ARE NOT DOING THAT TONIGHT BECAUSE WE DO NOT HAVE IT.
SO WE INCLUDED THAT AS AN ATTACHMENT TO THE PACKET.
I DON'T KNOW, COMMISSIONER ALLEN IF YOU'D LIKE TO DISCUSS THAT AND WE CAN PULL IT UP ON THE SCREEN.
SO I'M GOING TO ASK JIM MUELLER, YOU HAD SENT SOME NUMBERS AND I'M GOING TO ASK HIM TO PRESENT THIS ITEM TO US. OKAY. I GOT THESE NUMBERS WHEN THE FINANCIAL TRANSPARENCY FACILITY WAS UP ON THE CITY WEBSITE.
AND SO, AND THEN I GOT THE PROPOSED NUMBERS FROM THE PROPOSED BUDGET.
SO WHAT I FOUND WAS THAT ABOUT 8 TO 10% OF THE CITY'S BUDGET IS SPENT IN PROFESSIONAL SERVICES.
THAT'S A LITTLE BIT OF VARIANCE OF THE NUMBERS THAT STEPHANIE GAVE YOU.
AND I DON'T KNOW WHAT THE DIFFERENCE IS, BUT I FOUND THAT ACCORDING TO THE NUMBERS THAT I GOT, THAT 25 ACTUAL SPENDING ON PROFESSIONAL SERVICES WAS $12.4 MILLION.
THIS IS NOT. I'M SORRY, BUT THIS IS NOT A, HE'S NOT DOING AS A SPEAKER TIME.
THAT'S WHAT HE'S DOING. YEAH. THANK YOU. OKAY, SO NOW, I DID GET THE NUMBERS BY DEPARTMENT, AND I FOUND THAT BY FAR THE GREATEST AMOUNT OF PROFESSIONAL SERVICES WERE PROCURED BY A DEPARTMENT OR A FUNCTION CALLED COMM SERVICES. AND I ASSUME WHAT THAT MEANS IS COMMUNICATION SERVICES. THEY SPENT ABOUT 41% OF OR THEY PROPOSED TO SPEND ON THE 26 BUDGET, ABOUT 41% OF THE TOTAL OF PROFESSIONAL SERVICES CONTRACTS. SO PUTTING ON MY CFO HAT, I SAY, WELL, OKAY, THEY ARE BY FAR THE GREATEST SOURCE OF EXPENDITURE.
THAT WOULD BE THE FIRST PLACE I WOULD LOOK TO SEE WHAT IS GOING ON, WHAT THE PROCESSES ARE.
ARE THEY FOLLOWING PROCESSES THAT REALLY MAKE THE MOST OF THE CITY'S MONEY? SO WHEN YOU'RE DOING AN INVESTIGATION LIKE THAT, THAT'S WHAT YOU FOCUS ON IS THE START WITH THE GREATEST AND THEN WORK YOUR WAY DOWN.
THERE WERE SOME ITEMS OF GROWTH, FOR EXAMPLE.
AGAIN, THESE ARE THE NUMBERS I USED. THE, I SHOULD SAY, WELL, LET ME SAY THE, THE THERE IS ONE DEPARTMENT THAT GREW QUITE A BIT, THE FINANCE DEPARTMENT BETWEEN THE 25 ACTUAL AND THE 26 PROPOSED GREW 4%. AND, YOU KNOW SMALLER PERCENTAGES LIKE THAT ARE, ARE PRETTY MUCH THE RULE ACROSS THE BOARD AND ALL THE DEPARTMENTS.
NOW SOME OF THE INVESTIGATIONS MIGHT INCLUDE EVALUATING HOW CONTRACTS ARE AWARDED.
NOW, OUR PROCUREMENT, OUR CITY PROCUREMENT REGULATIONS ARE PRETTY LOOSEY GOOSEY.
PROFESSIONAL SERVICES IS A VERY, VERY BROAD CATEGORY.
AND THERE'S NO COMPETITIVE BIDDING ACCORDING TO THE MUNICIPAL CODE SO YOU CAN GO OUT AND FIND,
[02:00:07]
YOU KNOW, WHOEVER YOU WANT. AND I'VE BEEN A LITTLE BIT DISTURBED WHEN I, WHEN THE COUNCIL MEETING COMES UP, THE QUOTE A NUMBER, BUT THEY NEVER SAY HOW THAT NUMBER WAS ARRIVED AT.AND SOMETIMES I GET THE FEELING THAT THEY ASKED THE CONSULTANT, WELL, HOW MUCH ARE YOU GOING TO CHARGE FOR THIS SERVICE? AND THE CONSULTANT SAYS $60,000. AND THEY SAY, OKAY.
SO I THINK ONE OF THE FIRST THINGS YOU MIGHT FOCUS ON IS THE ADJUSTMENT OF THE PROCUREMENT REGULATIONS, TAKING A LOOK AT THOSE, BECAUSE, LIKE I SAY, THAT PROFESSIONAL SERVICES CATEGORY IS REALLY BROAD.
ANYBODY, BASICALLY ANYBODY WHO HANGS OUT A SHINGLE AND SAYS I'M A PROFESSIONAL, WHATEVER.
THERE'S NO NEED FOR BIDDING ON THOSE CONTRACTS.
AND I THINK THAT'S A RECIPE IF IT GOES ON AND ON.
AND THESE PROCUREMENT REGULATIONS AND THE MUNICIPAL CODE ARE MORE THAN TEN YEARS OLD.
SO IF THIS GOES ON AND ON AND ON, YOU CAN SEE HOW PRACTICES GRADUALLY DETERIORATE UNTIL YOU KNOW, IT GETS TO BE SO LOOSE THAT MONEY IS BEING SPENT.
AND THIS IS QUITE A LOT OF MONEY 10, 8 TO 10% OF THE TOTAL BUDGET.
SO. ANY QUESTIONS? THANK YOU. OKAY. THANK YOU FOR GOING THROUGH ALL THOSE NUMBERS AND ANALYZING THE DATA FOR US.
OKAY. THANK YOU FOR LISTENING. I THINK WHERE WE STOOD ON THIS, THE LAST MEETING.
STEPHANIE IS GATHERING INFORMATION ON THIS, TRYING TO SHOW US WHAT ANNUAL EXPENDITURES WE'VE HAD IN THIS CATEGORY OF PROFESSIONAL SERVICES SO THAT WE CAN THEN IDENTIFY, ATTEMPT TO IDENTIFY THE EXTENT TO WHICH A CERTAIN PERCENT OF THE BUDGET IS AWARDED TO NONCOMPETITIVE BIDDING, NONCOMPETITIVE AWARDS.
AND I STILL THINK THAT'S THE BEST PLACE TO START.
I UNDERSTAND YOUR SUGGESTION AND I THINK IT'S RIGHT WE SHOULD TAKE A LOOK AT THIS AND THAT'S, THAT'S WHAT WE'RE ABOUT AND GOING TO DO. SO, STEPHANIE, WHENEVER YOU CAN GET THAT DATA TO US THAT WOULD, WE WILL BRING THAT BACK AS A DISCUSSION ITEM.
AM I MISSING ANYTHING ON THIS? DOES ANYONE HAVE ANYTHING ELSE TO SAY THAT? I MEAN, IT'S SOMETHING THAT WE NEED TO LOOK AT, BUT WE NEED DATA FIRST TO SHOW US THE EXTENT TO WHICH IT EXISTS.
HOW MUCH ARE WE SPENDING EACH YEAR ON, AND HOW LARGE ARE THE ITEMS FOR US THAT ARE NOT BEING COMPETITIVELY BID? AND THE ISSUE IS, ARE THERE POTENTIAL ISSUES THERE FOR ABUSE AND FOR THE CITY WASTING MONEY? SO WE, THAT'S A PROJECT THAT WE ARE COMMITTED TO TAKE A LOOK AT WHEN WE HAVE MORE DATA.
AND WHEN WE'RE TALKING ABOUT GOING OUT ON BIDS WE'RE NOT, YOU KNOW, NOT NECESSARILY WE'RE CHOOSING THE CHEAPEST CONSULTANT, BUT WE ARE LOOKING FOR THE BEST VALUE.
THERE ARE COMPETITORS OUT THERE. THEY'LL BE MORE CAREFUL WHAT KIND OF PRICES THEY'RE GIVING US.
I THINK THAT'S TRUE. THAT'S REALLY THE IDEA. OKAY.
OKAY. I WOULD ENTERTAIN A MOTION TO CONTINUE THIS ITEM TO.
PUBLIC COMMENT BEFORE THE MOTION, SORRY. PUBLIC COMMENTS.
ARE THERE ARE THERE ANY COMMENTS? NO COMMENTS ON ZOOM OR ECOMMENTS.
SECOND. MOTION TO CONTINUE TO THE NEXT. ALL IN FAVOR.
AYE. OKAY. AND I THINK THAT CONTINUES, THAT COMPLETES THE AGENDA.
ANY OTHER ITEMS THAT ANY MEMBER HAS THAT. OR A NUMBER L, K, WHATEVER.
YEAH. IF NOT ITEM K, MEMBER ITEMS FOR FUTURE COMMISSION DISCUSSION.
[K. COMMISSION MEMBER ITEMS AND FUTURE COMMISSION AGENDA TOPICS]
NOTHING FROM DAMIEN. VIJAY? NO. WEBSITE, OUR WEBSITE, THE FINANCE WEBSITE.[02:05:09]
OKAY, I'M NOT GOING TO BE HERE NEXT IN IN MARCH MEETING.BUT MAYBE IN APRIL MEETING. BUT BECAUSE I'M NOT GOING TO BE HERE NEXT MONTH, I WON'T BE ABLE TO SAY, OH, LET'S DISCUSS FINANCE. FINANCE WEBSITE. DO WE HAVE A FINANCE WEBSITE IN DIFFERENT THAN THE.
THE CITY'S WEBSITE. CITY'S WEBSITE. YEAH. YEAH.
OKAY. YEAH. CAN I ASK IF YOU HAVE A SPECIFIC PART OF THE WEBSITE THAT YOU WOULD LIKE TO DISCUSS? I'M JUST WONDERING. YEAH. WHAT INFORMATION IS AVAILABLE TO THE PUBLIC? OKAY. THE BUDGETS, THE WHAT'S AVAILABLE TO THE PUBLIC TO.
THE FINANCE PORTION OF THIS WEBSITE IS A TERRIFICALLY LARGE COLLECTION.
SO IF YOU GO TO FINANCE DEPARTMENT, WHAT'S AVAILABLE FOR THE PUBLIC TO SEE REGARDING THE BUDGET? GOOD. BUDGET. OKAY. GOOD. NICK, ANYTHING? NO, I THINK THAT DEFINES MY, YOU KNOW, MY CONCERN TO NOTHING. THANK YOU.
ONE ISSUE THAT HAS BEEN MENTIONED, AND WE SHOULD BEGIN TO DISCUSS IT.
WE'VE GOT NEW A NEW BALANCE OR AN INCREASING INCREASED BALANCE IN UAL THAT WE TOOK CARE OF WITH THE BOND ISSUE AND BEGINNING OF FISCAL 22. THERE'S A SUGGESTION THAT THIS CAME ABOUT WHEN WE WERE DISCUSSING THE, THAT BALANCE.
WE'RE PAYING 6.8% INTEREST ON THAT. WHEN WE REFINANCED THE PROJECT FOUR YEARS AGO, WE WENT FROM A 6.8% TO A 2.8% ON $215 MILLION. SO THERE WAS A SUBSTANTIAL SAVINGS.
WE'RE NOW WHAT DO WE HAVE NOW? ABOUT A $50 MILLION UAL.
YEP. YES. SO $50 MILLION UAL. AND THE INTEREST RATE, INTEREST RATES HAVE CHANGED SO THAT INSTEAD OF BEING ABLE TO DO IT AT 2.8 IT'S MORE LIKELY A 4%, 4.5% VERSUS STILL A 6.8%.
BUT THE POINT IS THAT IT PROBABLY IS WORTH TAKING A LOOK AT THAT.
WE'VE UNDERPERFORMED THE 6.8%. CALPERS HAS UNDERPERFORMED THE 6.8% BY ALMOST 2% PER YEAR, COMPOUNDED FOR THE LAST FOUR YEARS. THAT'S HOW WE'VE COME UP WITH $50 MILLION IN ADDITIONAL UAL.
THAT MAY GROW. THAT MAY NOT GROW. IF THEY MAKE 6.8% IN THE FUTURE ON AVERAGE.
THEN THAT THAT BALANCE STAYS AT 50 MILLION. IT ONLY GROWS.
IT ONLY DECREASES IF WE PAY IT OFF OR IF RETURNS FROM CALPERS EXCEED THE 6.8%.
THEIR ASSET ALLOCATION PROCESS NOW SUGGESTS THAT WITH THEIR CURRENT ASSET ALLOCATION ON A LONG TERM BASIS, THEY'RE GOING TO MAKE ABOUT 6.8%. SO IT'S UNLIKELY THAT THEY'RE GOING TO SIGNIFICANTLY REDUCE THAT BY EXCESS EARNINGS.
MAKE SENSE RETURN. SO IT MAKES. I DID SOME QUICK NUMBERS AT A 50%, $50 MILLION AT 4%, 4.2% SAVES US ABOUT 700,000 A YEAR. SO IT'S IT'S NOT IT'S NOT INSIGNIFICANT.
SO WE SHOULD BE THINKING ABOUT TAKING A LOOK AT THAT AGAIN AND I DON'T KNOW EXACTLY HOW WE DO THAT, BUT WE, I PUT THAT ON THE AGENDA FOR FUTURE DISCUSSION AT SOME POINT SOONER THAN LATER.
THAT'S ALL I HAVE. ANYTHING ELSE? I'D ENTERTAIN A MOTION TO ADJOURN.
OH, I WAS GOING TO SAY SO OUR. I'M NOT GOING TO BE HERE IN MARCH.
AND I HOPE THAT YOU WILL CONTINUE THE PROFESSIONAL BRING IT TO APRIL MEETING.
AND THEN IN APRIL, WE'RE MEETING THE FOURTH WEEK IN APRIL.
WE VOTED. WE DID. OKAY. SO APRIL 23RD. I'M JUST HOPING THAT YOU WILL YOU'LL BRING ALL THOSE ITEMS FROM TONIGHT TO APRIL'S MEETING. OKAY. IF YOU CAN REMEMBER.
MOTION TO ADJOURN? MOTION TO ADJOURN. ALL IN FAVOR? AYE. SECOND. WE ARE ADJOURNED.
* This transcript was compiled from uncorrected Closed Captioning.