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Study Session 05/02/17APPROVED BY THE CITY COUNCIL ON JUNE 13, 2017 CITY COUNCIL ORANGE, CALIFORNIA MEETING MINUTES May 2, 2017 The City Council of the City of Orange, California, convened on May 2, 2017, at 5:00 p.m. in a Special Meeting in the Weimer Room, 300 E. Chapman Avenue, Orange, California. 5:00 P.M. BUDGET STUDY SESSION 1. OPENING This Special Meeting of the Orange City Council was called to order by Mayor Smith at 5:12 p.m. 1.1 INVOCATION Greg Warren, Public Works Department 1.2 PLEDGE OF ALLEGIANCE TO THE FLAG Mayor Teresa E. Smith 1.3 ROLL CALL PRESENT - Alvarez, Whitaker, Smith, Murphy, Nichols ABSENT - None 1.4 PRESENTATIONS/ ANNOUNCEMENTS/ INTRODUCTIONS Mayor Smith shared how honored she feels to serve as the elected leader of Orange. 2. PUBLIC COMMENTS - None 3. CONSENT CALENDAR - None 4. REPORTS FROM MAYOR SMITH Mayor Smith announced the loss of her brother, Mathew Robert Smith. He passed away suddenly at home on April 27, 2017. Please keep the family in your prayers. PAGE 1 APPROVED BY THE CITY COUNCIL ON JUNE 13, 2017 CITY COUNCIL ORANGE, CALIFORNIA MEETING MINUTES May 2, 2017 5. REPORTS FROM COUNCILMEMBERS - None 6. REPORTS FROM BOARDS, COMMITTEES, AND COMMISSIONS - None 7. ADMINISTRATIVE REPORTS - None 8. REPORTS FROM CITY MANAGER 8.1 Second Study Session for the Proposed Fiscal Year 2017 -18 Budget. City Manager Rick Otto presented the second budget study session. The figures for tonight's study session will be very similar to the first study session with a few slight revisions. Staff is pleased to present a balanced budget. Finance Director Will Kolbow presented a series of slides. For FY 17, staff estimates that the City will have $5.4 million revenues over expenditures. With transfers out that were previously approved, the estimated unreserved fund balance will be $8.6 million. Revenues are up by 1.2% not counting one time revenues related to property sales. Sales tax revenue is estimated at $42.3 million. Orange is 25 in the State in terms of sales tax revenue and 5 th in Orange County. Councilmember Whitaker noted how the Board of Equalization fee dropped and is now increasing slightly in this year's budget, a 1.4% increase. The higher rates from two budgets back were due to fees charged by the State to administer all the transfers the State requires. For FY 18, property tax revenues are trending up for commercial properties. There has been an increase in the number of transactions. Staff expects a bump in revenue due to this uptick in transactions. Transient Occupancy Tax remains at 10% in Orange. Property tax revenue for FY 18 is estimated to be $26.9 million. Mayor pro tem Murphy asked if the City receives reports on how many night stays are occurring at Orange hotels. Staff believes that the TOT reports the City receives from hotels includes how many stays. Murphy noted that visitors that stay in Anaheim pay a 15% TOT and a 2% resort fee. Councilmember Nichols noted that while counter visits are up, the revenue for licenses and permits is down a little. Staff indicated that they are very conservative with estimates for the revenue numbers at the counter, as this is the first area to drop in a down economy. FY 18 expenditures are estimated at $107.5 million. One factor is the animal control contract has increased from the County. $1.2 million is the estimate from the County for animal control services. The County indicates that salaries, benefits, services and supplies along with overtime are the main drivers of the increase. Mayor pro tem Murphy notes that the cost for animal control services have doubled in the last two years. PAGE 2 APPROVED BY THE CITY COUNCIL ON JUNE 13, 2017 CITY COUNCIL ORANGE, CALIFORNIA MEETING MINUTES May 2, 2017 8. REPORTS FROM CITY MANAGER (Continued) Councilmember Nichols noted that the new animal control facility will be completed by the end of 2017. Thirty-six full time frozen positions are not included in the budget. Forty full time vacant positions, are in this budget. Estimates indicate $234,000 revenues over expenses for the FY 18 budget. The total available fund balance is estimated at $4.6 million after transfers out. For the water fund, due to the end of the drought and a small increase in consumption in the City, the fund will not run out of money this budget. A water study is being completed to analyze the current rate structure. Public Comments: Marshall Krupp — Has concerns with the streets in his neighborhood. They are not in good condition. The streets need to be re- surfaced. Reserve Policy: Currently the City's catastrophic reserve is at 18.7% of the budget. The current reserves are $20,067,960. The recommended goal is 20% of the budget with a minimum of 12 %. The reserves are for economic uncertainties. Mayor pro tem Murphy noted that the current reserves in the CIP program is over the recommended amount of two times the highest year. Average life of equipment varies based on the type of vehicle. Use of a weighted average would help account for the different vehicle types and life expectancies. Mayor Smith noted that a catastrophe is for emergency purpose. Acts of God. Earthquakes. Floods. Financial meltdowns not caused by an act of God should also be planned for. Three months of operating expenses to cover during emergencies is the minimum goal of the catastrophic reserve. City Treasurer Richard Rohm agrees that the idea of a reserve policy is an excellent one. City Manager Otto mentioned the PERS cost issues that will hit hard in FYI and beyond. PERS costs will increase by $3 million just for PERS increases in FY 19. Revenue projections will not cover these higher levels. The City Manager will work with the Department Heads to strategize how to close these gaps. Thank you to the Council for the feedback and to staff for the effort in providing the budget. Finally the City Manager introduced Robert Moya as the new budget officer. Mayor Smith thanked staff for the great look at the budget. Wants to ensure that staff has the tools needed to do the accurate forecasts. Thank you to staff for your efforts. Please keep the Council informed of any changes to forecasts or the budget. ACTION: Received and filed report. PAGE 3 APPROVED BY THE CITY COUNCIL ON JUNE 13, 2017 CITY COUNCIL ORANGE, CALIFORNIA MEETING MINUTES May 2, 2017 9. LEGAL AFFAIRS — None 10. RECESS TO CLOSED SESSION The City Council recessed to Closed Session at 6:50 p.m. a. Conference with Labor Negotiator pursuant to Government Code Section 54957.6: City Negotiators: Laura Kalty, Special Counsel. Employee Organizations: All Bargaining Groups. b. Conference with Legal Counsel — Potential Litigation — Significant exposure to Litigation pursuant to Government Code Section 54956.9(d)(2). 1) One potential case. C. Conference with Real Property Negotiator — Real property negotiations pursuant to Government Code Section 54956.8: Property: 171 and 177 N. Cypress Street. 11. ADJOURNMENT — The City Council adjourned at 9:05 p.m. The next Regular City Council Meeting will be held on Tuesday May 9, 2017, at 6:00 p.m. in the Council Chamber with a Closed Session beginning at 5:00 p.m., if necessary. jkq ROB fT ZO NADO C CLERK C 4 � 4TESA E. SMITH MAYOR PAGE 4