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Study Session 04/28/15APPROVED BY THE CITY COUNCIL ON MAY 12, 2015 CITY COUNCIL, ORANGE, CALIFORNIA MEETING MINUTES April 28, 2015 The City Council of the City of Orange, California, convened on April 28, 2015, at 5:00 p.m. in an Adjourned Regular Meeting in the Weimer Room, 300 E. Chapman Avenue, Orange, California. 5:00 P.M. 1. OPENING 1.1 INVOCATION Deputy City Manager Irma Hernandez 1.2 PLEDGE OF ALLEGIANCE TO THE FLAG Mayor pro tem Fred Whitaker 1.3 ROLL CALL PRESENT — Alvarez, Whitaker, Smith, Murphy, Nichols ABSENT — None 1.4 PRESENTATIONS/ ANNOUNCEMENTS/ INTRODUCTIONS - None 2. PUBLIC COMMENTS - None 3. CONSENT CALENDAR - None 4. REPORTS FROM MAYOR SMITH Mayor Smith reported her father celebrated his 90 birthday on Saturday, April 25, 2015. 5. REPORTS FROM COUNCILMEMBERS - None CITY COUNCIL MINUTES April 28, 2015 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 2015 -16 Budget. DISCUSSION: Interim City Manager Rick Otto and Finance Director Will Kolbow reviewed a series of slides, outlining the updated status of the current year budget and the updated projections for the FY 2015 -16 budget. Mr. Otto thanked staff for their hard work in creating the budget and thanked the City Council for their input in helping craft the priorities and the policy direction for the budget. Finance Director Will Kolbow reviewed the next series of slides. FY 2016 revenue is estimated to be up 3.3 percent over the FY 2015 budget. The City enjoys a great diversity in the types of businesses that complete our revenue base. Mayor pro tem Whitaker asked about any leakage reports that have been produced. Mr. Otto explained that the City has produced these reports and found only a few small areas where we can improve. Furniture sales was one example of a retail sector where Orange is weak. FY 2016 expenditures are estimated to increase by $5.5 million. The City of Orange pie chart for expenditures looks very similar to other full service cities in the region. In response to a question from Mayor pro tem Whitaker, Mr. Otto explained that Orange transfers funds from its General Fund into Capital Funds to pay for capital projects. The funds do not come out of the General Fund directly. There is $5.4 million available in the unreserved funds. Councilmember Alvarez asked what is retained in the catastrophic reserve fund. Mr. Otto explained that in the past, extra funds would funnel into the catastrophic reserve. Lately the fund has remained static at $19 million. The City's goal is to increase dollar amounts saved in the catastrophic reserve. The Water, Sanitation, Capital Projects, and Internal Service Funds were discussed. Mayor pro tem Whitaker noted that as water consumption drops, so does revenue, this could put the entire fund in danger. Public Works Director Joe Defrancesco, in response to a question from Councilmember Murphy, noted that the City's costs go down as consumption drops because we won't have to buy as much water from outside or pay as much for the power to move the water, etc. The City's goal is to have 25% in reserves for the Water Fund and the City is a little under that goal today. In response to a question from Councilmember Nichols, Mr. Otto explained that the available Sanitation Funds are used only to fund ongoing operations. Capital projects would need another funding source. Mayor pro tern Whitaker noted he does not like when sanitation funds fees are tied to water usage. PAGE 2 CITY COUNCIL MINUTES April 28, 2015 8. REPORTS FROM CITY MANAGER (Continued) Councilmember Alvarez asked how much savings the City realized from contracting out street sweeping services. Mr. Otto explained that the $500,000 savings goes back to the Sanitation Fund. Mayor Smith noted that sewer costs are directly tied to water use. In response to a question from Councilmember Murphy, Mr. Defrancesco explained that tree trimming is a fixed cost for all homeowners in the City even when homes have very limited street frontage. Next, the City Council discussed PERS funding. Mayor pro tern Whitaker noted that solving the PERS problem today will save future City Council's time and money. He asked how other Orange County cities were financing their quicker pay -down plans. Mr. Kolbow explained that they created their own financing plans with PERS and took on additional risk. If PERS fails to perform up to standards, their General Funds will have to pick up the difference. Councilmember Murphy pointed out that the City does not want to be in the business of building trusts or complex finance. Orange County's bankruptcy was a result of prior poor planning related to finances. He also noted that the City's reserve funds were created to help cover costs when funding was tight. Mayor Smith noted that there are trust experts out in the business community that could help. She looks forward to hearing more about other options the City can utilize regarding PERS payments. She asked for the new water consumption rules to be spelled out clearly for the citizens of Orange. Finally, the Mayor thanked staff and the budget team for their hard work on this year's budget. ACTION: Received report and provided policy direction. 9. LEGAL AFFAIRS - None 10. ADJOURNMENT — The City Council adjourned at 6:15 p.m. The next Regular City Council Meeting will be held on Tuesday, May 12, 2015, at 6:00 p.m. in the Council Chambers with a Closed Session beginning at 5:00 p.m., if necessary. k6BEkT ZORNADO ERESA E. SMITH CHIEF CLERK MAYOR PAGE 3