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2001/01/27 ANAHEIM, CALIFORNIA - CITY COUNCIL MEETING ADJOURNED REGULAR MEETING OF JANUARY 23, 2001 HELD SATURDAY, JANUARY 27,2001 The City Council of the City of Anaheim met in regular session. PRESENT: Mayor Tom Daly, Council Members: Frank Feldhaus, Lucille Kring, Tom Tait and Shirley McCracken. STAFF PRESENT: City Manager Jim Ruth, City Attorney Jack White, City Clerk Sheryll Schroeder, Finance Director William Sweeney, Budget Manager Jeff Stone, Senior Management Analyst Edina Goode. A copy of the agenda for the meeting of the Anaheim City Council was posted on January 25, 2001, on the bulletin board outside of the Council Chambers and the east entrance to City Hall, bridge level, 200 South Anaheim Boulevard, Anaheim, California, as well as on the front entrance to City Hall West, 201 South Anaheim Boulevard. Mayor Daly called the adjourned regular meeting to order at 8:46 A.M. in the Gordon Hoyt Conference Center, Second Floor, 201 South Anaheim Boulevard, Anaheim, California for the purpose of a Mid-year Budget Review Workshop. Presentations were then made by the City Manager and subsequently, the Finance Director, both of which were supplemented by a Power Point slide presentation, and hard copies were submitted in binders entitled "Budget Workshop, January 27,2001", available in the City Clerk's Office. City Manager Jim Ruth explained that the purpose of this meeting was to review the City goals, achievements, and work plan status, budget /fiscal projections, upcoming challenges and to receive Council direction and priorities. The Council had endorsed the City's goals of ensuring public safety, building the economy, enhancing neighborhoods and community services, maximize assets and maintain infrastructure. City Manager Ruth gave an update pertaining to public safety. He said that one of the goals of the Council for many years was to continue low crime rates and crime was down 2.5% this year. Community Policing was a strong component of the reduction in crime and there had been great public support for the program, he said. City Manager Ruth said that the west Anaheim police facility was operational and provided meeting spaces for the community as well as proving police presence in the west Anaheim area. He said that bids had been approved by Council for the east Anaheim Police Station and the program should be complete in April, 2001. Funding for the east Anaheim Police Station had been made available through grant assistance and Mello-Roos, he noted. City Manager Ruth said that fire loss was down slightly this year from last year and the enhanced medical transport, Care Ambulance, was meeting the objectives and was responding within the 94.5% projected response time. In building the economy, the City Manager said that the last couple of years had been good due to the Resort revitalization. There was over $4 billion in the City with Caltrans and Disney improvements, which included the Convention Center. There had been an excellent response as a result of the new Council Policy to provide some economic incentive for businesses in the ----- --......"..-----.>"' ^_._._->----_.._._._-"..~". CITY OF ANAHEIM CITY COUNCIL MINUTES JANUARY 27, 2001 PAGE 2 resort area/Convention Center block, he said. The City was working with Marriott Hotel which, he noted, was looking to expand as well as the Hilton and the Inn At The Park. Staff was involved with a major marketing effort with the ULI and had met with many of the potential investors that may be interested in coming to the City. City Manager Ruth said that the Canyon Industrial Area with the EXPO and Pacific Sunwear were substantial economic growth areas and were very a well planned and though-out and appealed to high-tech industries that had come in to the City with better paying jobs. The City Manager said that staff had met with Pointe Anaheim and they had come up with new revised plans to include more retail and had eliminating entertainment. There may be an aquarium and 1,600 hotel rooms instead of 1,050 hotel rooms and they had obtained twenty acres either by lease or purchase and were proceeding with financing in the next 90-days, he said. Gotcha Glacier was working on financing for the project and would add additional retail to the area instead of Jillian's Restaurant, said the City Manager. City Manager Ruth reported that staff and Disney had been meeting weekly to discuss the EIR for the third gate project. There had been several conceptual possibilities for the property; however, nothing had been finalized and staff would continue to work with Disney on a specific plan over the next six months. The Irvine Company had not made any indication of development of the Mountain Park project which would be approximately 8,000 homes, said Mr. Ruth, but he believed that it would eventually be developed out to the eastern City limits. Toyota was developing on the old Best Products site on Euclid Avenue and would be an economic benefit to the City in terms of retail sales, he noted. He added that Murrielta Circuits, a 48,000 square foot expansion in the hill and canyon area was another nice development. City Manager Ruth said that there was some vacancy at the Festival Shopping Center but it was minimal and they believed that there would be other retailers that would back fill the vacancies. Council Member McCracken asked if the City would have the option to sell excess power to neighboring districts and school districts and City Manager Ruth said that Public Utilities General Manager Edwards had looked at that option on a preliminary basis and felt that the City did not have enough margin to be selling off power to other agencies. With regard to building the economy, Council Member Kring asked what the plans were for the old Orchard Supply Hardware building at the Anaheim Plaza and it was made known that Orchard Supply was still paying the lease even though the building was empty. Mayor Daly commented that it was important to that center that a replacement anchor be found for that large Orchard Supply Hardware space. He also agreed that the City should check into electric partnerships and sales and see what some options would be. Mayor Daly asked if Gotcha Glacier had to negotiate an amendment in the next thirty days and City Manager Ruth responded that Glacier was looking to have a 90-day extension and would have to get that in the next thirty days. - -_...---,~.,-_...,_. CITY OF ANAHEIM CITY COUNCIL MINUTES JANUARY 27,2001 PAGE 3 With regard to enhancing neighborhoods and community services, City Manager Ruth said major improvements had been made in terms of parks such as Ross, Vermont, Colony, which were all under development and Revere School. Delphi field was working through escrow and was a $2 million investment, he said. Downtown and east end community center were fully operational and would be very utilized. The west end community center was being planned which was the Maxwell presentation workshop, he said. The City Manager had set up a meeting with Edison to resolve the lease of the 7.5 acres in that area, A presentation on the main library had been made to Council and there were funds in the budget for renovations, he said. There were various options to expand or build a new library and the City Manager asked for specific direction from Council. Neighborhood improvement programs include the Resort and from the $5 million that Disney contributed, all but $1.2 million had been spent. He referred to a report that was included in the Budget Workshop binder that explained how the money was spent. The City was working with various communities in the Resort area and had made enhancements and improvements to those areas, he said. He referred to another report of how the $500,000 a year was spent and which projects were complete since input had been taken from the community, and needs assessed. Allocations were made for street lighting, security lighting, sidewalks, landscaping and traffic issues. City Manager Ruth said that the Jeffrey Lynne revitalization was a $50 million project currently in the process and would make a major impact on the area. City Manager Ruth said that even with the $2 million spent on the Delphi property, the City would have an unallocated $3 to $4 million for the community fund which was additional capital for Council consideration. This would be a reserve over and above the City's expenditures, he said. The general plan zoning ordinance would be updated and Planning Director Fick would be bringing a proposal to Council in February, said Mr. Ruth. He believed that the update could be done in three instead of five years. City Manager Ruth said that the beautification of major corridors such as Lincoln Avenue, Anaheim Boulevard, Beach Boulevard had been substantially improved with medians. The Cultural Plan adoption was a significant achievement, he said, and would help the City to obtain grants and outside funding to assist the cultural needs in the City. City Manager Ruth reported that there was a meeting with the west Anaheim residents on the community center and property had been acquired on Beach Boulevard for a potential police station subject to Council's review and consideration. Library options had been looked at and fire stations at Kraemer and Orange would have to be remodeled or replaced, he said, and the City Manager requested Council direction on those community improvements. With regard to maximizing City assets, City Manager Ruth said that to the Council's credit, utility rates were reduced by 2.85 percent when rates were up everywhere else. He said that golf maintenance was privatized over a period of time which was worth over $4.2 million net to the general fund over the next five years. He said that Council would then be able to do the $1.9 million transfer to pay for the golf operation in Anaheim Hills and still have another million left over at the end of five years. In response to Council Member Feldhaus, the City had privatized CITY OF ANAHEIM CITY COUNCIL MINUTES JANUARY 27,2001 PAGE 4 around $139 million per year and the City Manager Ruth would report back to Council on the privatization. The Convention Center bookings had exceeded expectations this year and the City Manager asked for policy direction from Council on naming rights for the Convention Center, not the entire building, but just certain components or just the arena. The Summit office complex, 250,000 square feet on the Stadium property was doing great, he said, and they were interested in developing the Stadium property in case Gotcha Glacier did not move forward with their plans. The resident/non-resident golf fees had dropped down and was coming back up. The privatization of the new Anaheim Hills Golf Course clubhouse was still a policy decision for the Council as far as a 250 or 350 capacity banquet facility. Council had been furnished a report on the economics of the banquet facility and Mr. Ruth believed that it would support the 350 capacity banquet center with no diminishment on the return of investment to the general fund. With regard to maintaining Infrastructure, the City Manager said that $3 to $4 million per year had been allocated for infrastructure and improvements in the City and the Resort construction was wrapping up as well as the freeway improvements. The City was spending $9 to $10 million per year for undergrounding utilities said Mr. Ruth. Landscaping on Anaheim Boulevard, Lincoln Avenue and Beach Boulevard were complete and there would be a $4 million per year allocated for street improvements. Council Member McCracken noted that there would be more serious fines for sewer problems and Streets and Sanitation had been replacing the weak spots, but since Anaheim was an older city, there was a real risk of failure of the sewer lines and millions of dollars in fines. City Manager Ruth responded that there was a $56 million deficit there was only about one half million dollars per year going into the fund, but the rates could go up and the City could build a reserve and do more. Private development and Redevelopment had helped in replacing some of those, and the City Manager agreed that there was a risk especially with additional development. He said that he would continue to keep the Council advised. City Manager Ruth concluded his presentation and referred the Council to the Budget Workshop binder for specific information. Finance Manager William Sweeney said that the City had a very strong first half of the fiscal year and he said that based on that and more modest projections for the balance of the fiscal year, there would be a very small operating surplus after transferring $3 million (which was not in the current budget) to the Community Improvement Fund and pay for the Delphi field. That did not include the ERAF money for next year but did include the ERAF for this year. Mr. Sweeney spoke about the economy and said that interest rates were cut by .5 percent in January and this would stimulate the economy as well as certain tax breaks and he had seen no negative trends. The taxable sales for the last two quarters were up ten percent each over the previous year. In March, he would receive sales tax for December which he anticipated to be much lower, close to zero growth. The final quarter of the year the City's taxable sales would still be up over budget. Mr. Sweeney said that there would be record booking at the Convention Center and a generally strong economy in California and it was much too soon to be moving -r-' '-'.--'-'" ----- CITY OF ANAHEIM CITY COUNCIL MINUTES JANUARY 27, 2001 PAGE 5 into a recession. He said that the law to reduce the motor vehicle license fees was based on the budget and the State had agreed to back fill the local governments to keep us whole. Mr. Sweeney then explained the slide presentation on topics which were contained in the Budget Workshop binder. Mr. Sweeney explained that property taxes were not a huge source of revenue for the general fund and he spoke about the ERAF payment from the State which meant $1 million to the City in the current fiscal year. He said that the City may receive another $1 million in 2002 since Governor Gray Davis had proposed it. If the City did get it, that would be $1 million on top of $3 million for next fiscal year 2002, he said. With regard to the ERAF Shift, the amount that was being shifted was a percentage of the total and it would continue to get worse, he said. The State back filled the City with a one-time ERAF payment and California cities were interested in getting ERAF eliminated or at least capped so it would not get worse and it suppressed an increase in property tax, he said. Mr. Sweeney said that the Transient Occupancy Tax was a major source of revenue to the City and he believed that the Convention Center would have a record attendance year in 2001. He would be meeting with Charles Ahlers, President of the Visitors and Convention Bureau to document numbers and prepare a report for Council. With regard to Transient Occupancy Room Sales Subject to Tax, Mr. Sweeney pointed out to Council the gross receipts of all hotel properties in the City subject to the transient occupancy tax. In the Transient Occupancy Tax Breakdown, Mr. Sweeney explained how the transient occupancy tax was allocated and that it was all general fund revenue. It came in and was allocated every year by the Council via appropriation, he said, and all the money administratively pledged. A discussion ensued pertaining to bonds and debt payoff. The meaning of List Payment Measurement Revenue was explained by Mr. Sweeney. He said that these were lease payments the City makes on bonds associated with the Disney Resort expansion and they were measured revenues that were unlike any other debt the City had on its books and were measured against actual performance. He said that he would report back to Council about the annual debt payment schedule. Mr. Sweeney was optimistic about sales tax even with a slowing economy and estimated a 4% growth for fiscal 2002/2003. He said that the City would not be affected as much with the hotel stays and convention trade but in a recession, people buy less cars or shop less at the shopping centers which would affect retail taxable sales. He would like to submit quarterly reports to Council. Business License had very little compounded annual growth, said Mr. Sweeney, and there were no proposals to increase or modify the business license ordinance. The business license tax was in excess of $4 million and the annual cost to process business license fees was $500,000 year. Mr. Sweeney would report to Council how neighboring cities were doing the processing costs of business licenses and he believed that the City's was just over $4 million. City Manager Ruth said that there had been a comparative analysis with other cities done quite a number of years ago by a consultant and Anaheim was substantially lower than other cities. Mr. Sweeney said that even in a recession, people continue to buy cars at a slower rate, and they pay their motor vehicle license fees. ...,.. CITY OF ANAHEIM CITY COUNCIL MINUTES JANUARY 27, 2001 PAGE 6 Mr. Sweeney said that the fees and charges that were slightly below budget were the paramedic and planning fees. All other fees were 4.2 % higher. He was proposing that the City Council transfer $3,000,000 from the General Fund to the Community Improvement Fund and to make the first deposit into that fund in the current fiscal year because in the following two fiscal years, he proposed a transfer of $3,000,000 in each year for a total of $9,000,000. Mr. Sweeney responded to Mayor Daly that yes, the general fund projections for this fiscal year were about $7 or $8 million higher that what the Council adopted six months ago and $2 million was allocated to Delphi field. He said that the Council would not have to take any money from reserves and they could still pay for Delphi field even though that decision had not yet been made. The $8 million in reserves had not been committed to anything until Council decided what they would like to do with it. Mr. Sweeney reported that there was no change on gas tax. The 4% transfer would be higher this year because of higher wholesale sales last fiscal year so utilities would exceed budget by the 4% transfer which would be almost $900,000. He said that there would be no change in golf and it would stay flat in the future. Sanitation would have no change and the Yo cent sales tax would be up 9.4% based on the estimate of county wide taxable sales coming back to the City, he said. Council Member Tait asked if Golf should be increased and Mr. Sweeney said that was at the discretion of Council and he had left it flat so golf would have more money to spend on other areas and to give Council an option to take money out of golf for other community needs. In response to Council Member Kring the City would need revenue for the new clubhouse and the more that item was increased, the less money was available for other golf operations. The Yo Cent Sales Tax must be spent on public safety and indirectly the general fund would benefit because the City must spend over a certain amount for the police and fire department and the City was well in excess of that threshold, said Mr. Sweeney. The Yo Cent Sales Tax was about $25 million and it went to the Orange County Sheriff's Department and the City Police received about $800,000 which was a very small amount compared to the service needs, he said. Mayor Daly asked about the Community Improvement Fund and Mr. Sweeney responded that it had not been approved by the Council and the structure of the Delphi was coming out of the general fund. Mr. Sweeney added that the out go of the Anaheim Resort Fund was 21 % higher and the Council had not approved that yet but these were measured revenues. From the period of July 1, 2000 through December 31, 2000, whatever 20% of the transient tax was, was the amount Finance was contractually obligated to transfer and this went along with the List Payment Measurement Revenue (LPMR) of 12.7% to construct and pay debt service. He said that this would be the last time Council would see that number. The amount necessary to fund construction was based on that amount and Council adopted a budget that had construction and the expense did not go up automatically, but the revenue did and only the Council could amend the budget on the expenditure side. Mayor Daly requested for separate documentation on the Resort Fund. Economic Development/Redevelopment was lower on what would be paid out on sales tax transactions and it could be 3% to 5% lower, said Mr. Sweeney. There was no change in the Air Quality Improvement Fund, he said. There were very few transactions on the Arena land, Mr. Sweeney reported, and there were auto fees and other miscellaneous taxes that had to be CITY OF ANAHEIM CITY COUNCIL MINUTES JANUARY 27, 2001 PAGE 7 paid. He said that there was one more payment on the Arena and there were funds and reserves for that shortfall payments, one in the current year and one next year and then the City was done, he said. Mr. Sweeney explained that the revenue from the Rams goes to off set the Stadium to pay debt service. In response to Mayor Daly, the Finance Director said that the budget adopted by the Council last June was $161 million plus with a couple of adjustments such a costs for the Anaheim Fire Association contract and about $1 million of expenses rolled over from the prior period. Mayor Daly thought that the Council had $8 million at its disposal today that they did not project they would have seven months ago and Mr. Sweeney explained that there were higher expenses also. He said that the Council had $3 million plus $2 million on the Delphi for a total of $5 million. Mayor Daly asked for detail on the spending side and Mr. Sweeney said he would respond to Council with a line item detail. Council Member Kring asked Mr. Sweeney if it would be better to take the Delphi funds from general fund or the reserves and he said that they would have to back fill the reserves and the most conservative way to handle it would be to take it out of the general fund and, in Mr. Sweeney's opinion, there was a very strong reserve in the General Fund and it was up to the Council to determine what the appropriate amount would be, he said. In response to Council Member Feldhaus, the Finance Director said that the bankruptcy money was in a separate account called the Capital Outlay Fund and it was listed in the Budget Workshop binder. All of the park projects were appropriated into that fund, he said, and Mr. Sweeney said that he would prepare a report for Council. He also addressed the $3 million transfer and said it would support a borrowing and since it would be a recurring transfer to the Community Improvement Fund, it would be treated like any other hands off expenditure line item like a debt service payoff and that was why it was important to build it into the base of the General Fund. Mr. Sweeney then gave a recap of the General Fund for fiscal year 2001 , spoke about the projected net of revenue over expenditures and the future status of reserves as a percent of expenses and the upcoming budget and challenges. The Finance Director was monitoring the funds and said that the point was not to allow funds to accumulate fast without an offsetting liability. In response to Council Member Tait, City Manager Ruth said that there had been several occasions that there had been a purchasing freeze so that departments did not go out and buy what they do not need and the City Manager would monitor and review that and departments were expected to come within one percent of a target amount. Finance Director Sweeney recommended that the Convention Center would have between $4 to $5 million and that it should accumulate to replace infrastructure over time, but that would be at the discretion of Council. Golf would have an excess of $4 million and Council needed to program how that would be spent. Other funds would go down by natural cause like the Resort fund and water and electric would be based on the market. City Manager Ruth reported that the City's fiscal picture was very positive and the City had positioned itself to deal with some of the critical needs in the community. The City Manager was looking forward to the completion of the downtown development. The Summit had expressed interest in developing downtown as well. Mountain Park was out at the east end, he said, and CITY OF ANAHEIM CITY COUNCIL MINUTES JANUARY 27, 2001 PAGE 8 SFX in downtown had revised plans and would be coming back to Council soon for review. The City was working with Kwikset for the conversion of that property to residential and Pointe Anaheim would be very positive input into the Resort area. Stadium development was in progress and the City was working on the EIR for Disney's Third Gate, he noted. Pond Management had been a concern and Ogden was still soliciting proposals for someone to come in and buy them out and manage that operation. General Plan update would be starting quickly and take about three years and the major thrust in economic development was hotel development. Labor negotiations for Fire would start in July and they were wrapping up AMEA. An approved agreement for IBEW would be appearing at the next Council meeting. The City Manager believed the City needed to place more money in the neighborhoods and was working on addressing the aging commercial strip segments particularly in west Anaheim. He said that staff would be working with the community to improve services to the central and west end areas of the City. The City was in a good position to deal with the deregulation of utilities, said Manager Ruth, and staff was waiting to see what the State would do to help mitigate the problem that Anaheim had been untouched by to date. The City Manager said that tracking and retaining outstanding team members was a concern due to the many retirements over the next five years. Maintaining low crime rates was a high priority of the Council and staff was working closely with schools, he said, and some capital improvements that staff had worked with the State for funding for schools and to provide cost effective services to the communities. In response to Council Member Feldhaus, City Manager Ruth reported on the status of the Freedman Forum. He said that the conditional use permit was for church use and a formal letter had been sent from the City and a letter received back from Ella Stern saying that they had ceased any use of that forum for church purposes and that she was still trying to sell it. The length of time for the parking agreement was long term and the exact term would be reported back to the Council. Council Member McCracken asked if the City should encourage Ms. Stern to give it to the school district since the school district had been looking for a school for performing arts. City Manager Ruth said that he would speak to them about the school district. Mayor Daly suggested that Council be furnished alternative strategies before contacting any outside entities on what the City would like to see done with that property site and/or building. Mayor Daly said that Ms. Stern had an obligation to fulfill the Leo Freedman Trust and at some point if they let the property go, they would not be fulfilling their obligations. City Manager Ruth said that even if the theater was leased to the school district for one dollar per year, at least the facility would be used and they could still try to sell it in the meantime. Council Member McCracken noted that the City had aging housing and apartments that were reaching their term on HUD financing and they would now go on the open market unless the Council negotiated some HUD refinancing for them for upgrade and repair. Some of the developers, she said, should be set on the right track as far as finding tax credits and grants and State Housing was looking at older cities like Anaheim with a housing concern. City Manager Ruth would bring back a comprehensive report on housing issues. Council Member Tait asked that the Police Department continue to decrease the City's crime rate and Council Member McCracken added that the partnership with schools and the business community would give youth opportunities to not get into trouble. City Manager Ruth commented on the positive relationship that the Police Department and other City departments had with the community. CITY OF ANAHEIM CITY COUNCIL MINUTES JANUARY 27, 2001 PAGE 9 Mayor Daly asked how much of the Police Department's budget was in direct coordination with the schools and it was probably around $2 million per year. Council Member McCracken noted that the Cultural Plan would give the young community options and would help. Council Member Kring asked about the Anaheim Hills Clubhouse and City Manager Ruth said the information was in the Budget Workshop binder and following an analysis by staff, there was adequate revenues to support the larger banquet facility if the Council so desired. This item would be placed on the February 6, 2001 Council agenda. In response to Mayor Daly, Mr. Sweeney said that the general benefit and insurance fund for all employee benefits include vacation and sick leave. The reserve was $48.6 million and it would be going up because the liability behind that reserve would be going up as well due to the cost associated to provide retiree benefits for existing employees. New hires after July 1, 2001, would not receive retirement medical benefits but there could eventually be a separate plan where the employee could contribute and the earnings would be tax free over time. After additional discussion and comments, Mayor Daly thanked staff for the informative presentation and he asked for a general fund reserve comparison of Anaheim to other cities and Mr. Sweeney would bring back a report to Council. ADDITIONS/DELETIONS TO CLOSED SESSION: There were no additional Closed Session items. PUBLIC COMMENTS - CLOSED SESSION ITEMS: None. Mayor Daly moved to recess to Closed Session, seconded by Council Member McCracken. Motion carried unanimously. The Council recessed to Closed Session at 11:16 P.M. ANNUAL EMPLOYEE PERFORMANCE EVALUATIONS Titles: City Manager, City Attorney, City Clerk, City Treasurer AFTER RECESS: Adjournment: There being no further business to come before the City Council, Mayor Daly adjourned the meeting at 12:45 P.M. Respectfully submitted: ~f)~ Sheryll Schroeder, CMC/AAE City Clerk