2014/03/04ANAHEIM CITY COUNCIL
REGULAR MEETING OF MARCH 4, 2014
AND REGULAR ADJOURNED MEETING OF MARCH 4, 2014
The regular meeting of March 4, 2014 was called to order at 3:00 P.M. and adjourned to 3:30
P.M. for lack of a quorum. The regular adjourned meeting of March 4, 2014 was called to order
by Mayor Tom Tait at 3:36 P.M. in the chambers of Anaheim City Hall. The meeting notice,
agenda and related materials were duly posted on February 28, 2014.
PRESENT: Mayor Tom Tait and Council Members: Jordan Brandman, Gail Eastman, Lucille
Kring and Kris Murray.
STAFF PRESENT: City Manager Marcie Edwards, City Attorney Michael Houston, and City
Clerk Linda Andal.
WORKSHOP — MID -YEAR BUDGET REVIEW
Finance Director Debbie Moreno began the mid -year budget review by going over the various
funds that made up the budget, indicating she would ultimately focus on the General Fund
revenues and expenditures during this workshop. The Enterprise Fund at $661 million reflected
43 percent of the total budget and covered operations for the water and electric utilities, solid
waste and sanitation, golf courses, and conventions, sports and entertainment venues. Special
Revenue Funds were shown as $184.5 million, at 12 percent of the budget, and were primarily
those funds awarded by other governmental agencies for restricted programs such as the
Housing Authority, Community Development Block Grant, Gas Tax, and Roads and Workforce
Development. Capital Project funds were shown at $172.5 million and 11 percent of the budget,
and also reflected restricted projects funded by other governmental agencies such as the
ARTIC project. Internal Services funds at $197.5 million and 13 percent of the budget, paid for
services used in employee benefits and insurance, fleet and facility maintenance, and
replacement and information and communication services which were then charged back to all
the other funds. Several other smaller funds remained besides the General Fund, which was
equivalent to 16 percent of total budget, and was used to support discretionary items and
Anaheim's core services.
GENERAL FUND (GF): Of GF revenues received, Ms. Moreno reported, taxes were the largest
portion at 95 percent and included Transient Occupancy Tax (TOT), sales and use tax, and
property tax, referred to as the "Big Three." She indicated nearly two - thirds of the GF dollars
were spent on public safety, one fourth spent on insuring quality of life and providing the
necessities for civil upkeep, and ten percent on supporting activities and government
administration. Last year, staff had projected collecting about $240 million in revenues and she
emphasized that estimate had been exceeded by almost $3 million as revenues grew beyond
expectations. TOT surpassed projections by $1.8 million, a total year- over -year growth of
almost 14 percent; sales tax was higher than projected by $300,000, a growth of seven percent
over the prior year, and property tax grew 4.4 percent from 2012 and reflected $500,000 over
forecasts. She noted other smaller revenues also exceeded projections by an additional
$300,000. She indicated final FY 2012/13 expenditures totaled $235.7 million, a savings of
$500,000 from the budgeted projections which resulted in a surplus of $8 million at the end of
Fiscal Year 2012/13. She added that along with the adoption of the budget, Council had
approved $4.6 million (of the anticipated revenue growth) to be used for one -time projects, so in
reality this surplus exceeded estimates by $3.4 million.
City Council Minutes of March 4, 2014
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REVENUES FOR FY 2014/15: For the next fiscal year, staff anticipated TOT and property tax
to be on target with an increase anticipated in sales tax. While TOT was slightly over budget
and up 5.3 percent through January of this year, staff believed it would end just over the
budgeted amount of $106 million with some moderation and smaller increases anticipated in the
near future. She reported there had been significant growth in sales tax over the last several
years while the projected growth for this year was 7.5 percent and expected to exceed the
budgeted figure. Ms. Moreno pointed out that Council had also approved $1.4 million in one-
time costs for 2013/14 budget which meant that after adjusting for this one time increase, the
true growth in recurring sales was $500,000 and expected to be less than one percent more
than budgeted. She added that increases in auto sales were mitigated by lower gas prices and
the reduction of related sales tax, but that construction continued to be strong. Staff also
expected to end the year with property tax revenues up 2.4 percent over last year and right on
budget. While the city's assessed values came in slightly lower than expected for 13/14, sales
prices steadily increased and this February, the median home price in Anaheim was $435,000
up 16 percent compared to prior year, and staff was hopeful this trend would continue for 14/15.
EXPENDITURES: Ms. Moreno remarked since all staff positions were fully funded in the
adopted budget, she anticipated some savings in personnel costs due to the length of time
between the creation of vacancies and the recruitment process emphasizing that through mid -
February, there were 58 vacant positions in the General Fund. Expenditures were also
expected to be higher, due to additional one -time costs for litigation and other anticipated costs
that were expected to offset some of the savings.
Ms. Moreno stated the adopted budget included one -time service enhancements of $5.3 million
which resulted in a planned draw on Anaheim's fund balance of $3.9 million; however, staff
expected it to be slightly less, around $3.4 million when the year closed. And, she pointed out
that over the past two fiscal years, while other jurisdictions were still struggling to balance their
budgets, Anaheim was able to do the following via Council's direction and support: $11 million
in service enhancements were made to public safety and neighborhood services, funding
programs and improvements that directly benefitted the community; $7 million was added to
public safety and resulted in the addition of 15 police officers, the restoration of one fire
company to service and opportunities for new public safety programs, training and equipment
purchases; $4 million was added to neighborhood services to add additional hours at
community centers and libraries, additional funding for sidewalk and curb maintenance and
opportunities for various facility improvements. It also contributed to graffiti abatement and
education and the implementation of the homeless prevention pilot program. She then outlined
in detail those service enhancements that were implemented.
SERVICE ENHANCEMENTS FUNDED BY SUPPLEMENTAL REQUESTS: Recruitment efforts
continued to fill all authorized positions, and the Police Department was able to add eight
officers over the last two years. This allowed the department to rebuild its community policing
teams to increase engagement and involvement at the neighborhood level and redouble its
efforts in crime prevention throughout all districts in the city. Three civilian investigators were
added to assist investigations and detective units with reported crimes; two additional safe
school officers approved last year resulted in expanded capabilities of Youth Services Bureau to
deliver critical services to schools and youth programs allowing for increased participation in the
Junior Cadets, Explorers and GRIP programs. The GRIP program itself was also expanded to
now include 12 elementary and middle schools, involving members of governmental agencies
and volunteer organizations working with school administration to identify at risk youths, with 20
students participating this school year. Another component of the program was the Girl's Club
with active clubs on all 12 campuses with 240 girls participating in this program to date.
Supplemental funding also allowed for the crime dashboard to be upgraded to expand the
City Council Minutes of March 4, 2014
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profiles being tracked and helped investigators and patrol officers quickly identify individuals.
The computer forensics lab received enhanced funding and relocated to the Main Station with
state of the art forensic computer equipment contributing to increased investigative functionality
and the capacity of extracting visible and hidden data from computer hard drives and digital
services. The creation and launch of the Chief's Neighborhood Advisory Council provided an
additional platform for community input and a two -way dialogue with the chief regarding issues
and concerns at the neighborhood level, thereby helping build and strengthen police and
community relationships.
This January the department Support Services Division, with the help of state funding, upgraded
the city's 911 and business telephone lines. This enabled the city to take advantage of the next
generation 911 features which included the ability to send and receive text messages and to
offer selective call routing once the infrastructure was in place throughout California. She
remarked these enhancements and the Police Department's commitment to increasing its
community policing efforts and presence at the neighborhood level contributed to the improved
response time to Priority 1 calls by 22 seconds or 4 percent. It also further contributed to the
significant reduction in crimes, specifically violent crimes and gang - related assaults.
In fire services, the Fire Department hired 12 new firefighter paramedics and candidates who
successfully completed the new firefighter training academy made possible with enhanced
money approved in the adopted budget and were assigned to the field in January 2014.
Additional personnel were trained in hazardous materials and urban search and rescue
specialties and three personnel graduated from paramedic training with an additional seven
currently enrolled. With the supplemental funding approved in FY 13114 budget, the department
outfitted 13 intersections with signal preemption technology and emitters were being installed on
front line fire apparatus with completion expected this month. The department also refreshed
and upgraded 21 cardiac monitors and was in the process of purchasing a new fire engine and
other critical safety equipment.
Supplemental funding also provided direct benefits for neighborhoods with additional library and
community center hours; over 600 hours were added to Central and Canyon libraries and over
37 additional community center hours were added since July. The mobile recreation program
began in September and over 4,000 youths participated in after school programs in their
neighborhoods. Park maintenance increased the frequency of restroom maintenance at city
parks, trimmed over 3,200 trees in city parks, and Public Works trimmed away 1,500 street
trees and removed over 100 trees with health issues. In a citywide effort to service the
homeless, the homeless check -in center was initiated with over 250 individuals participating and
there were more than 5,000 client visits to the check- in center connecting with outreach staff
and 166 successful referrals made to service providers.
COMPLETED PROJECTS AND SERVICES: Ms. Moreno reported funding was identified and
approved for one -time projects and improvements that were now in various stages of planning
construction. Planning for construction of dog parks in Olive Hills and La Palma Parks had
begun, West Anaheim Gymnasium air conditioning was being installed this spring, and almost
30,000 square feet of damaged neighborhood sidewalks were removed and replaced in the
west, central, and south neighborhoods with an additional 20,000 square feet tentatively
scheduled for April in the west. Parking and other concrete rehabilitation, electrical work and
park fencing lightings at Sage, Modjeska and Chaparral parks had been completed, and
Pearson Park pool project was nearly through the Orange County Health Department permitting
process with construction to begin in the coming weeks and completion by summer.
Specifications for Brookhurst Community Center and refurbishment of La Palma park bleachers
were completed and these projects were now in the procurement process.
City Council Minutes of March 4, 2014
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Ms. Moreno emphasized staff took pride in the strategic manner in which services were added
to the community coming out of one of the deepest recessions this country had faced and
looking forward, city staff was planning for modest growth in key revenues and would continue
to monitor trends and economic outlooks with more solid estimates offered along with the
proposed budget.
The priority for FY 14/15 was to maintain existing service levels while incorporating anticipated
increases in retirement and medical costs. She added that PERS announced changes in their
methodologies for contributing employer contributions that would result in increases, but that
these were anticipated in the city's five year plan, and were not unexpected. With modest
revenue growth in conjunction with the anticipated expenditures, staff would also identify
opportunities for expanded services within the limits of the five year plan and prioritize options
for one -time projects or improvements for Council's consideration. She noted departments were
finalizing their budget requests which would be reviewed with the City Manager throughout this
month and a strategic plan with the executive team would be put together by April. The
proposed budget would then be available in May and budget workshops would commence in
June with the adoption scheduled for June 17
Council Member Kring was appreciative that two dog parks were being considered in the north
and the east areas and recommending similar action be considered for the south and west as
funds became available. Mayor Pro Tern Murray asked that staff in preparing for the budget
preparation take into account that public safety was a priority and that officers lost through the
recession continued to be replaced. Council Member Brandman concurred that police and fire
safety were a priority and that the departments be made whole again within the next three fiscal
years. Council Member Eastman remarked that going forward she would be looking at keeping
a balance and adding public safety on a measured basis so that any actions taken could be
sustained. Mayor Tait asked what it would take to get back to the original level of service for
police and fire with Ms. Moreno replying it would be about $11 million to get back to 400 police
officers and 22 firefighters. He inquired where the city was in terms of reserves with Ms.
Moreno indicating they expected to end the year with 9 percent or $24 million dollars in
reserves. She added there was another $20+ million should there be a catastrophic event as
the city fully funds its uncompensated absences, the actuarial liabilities for self- insurance and
worker's compensation. Additionally, she was comfortable today with where the city was in
reserves with the plan to incrementally add back to those reserves over time. She added that
the city's long- standing policy had been for reserves to fall between 7 to 10 percent and that
goal had been met.
ADDITIONS /DELETIONS TO CLOSED SESSION Michael Houston, City Attorney, reported
correspondence from Briggs Law Firm had been received regarding Closed Session Item No. 1,
which was available for public review in the City Clerk's Office.
PUBLIC COMMENTS ON CLOSED SESSION ITEMS
Cecil Jordan Corcoran discussed his religious business venture.
CLOSED SESSION ITEMS:
CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION
Significant exposure to litigation pursuant to paragraph (2) of subdivision (d) of
California Government Code Section 54956.9: One potential case.
City Council Minutes of March 4, 2014
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2. CONFERENCE WITH REAL PROPERTY NEGOTIATORS
(Subdivision 54956.8 of the California Government Code)
Property: 2000 East Gene Autry Way, Anaheim, CA (Angels Stadium of Anaheim)
Agency Negotiator: Tom Morton
Negotiating Parties: Angels Baseball, LP, Pacific Coast Investors, LLC, City of
Anaheim
Under Negotiation: Price and Terms of Payment Regarding Lease
At 5:09 P.M., Council returned from closed session and the meeting was reconvened.
INVOCATION: Pastor Phillip Du Plessis, Grace Bible Church
FLAG SALUTE: Mayor Pro Tern Kris Murray
ACCEPTANCE OF RECOGNITIONS (To be presented at a later date):
Recognizing the recipients of the Delta Sigma Theta Sorority Orange
County Alumnae Chapter 2014 Impact Awards
Proclaiming March 2014 as Professional Social Worker Month
Mike Ryan, Director, Orange County Social Services, was appreciative that Anaheim
recognized the hard work the county's social workers provided to the community, serving one
out of every seven residents in Orange County through various assistant programs. He added it
was an effort they were able to offer in collaboration with community partners like the City of
Anaheim.
ADDITIONS /DELETIONS TO THE AGENDA None
PUBLIC COMMENTS (all agenda items): City Clerk, Linda Andal, outlined public speaker
guidelines to the community.
Cecil Jordan Corcoran, Outreach Homeless Ministries, reported he had completed his work on
teachings of the bible.
Craig Inglis, resident and member of Tenants Together, addressed his comments to Item No.
14, stating the ordinance concerned him and his organization. With their expertise on tenants'
rights, habitability standards, and code enforcement, he believed there were potential problems
in the ordinance which could pose complications to the city. Specifically, the appeals body
should be reconfigured into a representative body that did not have the majority policing its own
interests and also have a seat for a tenants' rights group should be added, the management
questionnaire should be revised to strike any reference to management practices questionnaire
and replace it with a basic registration form, and the program evaluation checklist contained
irrelevant and unfair criteria inconsistent with fair housing and general landlord tenant laws. He
added a letter to this effect had been sent from his organization to each of the council members.
Kurt Brunner, resident, addressed construction impacts of the Brookhurst Improvement project,
stating the storm drain overflow had become a dump for various trash and syringes asking the
city as well as OCTA to conduct regular and thorough cleanup of the area.
Daniel DeMeyere, resident, thanked staff for working with him to mitigate construction impacts
from the Brookhurst Improvement project and for the improvements planned for their
City Council Minutes of March 4, 2014
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neighborhood. However, he stressed the fact that trash maintenance and regular upkeep was
necessary as the lengthy project continued.
An unidentified speaker spoke for her children, Giovanni and Sofia who objected to the use of
exotic circus animals and requested the city join other municipalities in banning their use.
James Robert Reade addressed gang activities in the city remarking ESCRI could help
neighborhood kids break the cycle of gang involvement.
Brenda Cavillo asked Council to revisit the ban on using exotic animals in circus, remarking it
was a dying industry and Anaheim should have no part in collecting tax revenues on the backs
of animals who were abused and kept in chains most of their life.
Jill Malato urged Anaheim to ban the use of exotic animals in the circus remarking these
creatures deserved better than their sad life where they were kept in inadequate conditions with
their spirits broken.
William Pepper, resident, also supported the ban on exotic circus animals and urged Anaheim
to continue to be a leader in this effort as it had been in so many other areas.
Judy Gollette, Creative Identity, publicized an exhibit at the Anaheim Muzeo honoring
individuals with intellectual disabilities. She announced the opening ceremony last Saturday
was a success and urged the community to view and meet the exhibiting artists.
William Fitzgerald made a number of claims and allegations against specific council members.
Council Member Kring recognized Mr. Fitzgerald's right to speak but resented his terminology
and the pejorative words he used.
Donna Acevedo, resident, stressed there were no council representatives who cared about the
residents.
Keith Olesen, resident, remarked he had lived in an area with more than its fair share of
substandard rental housing owned by slumlords and the rental housing ordinance before council
now had the opportunity to address those issues and urged the city to approve it.
Paul Duran remarked his family owned and operated the Parkview Inn, the Anaheim Goldstone
Creamery, and the lease for IHOP restaurant. All of them were successful and he attributed
much of that success to its location across from the Disney main gate. He objected to the lack
of specificity for the Anaheim Rapid Connect street car alignment, remarking he had a project in
the planning stages to increase the Parkview Inn from 86 rooms to 162 and incorporating the
IHOP and Coldstone Creamery into the complex. He indicated his plan was at a standstill
because of the lack of specificity for the streetcar program with City staff stating he would have
to wait until December for an environmental impact report to be completed. He added he had
seen photos of a proposed street alignment on his property which added to his concern and
asked for a public hearing on this matter so the facts could be revealed and he had an
opportunity to comment.
An unidentified speaker supported the Higher Ground Lincoln Park project, explaining her son
had an opportunity to participate in the program and she had seen first -hand how kids were
encouraged to play sports. She supported more positive outlets for youths remarking Higher
Ground was one of those programs specifically benefitting neighborhood kids.
City Council Minutes of March 4, 2014
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Translation; Language: Spanish. Elizabeth Ramirez, resident, stated she had two children in
local schools, one in Lincoln and one in Sycamore, and she was here to support the Higher
Ground program offered in Lincoln and the need for more after school programs and other
resources that benefitted children and promoted good values.
Wally Courtney remarked he had followed the stadium lease negotiations inquiring if council had
seen recent letters to the editor printed in the Anaheim Bulletin and Orange County Register on
that issue. Both letters used different criteria to come up with different scenarios but both ended
up with the same outcome that the stadium property was worth much more than the numbers
discussed in the Memorandum of Understanding. He reminded the public that Angels Baseball
was not allowed to make any changes to the current lease without some type of mutual
agreement which should benefit both parties. He urged the city to get the best deal possible for
the taxpayers of Anaheim or to do nothing and let the lease stand through 2029. He also asked
that the negotiators be identified, as well as how often they met and how negotiations were
faring.
Arlene Barros, Lincoln teacher, asked council for support of the Higher Ground program, asking
her students to stand up and be counted as the faces of tomorrow.
Joe Baldo, Higher Ground, remarked he began this mentoring program to bring sports,
educational and recreational opportunities to at risk kids and had been working with the city for
over a year at Lincoln Elementary School. He thanked the city for the opportunity and looked
forward to a continuing relationship.
Tammy Ledesma, Abraham Lincoln School, spoke in support of Higher Ground, remarking both
she and Mr. Baldo's purpose was to make a difference in the lives of children and she fully
supported Higher Ground's program that focused on the positives for children and helped them
avoid the negatives surrounding them.
Barbara Gonzalez, resident, also supported Higher Ground's program, remarking on the need
for more resources for children and approved as well, the rental housing ordinance that insured
safe and healthy homes for residents.
George Gillingham, Creative Identity, thanked council for their support of the Muzeo Exhibit and
in helping those with developmental disabilities.
Eric Anderson, resident, supported the move to clean up and improve substandard rental
housing, remarking he had rental properties as well and was fully supportive of this action.
COUNCIL COMMUNICATIONS None
CONSENT CALENDAR Council Member Eastman removed Item No. 8 from the consent
calendar for further discussion. Mayor Tait pulled Item No. 13 and declared a potential conflict
of interest on Item Nos. 2, 7 and 11 as his firm had worked with OCTA during the past year. He
added there were others items on the agenda with OCTA involvement but he had been advised
by the City Attorney that those were not conflicts and it was not necessary to recuse himself.
Council Member Kring then moved to waive reading in full of all ordinances and resolutions and
to adopt the balance of the consent calendar as presented, in accordance with reports,
certifications and recommendations furnished each city council member and as listed on the
consent calendar, seconded by Council Member Eastman. Roll Call Vote: Ayes — 5: (Mayor
Tait and Council Members: Brandman, Eastman, Kring and Murray.) Noes — 0. Motion Carried.
City Council Minutes of March 4, 2014
Page 8 of 21
8105 1. Receive and file minutes of the Community Services Board meeting of January 9, 2014,
Cultural and Heritage Commission meeting of January 16, 2014 and Library Board of
January 13, 2014.
2. Approve Cooperative Agreement C -3 -2085 with Orange County Transportation Authority
and the City of Orange for implementation of the Traffic Signal Synchronization Program
AGR -8001 on State College Boulevard and direct staff to allocate capital project funding in the
amount of $195,186 for the required 20% cost match.
Mayor Tait recorded an abstention on this item. Move to approve by Council Member Kring,
seconded by Council Member Eastman. AYES — 4: ( Mayor Pro Tem Murray and Council
Members Eastman, Brandman and Kring) NOES - 0, Abstention - 1: Mayor Tait.
3. Approve the Grant Deed, the Covenant to Hold Properties as a Single Parcel
AGR -8002 Agreement, and the Agreement for Acquisition of Real Property with Long Ngoc Nguyen,
AGR - 8002.0.1 Thuy Trang Ngoc Nguyen, and Hieu Ngoc Trung Nguyen, in the amount of $11,000, for
the sale of surplus property located at 1771 South Garden Drive.
4. Approve the Grant Deed, the Covenant to Hold Properties as a Single Parcel
AGR -8003 Agreement, and the Agreement for Acquisition of Real Property with Matthew Vu
AGR- 8003.0.1 Nguyen, in the amount of $3,383, for the sale of surplus property located at 2172 West
Harriet Lane.
5. Approve the Grant Deed, the Covenant to Hold Properties as a Single Parcel
AGR -8004 Agreement, and the Agreement for Acquisition of Real Property with Duc and Lan
AGR - 8004.0.1 Nguyen, in the amount of $11,000, for the sale of surplus property located at 1773 South
Biscayne Court.
AGR -8005 6. Approve the Grant Deed, the Covenant to Hold Properties as a Single Parcel
AGR - 8005.0.1 Agreement, and the Agreement for Acquisition of Real Property with Roger and Andrea
Bullerdick, in the amount of $11,000, for sale of surplus property located at 1750 South
Ivanhoe Street.
AGR -8006 7. Approve Lot Line Adjustment No. 0000715 for city -owned properties located at 1771
P170 South William Miller Drive and 2159, 2163, and 2167 West Katella Avenue to merge said
four parcels into two separate lots, thereby creating two single lots suitable for residential
development.
Mayor Tait recorded an abstention on this item. Move to approve by Council Member Kring,
seconded by Council Member Eastman. AYES — 4: (Mayor Pro Tem Murray and Council
Members Eastman, Brandman and Kring) NOES - 0; Abstention - 1: Mayor Tait.
9. RESOLUTION NO. 2014 -040, A RESOLUTION OF THE CITY COUNCIL OF
0154.8 THE CITY OF ANAHEIM approving a Letter of Understanding between the Anaheim
Municipal Employees Association, Part Time Unit, and the City of Anaheim.
10. RESOLUTION NO. 2014 -041 A RESOLUTION OF THE CITY COUNCIL OF
P124 THE CITY OF ANAHEIM accepting certain deeds conveying to the City of Anaheim
certain real properties or interests therein (City Deed Nos. 11623, 11624, 11625,
11626, 11627, 11628, 11629, 11630, 11631, 11632, and 11633) ( Katella Smart Street
and Brookhurst Street widening projects).
City Council Minutes of March 4, 2014
Page 9 of 21
11. RESOLUTION NO. 2014 -042 A RESOLUTION OF THE CITY COUNCIL OF
P109 THE CITY OF ANAHEIM authorizing the sale of certain city owned properties located at
1771 South William Miller Drive and 2159 West Katella Avenue and 2163 West Katella
Avenue and 2167 West Katella Avenue and 2181 West Katella Avenue and 2203 West
Midwood Lane (APNS 128 - 604 -14, 128-604-13,128-604-12, 128 - 604 -11, 128 - 604 -15,
127- 611 -24).
Mayor Tait recorded an abstention on this item. Move to approve by Council Member Kring,
seconded by Council Member Eastman. AYES — 4: (Mayor Pro Tem Murray and Council
Members Eastman, Brandman and Kring) NOES - 0; Abstention - 1: Mayor Tait.
12. RESOLUTION NO. 2014 -043 A RESOLUTION OF THE CITY COUNCIL OF
D114 THE CITY OF ANAHEIM amending and restating the procedures and rules of order for
the conduct of City Council meetings.
14. ORDINANCE NO. 6297 (ADOPTION) AN ORDINANCE OF THE CITY OF
M142 ANAHEIM adding Chapter 15.70 of Title 15 of the Anaheim Municipal Code relating the
preservation of rental housing properties in the City of Anaheim (Introduced at Council
meeting of February 25, 2014, Item No 17).
D114 15. Approve minutes of Council meeting of January 28, 2014.
END OF CONSENT CALENDAR:
8. Approve and authorize the Director of Community Services to execute a License
AGR -8007 Agreement with Higher Ground Youth and Family Services to use a portion of Lincoln
Park for an after - school program.
Terry Lowe, Community Services Director, remarked staff was recommending the approval of a
license agreement between the City and Higher Ground to use a portion of Lincoln Park for their
youth development program, an activity in line with the youth services initiative of last summer
which placed a concentration of resources in places where they were needed the most. He
noted Higher Ground had been working for almost a year, building relationships with school
districts, on site at the schools, as well as building relationships with city staff. This action, he
explained, would formalize that relationship and provide Higher Ground with a home. He
pointed out this was an unusual step for the department, but staff had conducted extensive
public input to make sure the neighbors of the park and the school knew exactly what was
happening and received strong support from both.
Council Member Eastman was appreciative of the residents who came to support this program,
a perfect synergy between the city, schools and the neighborhood. She believed in investing in
the young through education and inspiration and moved to approve Item No. 8, seconded by
Mayor Pro Tern Murray who also looked forward to supporting additional infrastructure needs to
help this program prosper and grow. Roll Call Vote: Ayes — 5: (Mayor Tait and Council
Members: Brandman, Eastman, Kring and Murray.) Noes — 0. Motion Carried.
C280 13. ORDINANCE NO. 6296 (ADOPTION) AN ORDINANCE OF THE CITY OF ANAHEIM
adding Section 18.38.025 o Chapter 18.38 of Title 18 of the Anaheim Municipal Code
relating to alcoholic beverage manufacturing in the City of Anaheim and making
corresponding amendments to various sections of the Anaheim Municipal Code (Zoning
Code Amendment No. 2013 -00113 — allowing alcoholic beverage manufacturing,
City Council Minutes of March 4, 2014
Page 10 of 21
including tasting rooms, within commercial and industrial zones) (Introduced at Council
meeting of February 25, 2014, Item No. 16).
Mayor Tait moved to adopt Ordinance No. 6296, seconded by Council Member Kring. Roll Call
Vote: AYES — 5: (Mayor Tait and Council Members: Brandman, Eastman, Kring and Murray.)
NOES — 0. Motion Carried.
16. Discussion of ongoing negotiations with Angels Baseball and Pacific Coast Investors
D124 regarding Angel Stadium and the Stadium District and provide direction to staff, if
desired. Receive and comment on Major League Baseball stadium due diligence
presentation.
Tom Morton, Director of Sports, Entertainment and Convention Center, remarked as requested,
at each third council meeting a discussion item was agendized on negotiations with Angels
Baseball. This evening staff, working with the consultant, would provide a major league
baseball stadium development overview presentation, including a review of stadium
developments, stadium leases, stadium sources and uses of funds, public and private
investment summaries and economic structures. He introduced Dan Barrett, Barrett Sports
Group, who had come on board in December bringing extensive experience in negotiating and
structuring professional sports deals.
Dan Barrett explained he would act as a resource to the city in helping structure a deal that
would work for both the city and the team. He offered a brief biography of his firm, founded in
2000 as a boutique sports management firm that had worked on many stadium and arena
projects throughout the country, both for public and private sector clients. He emphasized his
firm understood the perspectives on both sides, how major league baseball teams and stadiums
operated, as well as the economics of a deal. As an independent, objective firm, he remarked,
council would receive an independent and objective viewpoint. He detailed his previous
business experience related to sports and entertainment and identified some of the projects he
was involved in; i.e., AT &T Park in San Francisco, Petco Park San Diego, Minute Maid Park in
Houston, Safeco in Washington, Toronto Blue Jays and he mentioned, a small project with the
Anaheim Angels involving ticket pricing analysis over 20 years ago under different ownership.
He explained the main purpose of this presentation was to give the city an overview of the type
of information he had which was available to the council, and a brief overview of major league
baseball (MLB), market demographics, relocation overview for MLB teams and several selected
case studies for discussion purposes.
There were 30 teams in MLB which was why the demand for teams was high across the
country. Baseball had an anti -trust exemption which applied to many different areas in baseball
operations, including limiting relocation activity in the league. He remarked that prior to the
Montreal Expos moving to Washington DC in 2005, the only previous relocation was in 1971
when the Washington Senators moved to Texas and became the Texas Rangers. Currently,
most teams were playing in new or substantially renovated stadiums; a trend that began in
1990's and continued for the past 20 or more years. The only teams actively looking for new
stadiums were the Oakland A's and the Tampa Bay Rays. The Atlantic Braves, he stated,
announced a new stadium deal in unincorporated Cobb County and the Chicago Cubs were in
the process of going forward with major renovations to Wrigley Field. He noted stadiums were
typically located in downtown or urban settings, to encourage activity, redevelopment and
revitalization of those downtown cores, a pathway that began with Camden Yards in Baltimore,
the most successful of the first stadiums built as part of a redevelopment /revitalization effort. He
explained the Braves were changing that dynamic, moving from an urban area to a suburban
City Council Minutes of March 4, 2014
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area in unincorporated Cobb County, a move that surprised the city of Atlanta. On the other
hand, the Miami Marlins moved out of Miami Gardens where the Dolphins played to the city of
Miami's limit, essentially moving from a smaller community to a larger destination and changing
their name as part of that relocation.
Mr. Barrett indicated that he looked at market size and competition within the market place as
the local market area for a MLB would impact the ability of the team to generate local revenue
and their overall operations; what they could afford to pay and what they could afford to support
in terms of their operation. He indicated Anaheim was part of the LA CBSA ( "Core Based
Statistical Area ") designation and a 20 mile ring and 30 mile ring was compared across MLB
markets to see how this specific team would fare, one of the ways his firm compared deals. Los
Angeles was the 3` largest market in terms of population and households, because there were
two teams in New York. In terms of average income levels, LA was in the middle, roughly close
to average and in terms of high income households, an important determinant for premium or
club seating, LA ranked high. It was also the largest media next to the two New York teams and
had a strong corporate base. All of these factors, he remarked, supported the fact that the
Angels were playing in a large market and impacted their revenue streams accordingly. As for
competition for the Angels, there was the Ducks, Clippers, Lakers, Dodgers and Kings within
that CBSA marketplace. And in addition to sports, there were many other entertainment
alternatives where people could spend their disposable income.
The Barrett Group also looked at the overall deal and leases, the market area size and
characteristics which were all factors that impacted the ability of the team to generate revenue
when considering the deal configuration. Another factor to consider was the anticipated
operating characteristics of the team and the facility in which they were located, along with
public /private partnerships not just in investment but whether there was revenue sharing, rent
paid, who was responsible for operating expenses, and capital repairs or occupancy costs
versus the public /private investment.
In the case of the Washington Nationals, Mr. Barrett stated there was over $600 million in public
investment in the stadium project in order to entice the Expos to relocate to Washington DC. He
added they were in competition with the market and that cost reflected the highest total dollar
amount in recent history. On the reverse side, large market teams like the Yankees and the
Mets invested significant private dollars to their projects, the Yankees putting in nearly $1.4
billion towards their facility. On average, the public sector investment was approximately 57
percent public, 43 percent private, ramped down from five or six years ago when it would have
reflected 2/3 public and 1/3 private. Mayor Tait asked if New York invested in the Yankee deal
with Mr. Barrett responding in the affirmative, $234 million was given primarily in land and
infrastructure investment by the city. He added the Mets and Yankees deals were also unique
in that they were able to take advantage of PILOT (Payment In Lieu Of Taxes) financing that
was available in the state of New York and not available in California, where they were able to
get access through the city of New York to use tax exempt financing but were responsible for
debt service on that financing. Mayor Tait asked how much the Yankees would pay for their
debt service with Mr. Barrett responding it was substantial and he would get that figure for the
Mayor and Council. Mayor Tait wondered how much the Cubs were putting up for their project
with Mr. Barrett responding the total project cost was about $500 million and the Cubs were
putting $300 million into the stadium and $200 million in development around the stadium which
would include a hotel project. He noted the Cubs were primarily financing that but were taking
advantage of Federal historic tax credits as part of the financing which was also what the Red
Sox did with their renovation.
City Council Minutes of March 4, 2014
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CASE STUDIES: Petco Park was a project his firm worked on for the city of San Diego which
was a complicated and challenging project but at the end of the day was a win for the team and
the city. It resulted in a substantial investment in a part of downtown San Diego that had not
seen investment in 50 years, the East Village site. His firm represented the city and Charles
Black was on the team side. He indicated the project was unique in that it had a requirement
the Barrett Group negotiated that the Padres had to develop a minimum development that went
with the ball park, something not done before or since, although there were other projects where
teams had the rights to develop but not the obligation nor penalties if they didn't meet certain
requirements or hit certain assessed valuations or TOT collections. He added there was
investment from the city on that project as well as from the Padres, which resulted in major
redevelopment around the ball park area with over $3 billion of investment, part of which was
spurred on by the team and the rest due to development going on in San Diego at that time.
Mayor Tait inquired if that was financed with a bond sale with Mr. Barrett replying it was a
combination of funding through the Redevelopment Agency and City bonds with hotel
occupancy tax set aside for a portion of their investment and the Padres funding their private
equity investment. He added that project took a vote of the electorate to go forward. Council
Member Kring asked if the proceeds from the sale of surface parking lot was included with Mr.
Barrett responding there were a number of parcels included which they acquired for their own
surface parking lots, but he would confirm that at a later date. As to what was on the site before
development, he replied it was fifty years of neglect although an historic candy store and the
Western Metals Building were actually incorporated into the ballpark as an architectural feature.
Mayor Tait asked how many acres were in the land acquisition price of $104 million with Mr.
Barrett responding that it was not a large parcel, roughly between 25 -30 acres, as the city had
acquired the ballpark footprint and the Padres acquired portions of the development property
and much of the property had been taken through eminent domain with the overall land
acquisition cost in excess of $100 million.
On the other end of the spectrum, he explained the San Francisco Giants funded their ballpark,
an iconic site on the water and one of the first privately funded ballparks in MLB since Dodger
stadium was built. In this situation, the total project cost was about $354 million, there was a
$15 million tax increment redevelopment funding used by the Giants, but for the most part it was
privately financed. What was not included in this source and use, he stated, was the city's
substantial investment in infrastructure in the China Basin area, and that investment combined
with the ballpark significantly transformed that area as part of the major redevelopment of that
district. In this instance, there was a $1.2 million land lease with the city and a gate admissions
tax that was significantly reduced over the current rate of $2.25 per ticket to 25 cents per paid
ticket, with a 22 year waiver for the lease and then the admission cost would revert back to
$2.25. Mayor Tait asked how much land was included in this rent, with Mr. Barrett remarking it
was about 12 acres and was paid to the Port Authority instead of the city of San Francisco.
Mayor Tait asked if the team paid rent for the stadium as well, with the answer given that a
combination of different funding mechanisms were used, a private financing element, a naming
rights payments up front, sponsors paying money up front, and a combination of financing as
well as using their partners up front along with the sale of charter seat licenses. He added it
had been publicly reported they were able to sell charter seat licenses for about $75 million
which was unheard of for MLB, although for NFL stadiums it was common. Mayor Tait
remarked that teams were making mortgage payments on their stadium developments and
wondered what that annual cost would be for Yankee Stadium with Mr. Barrett responded that
he would get those numbers and report back to Council, adding that with $1.4 billion of private
investment, the PILOT bonds alone were in excess of $700 or $800 million which could
translate to $80 or $90 million a year in mortgage payments.
City Council Minutes of March 4, 2014
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Mayor Pro Tern Murray asked why the city of San Francisco received no revenue sharing from
the many opportunities available. Mr. Barrett responded that other than the base rent payment
for the land lease and the gate tax (which was currently at 25 cents per ticket) they received no
other revenue stream from the ballpark. There was still an economic and fiscal impact through
sales tax and transient occupancy tax, but the city did not participate in direct revenues coming
from the park. He stated one of the trends in stadium operations, not only in MLB but in other
sports as well, was for the public sector not to participate in the revenue sharing but to put the
obligation for operating expenses onto the team which could be a significant amount, possibly
between $15 -25 million per year depending on the facility. He added that and along with that
was the capital repairs component which was sometimes shared, sometimes on the public
sector and sometimes on the team. Specific to Anaheim, he remarked the city had the obligation
to cover operating expenses at Anaheim Stadium before 1996, an obligation that went away
when a new agreement was reached in 1996. Mayor Pro Tern Murray asked if it was unique to
the Giants that all of their direct revenues went to the team. Mr. Barrett replied it was common
with teams privately financing their facilities, as in the case of the Yankees. With the Mets, a
similar situation arose where everything was on the Mets side of the ledger except the parking
and in the case of Citi Field, there was revenue sharing on parking when parking revenues were
paid in excess of $8 million. Ms. Murray then asked how that city benefitted from having a
stadium in town. Mr. Barrett indicated there were economic benefits in having a professional
sports franchise in the community along with the national and international exposure associated
with the teams, emphasizing that fiscal debates over the numbers had been contested for years.
Regardless of the ongoing debate, the one thing not debated was that the teams were in high
demand by communities across the country trying to attract teams to their markets. Ms. Murray
inquired how much had the city invested on behalf of the Giants, with Mr. Barrett stating the
possessory tax increment that was generated was used to support the bonds that were issued
by the Redevelopment Agency for project financing. Ms. Murray pointed out they basically
received a base rent and per ticket price, put up $15 million in bonds and otherwise walked
away from any other direct benefit, a deal she would not have been able to support. Mayor Tait
remarked that was slightly different as the team built the stadium, owned the improvements but
did not own the land, the opposite of Anaheim's situation. Mr. Barrett explained that the Giant's
also partnered with a real estate developer to redevelop the area across the channel, an effort
now in the EIR process.
Regarding the Braves, Mr. Barrett stated they played in Turner Field in a stadium built in 1997
originally for the Olympics and when the lease expired, the facility would be 20 years old and
the Braves would be relocating to an unincorporated portion of Cobb County, outside the city of
Atlanta limits. Cobb County was investing $300 million in public investment, which surprised the
city of Atlanta, and the Braves would be investing $372 million towards the financing of that
project. He noted the Braves had been in discussions with the city for an extended period of
time for significant capital repairs and improvements that were required for Turner Field at a
cost in excess of $100 million and when city decided to use TOT for the Falcon's project while
believing the Braves would not relocate, was when the Braves began having quiet discussions
with Cobb County, and between July of last year and October, they were able to quietly cut a
deal with Cobb County. He added the state of Georgia and Cobb County was completely
different from the state of California in terms of what was possible and what was legal. Mayor
Tait asked how they were different in terms of stadium development with Mr. Barrett indicating
it was more challenging to get public funds into a stadium deal in California than it was in
Georgia, although he pointed out that the state of Georgia was reluctant to put significant dollars
into their stadium project. The Falcons project included only $200 million of public money
towards a $1+ billion project. The situation in which Cobb County actually tapped into their
City Council Minutes of March 4, 2014
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General Fund was not only unique for Georgia, but unique for many communities across the
country.
The last case study was the Mets with Mr. Barrett emphasizing he had not been to Shea
Stadium for a long time and found it was now next to a series of chop shops surrounded by
surface parking and in a sorry state. He remarked they were embarking on a major
redevelopment of that entire site including an area to the left in conjunction with the city to
redevelopment that portion of the property and because public transportation was available, the
parking requirements would be less than the Angels would need. This was another example of
the trend of teams, stadiums and arenas trying to develop properties around the stadiums to
encourage people to come before games, stay longer after games and spend dollars within
those communities and those sites. In this situation, he noted the project would be primarily
privately financed, using tax exempt financing that came from PILOT funds and investment from
the public sector into infrastructure similar to the Yankee's deal. There was some parking
revenue sharing, but it was nominal, and the Mets would make a $500,000 rental payment as
part of that transaction.
Mr. Barrett ended the presentation stating his firm would act as a resource to the city throughout
the negotiation process.
Mayor Pro Tern Murray requested Mr. Emery, Interim City Manager, ensure this information was
available on the Angel section of Anaheim's home page for every interested person's access.
Mayor Tait wondered if any areas had been identified as possible relocation sites for the Angels
team with Mr. Barrett stating the television deal the Angels had was substantial and hard to
replicate in other communities so the area to consider would be within the Los Angeles CBSA
and he did not know whether the discussion about Tustin was real or not. He indicated there
had been discussion about an NFL football stadium adjacent to Staples, with rumors about a
possible ballpark instead of an NFL Stadium. Moving to Irvine or the City of Industry would be a
significant investment in terms of the construction of a new stadium with the economics being
substantially different than the existing situation that would offset some of that investment. He
added it was difficult to speculate on how much a local municipality could invest. Mayor Tait
asked what it would take for the Angels to move to Tustin or Irvine, purchase the land, and build
a stadium. Mr. Barrett indicated if he were representing a team, it would not be a $1 billion
investment, he would be looking at potential partners with a potential investment that was not a
direct tax investment by a city. He stated it was hard to say what the cost of the land would be,
although typically cities donated land as part of the project to attract teams and a ballpark would
cost around $600 to $700 million. He added many teams had been creative in putting together
financing packages so that it made sense to do it. Mayor Tait emphasized that over the last 16
years with the existing Anaheim lease, what the team paid to Anaheim was historically close to
zero, with possibly $300,000 to $400,000 remitted in the last few years. He asked if there was
any team that did not have to pay rent or mortgage payments with Mr. Barrett remarking in
many cases the rent payment was nominal, particularly teams in small markets. When he
considered a deal, all elements of that deal were included, and any up -front money that went
towards the renovation of the stadium was considered prepaid rent when leases were
compared. Kansas City, for example, invested $25 million of private funds into their ballpark; in
the National's relocation situation, they had very little up front funds into their ballpark, while
Pittsburgh, a smaller market team, paid nominal amounts and typically kept the revenues but
were responsible for operation expenses of the building.
City Council Minutes of March 4, 2014
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Tom Morton interjected that the $80 million that Disney put in was considered prepaid rent for
the current contract and the city's $20 million plus the billboard revenues was categorized as
capital contributions. Mr. Morton added that should the team leave prior to 2029 an amortized
portion of the money would be rebated back to the city. Mayor Tait asked if on the city's
balance sheet there was a prepaid rent item with Mr. Morton responding the city's $20 million
had been amortized over the course of the contract but the $80 million was prepaid rent up-
front. The city's money would not be returned upon separation.
Mayor Tait asked that when an agreement was reached, the public would have 30 days to
review the terms and comment. Mr. Emery remarked the intent was to bring forth a public
session with a term sheet and upon approval of that, staff would return with lease documents
and at that time, it was intended to offer an opportunity for public comment for an extended
period of time.
17. Receive and file the Independent Audit Report pertaining to the first year of the
D159 Professional Service Agreement with the Anaheim Chamber of Commerce and its
implementation of the Anaheim Enterprise Zone.
Sheri Vander Dussen, Director of Planning, offered the findings of an audit of the first year of the
Anaheim Enterprise Zone (AEZ) presented for Council's consideration. Providing historical
background, she explained that in January 2012, the California Department of Housing and
Community Development (HCD) approved the Anaheim Enterprise zone (AEZ), effective
February 1, 2012, for a period of 15 years. The city then entered into a Memorandum of
Understanding with HCD that identified specific tasks and achievements required for the first
five years of the program, which included budget, marketing, outreach activities, as well as
reporting requirements. This was followed by an agreement with the Anaheim Chamber of
Commerce to administer the Enterprise Zone (EZ) for five years, identifying reporting
requirements and the scope of work for Year 1, and mirroring the obligations in the city's MOU
with HCD including a compensation schedule for each of the five years of the contract. In May,
2013, Council modified the agreement with the Chamber to provide additional compensation
after it was demonstrated the Chamber spent more than the contracted amount to administer
the AEZ and when the state repealed the California Enterprise Zone effective December 31,
2013, Council approved a second amendment to the contract with the Chamber in September,
which scaled back the contract scope of work and compensation and terminated the contract at
the end of 2013.
Ms. Vander Dussen noted staff, per the contract, retained the independent audit firm of Sjoberg
Evasherk Consulting to evaluate the Chambers performance, overall performance of the AEZ,
and to also ensure the EZ was prepared for the eventual audit by HCD staff. The audit work
was conducted January through April of 2013, and since the city had never participated in the
EZ program before and the Chamber was the first private entity to administer it, the contract
required that two audits be conducted; one after six months and another at 12 months. Instead
of two separate audits, she reported, a single audit with two separate phases was performed
that yielded the same results that would have been obtained through two audits. The objectives
of the audit were to determine whether the AEZ was in compliance with state statutes, the MOU
between the City and HCD, and the contract between the Anaheim Chamber of Commerce and
the City. In addition to the Chamber's performance, the audit addressed the city's
administration in monitoring the contract, internal controls over the tax credit vouchering
process, and resource tracking.
City Council Minutes of March 4, 2014
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Once the work was completed and the draft report prepared, the findings were presented to
Council and discussed. Responses and input provided by the city and the Chamber were
considered and then incorporated in the final report. She explained the Planning Department
had prepared written responses to the audit report which noted the city's agreement with the
findings and recommendations in the audit and outlined specific corrective actions that staff was
prepared to employ. Written responses to the report were also received from the Chamber
which noted disagreement with some finances presented in the audit report, however, the
auditor did not make any changes to the conclusions or recommendations of the report. The
auditor found that the city and the Chamber developed an effective partnership and made
substantial progress implementing the EZ program and that the program was meeting its targets
the first year of operation. The auditor also found that the Chambers substantially complied with
the core provisions of the contract and that the Anaheim Enterprise Zone successfully achieved
the majority of the approximately 200 goals established, and in some cases exceeded those
goals. These successes included the processing of more than 1,400 tax credit voucher
applications from local businesses, each representing a newly hired employee, a goal she
emphasized that HCD did not expect. The auditor also found that the Chamber had generally
strong protocols and had complied with the document and vouchering plan and that records
supported the decisions to approve or deny all of the voucher applications reviewed.
Additionally, the auditor found that the Chambers appropriately accounted for voucher revenues
through the first program year and did not identify any instances of noncompliance with regard
to costs and expenditures submitted by the Chambers.
Ms. Vander Dussen indicated the audit also identified opportunities for improvement included in
17 key findings. Staff's responses to the findings and recommendations provided both context
for the observations made by the auditor as well as actions staff had taken to address the
recommendations. She added that some of the recommendations could not be implemented
given the expiration of the EZ program and the termination of the contract, however, staff
intended to take all of the audit findings under consideration as the Department developed
future contracts. She added the auditor also found that the existing reporting requirements were
cumbersome and inefficient and that improved documentation was necessary to support some
activities.
The first two findings and the corresponding recommendations related to: the reporting required
by the city, the ongoing monitoring by the City of the Chamber's activities, the simplification of
quarterly reporting tools and consistent documentation and methodology. Staff agreed that the
reporting requirements were cumbersome and after consulting with outside enterprise zone staff
members, learned that HCD used the reporting on the MOU activities as its chief tool in
evaluating the success of the program and required that the reports be submitted in the same
format as the Memorandum of Understanding which was why the city and the Chambers used
the same reporting format as HCD who confirmed it met the state's requirements.
Since the State terminated the program, no changes were made to the reporting format. The
auditor indicated the city needed to expand its monitoring activities beyond the scope of the
MOU to include the vouchering process, program costs, and other administrative requirements.
She added that while staff expected the financial documentation for these components would be
evaluated as part of the audit (which it was), the auditor also recommended that on -going
monitoring be increased. This feedback, she stated, was incorporated into the amended
contract and the Chamber also used a new timekeeping system in March 2013 in response to
this feedback. So far, Ms. Vander Dussen stated, staff had not observed any unusual program
costs or unusual or incomplete activity tracking. The auditor also believed the city's contract
imposed more stringent performance requirements on the Chambers than what was required
City Council Minutes of March 4, 2014
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within the MOU and she noted staff linked the completion of work products to quarterly
payments made under the original contract and did not authorize payment of the quarterly
invoice until the Chambers demonstrated it had completed all of the activities and tasks for that
quarter.
The third finding addressed: the potential for conflict of interests or influence by Chamber's
board members on the voucher process; the city's oversight of voucher applications processed;
and conflict of interest Form 700 submittal requirements. She remarked the auditor did not find
any evidence of inappropriate voucher approval or actual conflicts of interest; however, since
the Chamber was comprised primarily of business members who could participate in the
voucher program, the auditor believed potential risks of conflict of interests could occur and
recommended the city and the Chambers take additional steps beyond what was required to
ensure and demonstrate vouchers were properly approved or denied without undue influence.
The voucher plan developed by the Chamber, at the beginning of the program, indicated that
only the Chamber's CEO reported to the Board of Directors while others such as the Enterprise
Zone manager reported directly to the CEO. This structure functioned to restrict the ability of
board members to influence staff and to make hiring and firing decisions that would affect the
EZ program, important as members of the board could represent companies requesting
vouchers under this program. City staff prohibited the CEO in engaging in any voucher
activities due to his direct reporting relationship to the board and, as noted in the audit, the city
did require the Chambers to submit certifications and Form 700 filing from individuals involved in
the processing of vouchers to insure the chamber was free of any conflicts. The auditor found
that the Chamber made timely submissions of the Form 700 for the chamber's President,
Enterprise Zone Manager, and Vouchering Clerk, as well as a certification signed by its
Enterprise Zone Manager. Feedback received from the auditor focused on the fact that the
contract did not clearly articulate which individuals or which EZ activities required filings by
Chamber employees, and in response, staff consulted with HCD and obtained that clarification;
city staff confirmed that Chamber staff reviewing voucher applications had submitted the
appropriate Form 700 documentation.
In addition, the auditor found that the vouchers evaluated were properly processed with
adequate documentation as required by the state to authenticate decisions to approve or deny
the vouchers. Throughout the contract term, Ms. Vander Dussen reported, staff reviewed
monthly voucher reports submitted by the Chambers and began monthly spot- checks of
voucher activities starting in September. During these spot- checks, staff noted that the
vouchers evaluated were properly processed with adequate supporting documentation to
substantiate the voucher approval or denial. The auditor recommended that although HCD did
not require it, the city should require the Chamber to segregate their review and approval of
vouchers, meaning one staff member would conduct an initial review of each voucher and
another would conduct the final review and approve or deny the application. The Chamber
updated its voucher policies and implemented this recommendation last October. Ms. Vander
Dussen further stated that during the monthly evaluations conducted by the city until the
contract terminated in December, there was no instance where a single Chamber employee
conducted both the review and approval of vouchers and those vouchers evaluated had been
properly processed with adequate documentation. She then explained the city assumed
responsibility for processing vouchers at the beginning of this year following the termination of
the contact with the Chambers.
The final findings addressed defining expectations in the contract related to cost and cost
control measures, including limitations on expenses and specific documentation to support
City Council Minutes of March 4, 2014
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hours charged to the program. The auditor recommended that the Chamber implement a
comprehensive timekeeping system and that the city and the Chamber agree upon hourly rates
and other allowable expenses within the contract. The auditor also recommended that a
budgetary framework be included in the scope of services so that the city could monitor this on
an on -going basis. Finally, she remarked, the auditor recommended that the city require the
Chamber to provide supporting documentation in the form of a final receipt or invoice as
evidence of a legitimate enterprise zone purpose for all enterprise zone expenditures. This
information was received in time to include several provisions in the amended contract that was
approved by Council in May. Since the contract provided payment up front, she noted a hold
back provision of 10 percent from each payment was specified to provide an incentive for the
Chamber to perform the work that was required. The revised scope of work did include budget
allocations and quarterly reports were expanded to include budget reporting. Limitations on
allowable expenses were also included and beginning last September, staff evaluated program
costs and time tracking during monthly spot- checks. Comprehensive costs and resource
information would be evaluated as part of the final report that the chamber must submit to obtain
the final payment on the contract. In the event that certain expenses were not acceptable the
city would withhold that amount from the final payment to the Chambers, however, the auditor
did not identify any instances of noncompliance with regard to costs and expenditures submitted
by the Chamber for the first year of the Anaheim Enterprise Zone program.
She ended the presentation emphasizing the independent audit of the program did not identify
any significant findings related to the implementation and administration of the AEZ and found
that the first year targets had been met. In addition, many of the findings suggested by the
auditor were incorporated into the amended contract approved by Council in May of 2013. With
the state's termination of the program at the end of last year, the Chambers contract also
expired although staff would need to review the final report and reconcile the last payment,
recommending that Council receive and file the audit report.
Mayor Tait identified several areas of concern, beginning with the contract amendment in May
of 2013 awarding an additional $1 million to the Chambers as the Chambers had reported there
were not adequate funds to cover their expenses and that the increase was to be awarded over
a five year period. Mayor Tait remarked he voted against that amendment at the time because
of the lack of an audit. In September, 2013, Council canceled the contract and voted for a wind
down as the state was terminating enterprise zones by the end of 2013. The audit that was
expected was not received at the end of calendar year 2013 and questions were raised from the
public and the media as to whether the Chamber adequately performed its duties and how time
was tracked. He asked the auditor, George Skiles, to address that concern with Mr. Skiles
responding as the program was ramping up, there was a transition in the method of time
keeping with some documentation as informal as writing hours in a calendar. Further, as time
went on those methods became more consistent and by the second year of the program, the
Chamber had established a standard timekeeping system. His firm looked to validate the hours
reported to justify the costs and to determine whether they were contemporaneous or not. He
added what was clear was that the Chamber achieved virtually all of the goals in the contract,
was spending substantial time on the program, and in many ways exceeded their performance
goals. Looking back a year later, he remarked, it would have been clearer if they provided
timekeeping records on a monthly basis or in their quarterly report along with expense records,
thus creating an audit trail.
Mayor Tait asked how 30 hours of marketing could be authenticated if there were no time
records in place. Mr. Skiles indicated that other than looking at what was accomplished during
that time and whether the work product reflected the outcome, the specific hours identified could
City Council Minutes of March 4, 2014
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not be determined with 100 percent certainty, adding the Chambers or the city could have put
better controls in place. Mayor Tait added there was a portion of the contract that was a fixed
fee and other components which did not identify whether they were time and materials or a fixed
fee. Mr. Skiles replied the way the contract was structured, the Chamber would perform the
tasks and on a quarterly basis, if the city accepted completion of the tasks, the Chamber would
be paid. Discussion continued with Mr. Skiles remarking that the evidence suggested the
resources the Chamber committed to putting towards the EZ program happened. Mayor Tait
asked if the supporting documentation received was within the reasonable range of timekeeping
for an organization. Mr. Skiles responded that for auditing purposes of professional contracts,
timesheets from a timekeeping system signed each month offered evidence they were
contemporaneous and would meet the typical expectations and his firm recommended the
Chamber improve the timekeeping system for that reason. Mayor Tait expressed concern over
whether the city knew if the tasks being performed actually cost more than the payments being
made. Mr. Skiles responded that based on the audit evidence, it was reported the Chamber
spent $30,000 more than the city's budget for the first year and the audit found they had
expended significant resources and were achieving the desired effect of the Enterprise Zone.
He stated that while there were deficiencies in the timekeeping process, he had no knowledge
of falsifying information or that staff was not spending time on the project.
Mayor Tait asked why the audit was delayed until January 31 Mr. Skiles remarked field work
had been completed in April and a draft report was ready by May or June, however, the
amendment to the contract at that time changed the conditions and auditors had to re- evaluate
how those new provisions impacted the findings and whether there were any other concerns.
Part of that required his staff to consult with various other employees, which took additional
time, and he shared that the Enterprise Zone manager separated at the completion of the field
work, making it more difficult to get final answers to questions because the person most
involved in the program was no longer there. Mayor Tait remarked one of the provisions in the
contract reflected that the Chamber could not subcontract any portion of the work to be
performed without prior written authorization of the city, asking if a subcontractor had not been
approved, should or did the city pay for their work. Ms. Vander Dussen stated that the reason
the city paid for those subcontractors was to ensure they had appropriate insurance that met the
city's criteria, and was the sole reason for evaluating the suitability of the contractors. She
indicated the auditor did review the expenses submitted for the contractor which were generally
small amounts and found those expenses were related to the EZ and the city paid on those
expenses even though the Chamber neglected to obtain the city's approval in advance. Mayor
Tait asked if the Chamber was contractually obligated to pay the audit costs with Ms. Vander
Dussen replying there were discussions with the Chamber in terms of how much had been
budgeted and how much of the audit would be focused on the City's processes, so at that time,
the City Manager made the decision the City would contribute to the cost of the audit and the
Chamber's obligation would be $10,000 with the City paying $32,000. That $10,000, she
stated, had not yet been remitted to the city.
Council Member Kring remarked that the Enterprise Zone program was a success and if it
weren't for the state's termination, it would have continued. The fact was the Chamber
exceeded expectations and while there were some minor flaws in getting the project on line, it
was a good experience for both the Chamber of Commerce and the City and should the
program return, all participants would be wiser due to this experience. Council Member
Eastman concurred that the new program was a good learning experience for staff and the
Chamber and based on the audit report, there were attempts made to enact changes to improve
the process and she felt it was a true success story and moved to receive and file Item No. 17
seconded by Council Member Kring. Mayor Pro Tern Murray remarked lessons had been
City Council Minutes of March 4, 2014
Page 20 of 21
learned on the city's side as well as the contractor's and the facts were this program was
successful and exceeded most of the goals. She was hopeful that through Governor Brown's
new initiatives, there would be another opportunity to partner with the state and with the
Chambers help to attract new businesses and create new jobs in Anaheim. Mayor Tait
appreciated staff's time and effort on this program and the auditor's in depth review and frank
discussion with Council. Roll Call Vote: Ayes — 5: (Mayor Tait and Council Members:
Brandman, Eastman, Kring and Murray.) Noes — 0. Motion Carried.
18. Appoint two representatives to the Cultural and Heritage Commission to complete two
B105 unscheduled vacancies, both terms expiring June 30, 2015 (Continued from Council
meeting of February 25, 2014, Item No 18).
Cultural and Heritage Commission
Appointment: Ernesto Medrano (June 30, 2015)
(unscheduled vacancy of Jimmie Romero)
Council Member Eastman nominated Ernesto Medrano to the Cultural and Heritage
Commission with Council Member Brandman offering the name of Ryan Ruelas and Council
Member Kring nominating Thomas Peters.
Vote for Ernesto Medrano: Ayes — 4: (Mayor Tait and Council Members: Brandman,
Eastman, and Murray). Noes — 0. Abstention — 1: Council Member Kring
Vote for Ryan Ruelas: Ayes — 1: (Council Member Eastman). Noes — 0. Abstention —
4: (Mayor Tait and Council Members: Brandman, Kring and Murray).
Vote for Thomas Peters: Ayes — 1: (Council Member Kring). Noes — 0. Abstention — 4:
(Mayor Tait and Council Members: Brandman and Murray.)
Mr. Ernesto Medrano was appointed to the Cultural and Heritage Commission.
Appointment: Ryan Ruelas (June 30, 2015)
(unscheduled vacancy of Kelly Castillo)
Council Member Brandman nominated Ryan Ruelas and Council Member Kring nominated
Thomas Peters.
Vote for Ryan Ruelas: Ayes — 3: (Mayor Tait and Council Members Murray and
Brandman. Noes — 0. Abstention — 2: Council Member Eastman and Kring.
Vote for Thomas Peters: Ayes — 2: (Council Members Eastman and Kring). Noes — 0.
Abstention — 3: (Mayor Tait and Council Members Brandman and Murray.)
Mr. Ryan Rue /as was appointed to the Cultural and Heritage Commission.
REPORT ON CLOSED SESSION ACTIONS None
COUNCIL COMMUNICATIONS
Council Member Brandman congratulated Public Works on receiving four awards from the
American Society of Civil Engineers and the Public Utilities Department for the Water Recycling
Plant's successful operation and receiving its permit to use recycled water for landscape and
domestic waste conveyance at Anaheim West Tower. He highlighted the City's monthly
newsletter, "Andy Anaheim's Updates" and welcomed Paul Emery as Interim City Manager.
City Council Minutes of March 4, 2014
Page 21 of 21
Mayor Pro Tern Murray welcomed Paul Emery as Interim City Manager and spoke of her
participation in the Disney Scholarship Program, reporting the future looks bright with over 250
applicants. She also congratulated the Anaheim Public Works Rock Band as they competed at
the Cleveland Rock and Roll Hall of Fame. She announced programs hosted by the Anaheim
public libraries in the month of March, including a four week Technology Workshop at the
Central Library, the Boys and Girls Club Gala on March 22 and the Orange County Family
Justice Center and Cops for Kids Casino Night fundraiser on April 11
Council Member Kring welcomed Paul Emery as Interim City Manager and announced Saint
Catherine's 125 Anniversary on March 22 She spoke of the Creative Identity exhibit at the
Muzeo, announced the Express Toll Account program and reminded everyone to set their
clocks one hour ahead for daylight savings.
Council Member Eastman spoke of her attendance at the Paseo Village remodel celebration
and the City's recognition for its support and partnership of the project. She also spoke of
Anaheim Public Libraries programs and her opportunity read to 3 rd grade classes. She provided
highlights of AB 1453 and requested staff agendize a resolution in support the legislation on the
March 11 th agenda.
Mayor Tait welcomed Paul Emery and congratulated El Rancho Charter School on being named
the No. 1 Middle School in Orange County. He spoke about his opportunity to read to the
children at Hillsborough School and Crescent Elementary as part of the Anaheim Public
Libraries program and highlighted the Make Kindness Contagious (Month) assembly at
Crescent Elementary.
ADJOURNMENT With no other business to conduct, Mayor Tait adjourned the March 4, 2014
council meeting at 8:57 P.M.
spe tfully submitted,
Linda N. Andal, CMC
City Clerk