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Budget Advisory 1996/05/15j.7 MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: GUESTS PRESENT: BUDGET ADVISORY COMMISSION MAY 15, 1996 - 3:30 P.M. j '' SIXTH FLOOR CONFERENCE ROOM .0 J 4t "_ r J f Gene Brewer, Jeff Farano, Phil Knypstra, (Dan Yan Dorpe; Jimmie Kennedy, Shirley McCracken, Bill O'Connell None James D. Ruth, David Morgan, William G. Sweeney, Chris Chase, Jeff Stone, Charyl McCully John O'Malley, Orange County Employees Association; Paul Van Dorpe The meeting was called to order by Chairman Brewer at 3:35 p.m.. APPROVAL OF THE BUDGET ADVISORY COMMISSION MINUTES: The Secretary indicated that a change was made on page two of the minutes to correct a duplicate statement. Mr. Kennedy moved to approve the Minutes of the April 17, 1996, as corrected. Seconded by Mr. O'Connell. Mr. Farano was absent for voting. MOTION CARRIED ( 6 - 0 - 0). REVIEW OF 1996/97 BUDGET: Workbooks were distributed to the Commissioners for their review of the proposed budget. Chairman Brewer proposed that a letter to the City Council be prepared, congratulating them on their many positive accomplishments, and addressing those issues that are of concern to the Commission. Mr. Sweeney suggested that Mr. Ruth address overall policy, and cited the transmittal letter from the City Manager in the Budget. Mr. Ruth said that the Budget Advisory Commission has made a positive impact on the City, helping us deal with resource allocation and priority structuring. He went on to say that the good news is, that after six years, major revenue sources have increased, and the budget reflects the direction of the economy for the next year. The budget deals with constraints on fiscal resources and priorities in the community. He said that he feels the projections are realistic, and that FY 1996/97 will be another great year. Revenues are projected favorably, tourism is up, and home sales are beginning to turn. The City has dealt with some difficult issues, including personnel matters, and keeping wages in check. The City Council has been very supportive, and there has been a real team effort in dealing with these issues and the necessary spending cuts. We've cut $34 million out of the General Fund, as well as ten percent of the City workforce, and fifty major management positions. The reorganizations have been geared to reducing costs and increasing efficiency, and have been very successful. With the increase in revenues, there will be no reliance on reserves or one-time monies. He went on to say that the City has made strides in curtailing spending, without jeopardizing services or public safety. In fact, thirty six police officers will have been added, if Council approves the additional five hirings proposed for this year. No other Orange County city has done that. Budget Advisory Commission, May 15, 1996 C Page 2 We have been responsive to the community and to the safety needs of the public. As a result, community crime statistics show a decrease. Community based policing and community relationships have helped. Mr. Ruth praised the volunteer groups for their contribution to the City, giving special mention to the volunteers in the Police Department, for their positive influence on the community. We've added $250,000 to the Parks and Recreation budget, primarily aimed at youth service programs; we've restored library hours; and have dealt with capital improvement needs. The planned downtown community center is coming to fruition, and will be financed through a variety of funds. Chapman University will move their law school into the Pac Bell building in August or September. In response to Messrs. Farano and Knypstra, Mr. Ruth indicated that no City or Redevelopment monies are involved in university's relocation to Anaheim, and all improvements to the building will be the Chapman's responsibility. The City owns the parking structure, and the Koll Company has development rights on adjacent properties. He feels that this move will lend an element of prestige to the area, and might attract other businesses to the area. The budget looks good; the line has been held on expenditures; and privatization has been done with sensitivity to employees. As regards the Stadium, the City has asked Disney to give every consideration to current City employees when hiring decisions are made. Stadium employees will be absorbed into other City positions wherever possible. In response to Mr. Knypstra, Mr. Ruth said the Stadium was not built as a profit center, and there have been many misconceptions about the actual return to the City, which in fact, over its lifetime, has totalled a net of only $2.9 million. The City has first right of refusal on the parking lot operation, and may want to keep it, especially in light of the Sportstown project, which will be considered by the Planning Commission on May 29, 1996. It may be possible to have a certified EIR by mid-June, and to issue an RFP in July. If the city does not keep the parking operation, Disney will probably seek bids. Disney may use their own security at the Stadium, but will be expected to have Anaheim Police on hand as well. Mr. Knypstra questioned the accounting method to be used. Mr. Sweeney indicated that the current Stadium budget will have to be modified, and that every effort will be made to have accurate reporting after Disney takes over. Sales tax will have to be reported as a footnote. Chairman Brewer indicated his concern about current season ticket holders, especially in light of the reduction in the number of seats to 45,000. Mr. Ruth also indicated that the City is working hard to get a basketball team for the Arena; he's hopeful that we'll have basketball in Anaheim next year. Following Mr. Ruth's report, Mr. Sweeney reported on the expense side of the budget. The Proposed FY 1996/97 budget is $588,492,532, a reduction of approximately 5.9 percent. The largest portion of the Budget is the Utilities operation. Sanitation fees will be reduced in July to reflect the reduction in dump fees. Mr. Sweeney gave a run down of the individual funds, explaining the information on the reduction of funds and fund balances for the proposed FY 1996/97, as reflected on page 18 of the Budget. He indicated that, although there are 111 funds, some are cost accounting funds which are lumped together into major categories. Most funds are set up due to legal requirements governing expenditures; and most General Fund increases have been for Police and Fire. General City Capital Reserves reflect "one-time" money, or one- time funds that do not have to be paid back. In an effort to clarify a misconception as to the actual portion of TOT appropriated to the Anaheim Resort Project, Mr. Sweeney stated that the fund receives 3 percent of the TOT, or approximately $8.4 million. r Budget Advisory Commission, May 15, 1996 Page 3 In response to Chairman Brewer, Mr. Sweeney indicated that bond counsel will advise us on the type of Revenue Bonds that will be sold for the Stadium. They will not be General Obligation Bonds; Mr. Sweeney views this more as conduit financing. Disney will probably have to have a Letter of Credit, and borrow on the full faith and credit of the Disney Company. PUBLIC COM TENTS: None AGENDA FOR NEXT MEETING: Mr. Sweeney recommended that the Budget Advisory Commission meet on Thursday, May 23, 1996 to discuss any questions that arise from the Commissioners' review of the budget material; and to review a draft report to the City Council. Mr. Sweeney also suggested that the Commissioners review the material distributed today, related to the Visitor & Convention Bureau, for discussion on May 23. ITEMS BY COMMISSION MEMBERS: Chairman Brewer indicated that a report received from Mr. Knypstra showed an analysis of unfunded liability for postretirement health insurance benefits. Chairman Brewer acknowledged Mr. Knypstra's concern in this matter, and said that he shared that concern. He indicated that employee morale can be impacted by inattention to such matters. Mr. Chase stated that the last actuarial study, performed in July 1993, indicated a liability of $100 million. This is long-term, and only valid if ali actuarial assumptions are correct. Only the current portion is being funded at this time, and represents 3.5 percent of the payroll; the past portion is equal to approximately 3.7 percent. According to Mr. Morgan, part of the assumptions address the types of plans offered. Mr. Chase indicated that $33 million in reserves have been built up to fund the program. Mr.Morgan agreed that the unfunded liability is a serious problem; he suggested that the Commission challenge staff to devise a plan to address this issue. Mr. Sweeney indicated that the unfunded portion will be added to the budget in FY 1998. In response to Mr. Farano, Mr. Sweeney said that there have been no major problems, to date, with Mello Roos collections. Mr. Stone added that, although the current delinquency rate is 2 percent on two of the Mello Roos districts and 20 percent on the other, our consultants do not foresee any major problems. The City Attorney's office is working on collecting delinquent payments. ADJOURNMENT The meeting was adjourned at 6 p.m., by Chairman Brewer. Respectfully submitted, Charyl McCully Secretary to the Commission