Budget Advisory 1995/11/15B ET ADVISORY MINUTES
COMMISSION O U ES
NOVEMBER 15, 1995 - 3:30 P.M.
SIXTH FLOOR CONFERENCE ROOM
MEMBERS PRESENT: Gene Brewer, Jeff Farano, Kathryn Freshley, , Phil Knypstra,
Dan Van Dorpe, Shirley McCracken
MEMBERS ABSENT: Jimmie Kennedy
STAFF PRESENT_ Jim Ruth, David Morgan, Bill Sweeney, Jeff Stone, Dan Amyx, Charyl
McCully
GUESTS PRESENT: Edward Fraga and Bill Kumagi, The Warner Group; Marla Jo Fisher, The
0. C. Re�, i� ster; Albert Geiger, Rick Brown, and Kevin Young, Business
Records Corp.; R. Joseph Dale, Formula Consultants, Inc.
The meeting was called to order by Chairman Brewer at 3:35 p.m. .
APPROVAL OF THE BUDGET ADVISORY COMMISSION MINUTES:
The Minutes of the October 18, 1995, meeting were approved on a motion by Ms. Mc Cracken and
a second by Mr. Knypstra. MOTION CARRIED (6-0-0).
EVALUATION OF SUBCOMMITTEE RECOMMENDATION FOR DATA PROCESSING:
Mr. Sweeney introduced Messrs. Fraga and Kumagi of the Warner Group, with whom the City contracted
to evaluate the entire data processing operation, and to advise the City as to those areas most suitable for
outsourcing. The report identifies all functions, and the advantages and disadvantages of the current operation.
Mr. Van Dorpe, Chairman of the Privatization Subcommittee, indicated that the Subcommittee did not have
a recommendation at this time. An additional meeting will be scheduled in the near future to further study the
matter. Mr. Sweeney suggested the possibility of issuing an RFQ to determine the type of service providers
available.
According to Mr. Fraga, the Warner Group is a management consulting firm, with sixteen years of state,
county, and city government experience. They are not associated with any EDP firms. The firm is organized
in three major practices: data processing; communications; organizational effectiveness. Mr. Fraga explained
that the objectives of the study included the determination of any current data processing functions that could
be performed more cost effectively by a private vendor. The Warner Group's "Outsourcing Feasibility Study"
was conducted with the specific objectives of identifying key City automation services; surveying and
evaluating outsourcing vendors; and surveying outsourcing experiences of other municipalities. The final
report was issued October 30, 1995. Key findings indicated that outsourcing should target expensive, one-
time functions, or those items where little loss of control would ensue, e.g. data entry. It was also determined
that there is a limited number of outsourcing vendors who service municipalities, and that very few cities have
outsourced this function.
Budget Advisory Commission, November 15, 1995 Page 2
Mr. Fraga went on to say that the study also indicated a lack of alignment with service needs in the areas of
organizational structure, job classifications, staff skill levels and resources. There is also a marked
decentralization of services with the City, and the need for a comprehensive automation master plan. It was
suggested that consolidation of PC and LAN hardware maintenance be instituted, as well as the consolidation
of telephone and telephone wiring with the EDP effort. According to the presenter, imminent outsourcing
of the EDP function is not a feasible option. Decisions regarding outsourcing should be deferred until a
comprehensive automation master plan and necessary reorganization of the operation are effected.
Two firms with the most significant presence in the municipal market are Business Records Corp. (BRC) of
Minnesota, and Systems & Computer Technology (SCT) of Irvine. Outsourcing often requires a long-term,
expensive commitment with the vendor. The City's EDP profile differs from that of comparable cities in
certain key areas, which indicate the need for revitalization of the current program. Ms. Freshley asked if any
of the cities in the comparison had its own utilities department, and if the data had been normalized to
exclude utilities departments. Mr. Fraga responded that total city budgets were used, and the major focus
was to examine the service available, and the needs of the current user. There were no cities of a size
comparable to Anaheim's that are currently outsourced. The report indicates that Anaheim has a well
compensated, senior staff, whose skills have not kept current with recent technological changes in the
computer field. While Anaheim has similar automation efforts as other comparable cities in terms of end-user
devices and chargeback costs, it lags in the replacement of terminals with PCs. Anaheim has the highest
programming charges and support cost per PC; but has more PCs installed, and a higher percent tied to the
network than comparable cities. It was also determined that Anaheim's EDP organizational structure is a
traditional mainframe environment, and the predominant skill set of staff has not adapted itself to the newer
LAN-based information systems. A deficiency also exists in the coordination of City telephone and data
processing services, hampering progress in areas such as voice and electronic mail integration.
Mr. Fraga stated that outsourcing is not going to solve the City's current EDP problems, and should be
deferred. The data processing operation must be re -engineered within eighteen months to be completely
effective, and to keep pace with technological advances. Steps recommended to achieve this are: Develop an
Automation Master Plan; Determine service provider for each service; align EDP to provide designated
services; set Mission Statement; reorganize internally; reclassify positions; upgrade staff skill level; revise
service agreements with users; timely, non -disruptive mitigation of existing applications to new system.
Mr. Van Dorpe asked for a list of mainframe applications and corresponding costs to the departments. Mr.
Sweeney indicated that the report is available; it will be reviewed and sent out. A discussion about the City's
participation in the INTERNET followed. Mr. Sweeney indicated that the City Clerk is in the process of
digitizing much of the information originated or maintained in her office.
Ms. Freshley asked what would happen to existing mainframe and corresponding software. Mr. Fraga
indicated that these legacy applications can be used in a variety of ways. Mr. Kumagi added that this process
should be included in the Automation Master Plan. The functional aspect of current applications should be
evaluated. Ms. Freshly indicated that outsourcing allows for the external expertise in the transitional phase.
Mr. Brown from BRC suggested that outsourcing might be feasible and offered to furnish information and
costs. BRC currently handles EDP for the City of Irvine. A migration plan is part of their work. In response
to Ms. Freshley, Mr. Brown indicated that his company brings expertise into areas to solve existing Budget
problems and deficiencies. In Anaheim's EDP operation, 15% of labor is currently outsourced to privately
contracted individuals.
Advisory Commission, November 15, 1995 Page 3
In response to Mr. Knypstra, Mr. Morgan stated that the reason for looking at data processing is not
dissatisfaction, but part of the plan to periodically evaluate various City operations. Mr. Morgan also stated
that any transition would have to be completed in substantially less than the recommended eighteen months.
In response to Ms. Freshley, Mr. Sweeney indicated that staff are trained for current applications, but not for
the future focus. Current employees would not merely be given new titles. Extensive training will be
necessary, and competition would exist for new positions. With approximately half of the current data
processing employees covered by an MOU, some cooperation from bargaining units might be required. Mr.
Van Dorpe indicated that another subcommittee meeting will be scheduled soon.
Mr. Ruth said that the Data Processing Division has outstanding people; but the City Manager's Office wants
to find what is available. He feels that the City has a responsibility to see how we stand up against the private
sector. He stated that the City will move ahead carefully in this process. The City currently contracts over
360 functions, for a total dollar value of over $140 million.
CITY COUNCIL BUDGET WORKSHOP:
A workshop is scheduled for November 18, 1995. Mr. Ruth indicated that each year the City Manager and
staff have met in an informal setting for three to four hours, to advise the City Council of budgetary matters,
and get policy direction. Mr. Ruth will make the same presentation to the Budget Advisory Commission in
the very near future. Trends and projections will be available. Mr. Brewer indicated that TOT seems to be
up substantially.
PUBLIC COMMENTS:
Guest introduced themselves. Mr. Dale encouraged the City to look hard at needs and inventory before
committing to any plan.
AGENDA ITEMS FOR DECEMBER MEETING:
Evaluate the Anaheim Public Library, vis-a-vis the recommendation of the Subcommittee on Other Service
Delivery Approaches.
ITEMS BY COMMISSION MEMBERS:
Chairman Brewer asked for comments regarding the letters from the Budget Advisory Commission on the
Employee Compensation and Street Maintenance operation. Mr. Knypstra suggested changes in content
which essentially eliminated reference to evaluation of performance of the street maintenance operation. Ms.
Freshley disagreed and indicated that when a presentation is made, it is appropriate to acknowledge a job well-
done. Mr. Van Dorpe indicated that Mr. Kennedy had suggested that the group be commended. After a brief
discussion, it was decided that the letter would be modified to indicate commendation for the report that was
presented, without reference to performance. Mr. Farano recommended keeping the issue of further
privatization open.
a
. a
Budget Advisory Commission, November 15, 1995 Page 4
Regarding the Employee Compensation letter, Mr. Knypstra asked the difference between having the issue
decided by Minute Order or Resolution. Mr. Sweeney indicated that the City Attorney would advise the
Council on the proper manner of enactment. Mr. Van Dorpe asked for clarification on the manner of
presentation of the information recommended by the Budget Advisory Commission. Upon Mr. Van Dorpe's
suggestion, wording was modified. Chairman Brewer directed the Secretary to modify the letters for his
signature.
OTHER BUSINESS
None
ADJOURNMENT
The meeting was adjourned at 5:05 p.m., by Chairman Brewer.
Re pectfully submitted,
Charyl McCully
Secretary to the Commission
W P/BAC/MINNO V/CPM
MEMBERS PRESENT:
MEMBERS ABSENT:
STAFF PRESENT:
GUESTS PRESENT:
C�
0
BUDGET ADVISORY COMMISSION /`i+fi_
SPECIAL WORKSHOP
MAY 8, 1996 - 3:30 P.M.
SIXTH FLOOR CONFERENCE ROOM
n vil
Gene Brewer, Shirley McCracken, Phil Knysptra, Jeff Fa - no;
Dan Van Dorpe
Jimmie Kennedy, Bill O'Connell
Bill Sweeney, Jeff Stone, Charyl McCully
None
The meeting was called to order at 3:45 p.m. by Chairman Gene Brewer.
Mr. Sweeney indicated that today's informal meeting would focus on Income, and some of the assumptions
that went into the Budget. He said the Budget is expected to be released to the City Council on Friday, May
10, and will be mailed to Commissioners as soon as it's printed. He said he's hopeful that the meeting today,
the regular meeting on May 15, and possibly another workshop on May 22, would provide sufficient
information to draft a summary letter to the City Council by the first week of June.
MAJOR SOURCES OF REVENUE:
Transient Occupancy Tax TOT);
A graph (attached) was distributed, showing TOT for the years 1991 through 1995; the numbers represent
gross room sales, tracked by month. Mr. Sweeney indicated that the gross numbers are more highly reflective
of the corresponding trend, whereas the raw TOT numbers reflect rate increases and can go up and down
based on audit findings. The City gets 15% of these numbers. TOT is normally difficult to estimate, but trend
lines in recent years lend confidence to the ability to project. The civil disturbance in 1992 contributed to
decreased TOT income. While 1993 showed a marked improvement ($252,805,647), the 1994 earthquake
caused a decrease in tourism with the TOT decreasing to $244,176,561. Tourism was substantially higher than
expected in 1995; the 1996 TOT is tracking above 1995. Mr. Sweeney suggests budgeting on the basis of these
trends. In answer to Mr. Knypstra, Mr. Sweeney indicated that $283,000,000, is the projected figure for FY
1995/96 room sales; and $291,400,000 is proposed for 1996/97. In terms of actual budget dollars, the tax is
projected at $43.1 million for 1995/96, and $43.7 for FY 1996/97. This represents an increase of $555,000
(approximately 1.3 percent) over FY 1995/96 projected. In answer to Mr. Farano, Mr. Sweeney indicated that
room sales appear to reflect increases in tourism rather than convention trade. He feels that the hotels will keep
pace with inflation. Copies of recent newspaper articles were distributed, as well as an excerpt from the
Budget, entitled "General Fund Revenue Assumptions" (attached).
The majority of TOT revenue is allocated to special uses, such as Convention Center, Visitor's Bureau, and
Anaheim Resort Area. The most recent 2 percent TOT increase was earmarked for the Anaheim Resort
Area. In response to Mr. Farano, Mr. Sweeney explained that the money for the Convention Center
expansion, is being transferred from the General Fund to the Anaheim Resort Fund to finance the debt
service. Approximately $100 million in bonds will be sold for both projects.
0
Budget Advisory Commission Workshop Minutes, May 8, 1996 Page 2
Mr. Sweeney stated that the City will not have to rely on one-time money or use reserves for general fund
expenditures this year. He feels it important that the message be conveyed that, despite fiscal improvement,
it is important to continue to keep a lid on spending. He stated that the Budget Advisory Commission should
consider incorporating into their report to the City Council, the necessity of not allowing spending to increase
materially, despite the current fiscal picture. In answer to Mr. Knypstra, he explained that all TOT revenues
pass through the General Fund, and are administratively transferred out to specific revenue funds.
Mr. Knypstra asked for an accounting of TOT allocations for last year. Mr. Stone will furnish this information.
Sales Tax:
Mr. Sweeney reported that Sales Tax revenue is approximately $1 million over budget. A report by Municipal
Resource Consultants, entitled "Calendar Fourth Quarter 1995 Sales Tax Revenue Recap" was distributed
(copy attached). The report forecasts sales tax revenue of $35.9 million for FY 1995/96, and $36.6 for FY
1996/97. MRC indicates optimism with future sales tax receipts, especially with the success of Anaheim
Plaza, Festival Shopping Center, and Fry's. While MRC charges $2,000 per quarter, there is never a net cost
to the City, due to audit findings. MRC ensures that monies are correctly allocated among cities. The State can
reallocate sales tax whenever it determines misallocation. The City's Audit Manager has proposed doing the
entire program in-house.
In answer to Mr. Van Dorpe, the Rams lawsuit has been settled (City regained development rights to the
parking lot). In answer to Mr. Farano, Mr. Sweeney indicated that the Arena produces both direct and indirect
sales tax revenues.
Motor Vehicle License Revenue:
A table (attached) showing a compilation of Motor Vehicle License revenue from 1991 to present was
distributed. Mr. Sweeney explained that the DMV (Department of Motor Vehicles) fees are divided into two
parts. One fee is tied to paperwork, while the other is a tax equal to 2 percent of the value of the vehicle,
amortized over a 13 -year period. Of this amount, 81.25 % is split the between the City and the County, based
on population. The State requires an annual population estimate for the purpose of distributing such revenues.
Anaheim's most recent population figure is 296,497. The chart includes one-time monies that were received
in place of property taxes, in 1992/93, accounting for a 5.75 percent increase over the previous period. We're
anticipating approximately $10.6 million for 1995/95, and $10.8 million for 1996/97, increases of 3.5 and 2.55
percents respectively.
Property Tax Revenue:
Property tax is a more complicated matter, according to Mr. Sweeney. A portion of the City's Property tax
money was withheld last year because of the bankruptcy. Some of that money will be repaid to us this year,
making the figures presented in the Budget unreflective of the true base. Mr. Sweeney indicated that his
estimate for property Tax revenue for FY 1996/97 is approximately $15.8 million, a decrease of $598,000 or
3.6 percent below the projected FY 1995/96. This is the result of lower projections of prior year receipts, again
related to the County bankruptcy. Excluding this amount, the proposed budget is equal to the FY 1995/96
projected.
Advisory Commission Workshop Minutes, May 8, 1996 Page 3
There is no expected increase without material economic improvement, and Mr. Sweeney indicated that
improvement is not expected in the immediate future. He recommends flatlining this revenue source.
The Redevelopment Agency was hurt by the reduction in property tax. Assessed value for the general City
dropped less than 1 percent last year. Chairman Brewer indicated that there appears to be a great
misconception on the part of citizens as to the true impact of their property taxes in terms of funding City
services, with most believing that property taxes pay for a great deal more than is accurate.
The existing annual debt service on the Arena property is approximately $1.8 million. Property tax
(possessory) has been reduced to approximately $133,000 from $433,000 (budget). The newly assessed
(taxable) base was reduced from approximately $130 million to $40 million; Ogden will pay 1 percent of this
or $400,000 annually. The City will spend approximately $133,000 per year from TOT revenues for its portion
of the $400,000 amount. One percent of TOT generates approximately $2.8 million annually. Direct expenses
at the Arena are $2 million. The remaining $800,000 is adequate to borrow $10 million. The County originally
assessed Ogden for the entire value of the facility. The City, along with Ogden, protested, and won a judgment
to reduce the tax liability. Every tenant in the building with a leasehold interest may now be taxed. If we don't
get a basketball team, the City will incur a liability of $1.5 million, for five years, beginning in Fiscal 1998.
ITEMS BY COMMISSION MEMBERS:
Mr. Van Dorpe asked for clarification of Stadium earnings over the last twenty years. A "Summary of Stadium
Profits Over The Life Of The Stadium" (attached) was distributed, which showed the bottom line profit and
loss for each fiscal year since 1966/67. The lifetime profit for Anaheim Stadium through 1994/95 is
$2,914,000.
Ms. McCracken mentioned the need to budget for the Pearson Park Amphitheater to enable the Arts Council
to schedule far enough in advance to attract quality events. She stressed the need to schedule at least eight
months out, and to have a budget that will allow maximum usage of the facility. Ms. McCracken indicated that,
with proper funding and the ability to plan long term, the Amphitheater could become self-supporting .
Current funding is budgeted at $70,000. Mr. Sweeney suggested that this matter be included in the
Commission's final report to the City Council, citing the profit-making potential of the facility and suggest that
staff devise a plan to fund this facility.
Mr. Farano indicated his concern about the possibility of convention decline during the expansion of the
Convention Center, and questioned the plans for marketing the Center during this time. A discussion followed
concerning the role of the Visitor & Convention Bureau in marketing Anaheim facilities. Mr. Sweeney said
that the Visitor and Convention Bureau will continue to receive approximately 11.1 percent of the TOT
(approximately $4.5 million) per annum. These monies are given to the V&CB as expense reimbursement.
Bureau income includes membership dues and in -lieu contributions, in addition to the cash contributed by the
City of Anaheim from TOT revenue. The Commission concurred that it would like more information on the
Bureau's activity and performance level. Mr. Sweeney indicated that the contract with the V&CB is being
rewritten. An element of the new contract will require activity reports. Mr. Stone will provide copies of both
the old and new contracts for next week's Budget Advisory Commission meeting. Mr. Farano suggested billing
Budget Advisory Commission Workshop Minutes, May 8, 1996 Page 4
the hotels outside Anaheim for the 11.1 percent of their TOT, to help finance the V&CB when hotels are
booked. Ms. McCracken suggested billing those venues advertised on V&CB brochures.
The Commission indicated an interest in the budget and salaries of Visitor & Convention Bureau employees,
as well as the proportion of Bureau activity that benefits other cities.
Mr. Knypstra asked the current state of unfunded liability in health care for retirees. Mr. Sweeney stated that
the City is funding only the current portion at this time. An actuarial report will be prepared to study this
matter. Mr. Knypstra said he would provide a comparative analysis of unfunded liability based on his study
of the matter. Mr. Sweeney suggested that post-retirement medical insurance should be re-evaluated.
Chairman Brewer asked the Commissioners to begin thinking about the report to the City Council. Mr.
Sweeney offered staff support.
The regular meeting of the Budget Advisory Commission, on May 15, 1996, will focus on budgeted
expenditures.
ADJOURNMENT:
The meeting was adjourned at 5:37 p.m..
Respectfully submitted,
/ O
LIr
aryl McCu y
Secretary
F/WPBAC/WKSHPM[NCPM/% 8/96
MEMORANDUM •
DATE: May 13, 1996
TO: Budget Advisory
Commission and City
Council
FROM: Phillip Knypstra
RE: Postretirement Health
Insurance Benefits
The purpose of this memo is to inform the Budget Advisory
Commission and City Council of my concern over the level of unfunded
liability for postretirement health insurance benefits. As you will
notice in the table below, Anaheim's current unfunded liability for this
benefit is over $67,000,000. You will also notice no additions to
reserves were made in 1994-95, even though, $3,350,000 was originally
budgeted. Furthermore, no additions to reserves were made in 1995-96,
and none are scheduled to be made for the next five years, as I read the
proposed 1996-97 budget. But maybe I'm wrong.
As a member of an oversight committee for Anaheim taxpayers, I
think the Budget Advisory Commission would be remiss if they did not
explore this budgetary item in more detail. For this reason, I think a
workshop of some kind is warranted so that we can thoroughly discuss
this matter, preferably before the 1996-97 budget is adopted by the City
Council.
CITY OF ANAHEIM
HEALTH INSURANCE FOR RETIREES
COMPARATIVE ANALYSIS OF UNFUNDED LIABILITY:(1988 - 1995)
FISCAL
YEAR
ESTIMATED
TOTAL
LIABILITY
FUNDED
LIABILITY
NF.UPIDEQ'
BiL,'
ADDITIONS TO
RESERVES
*CURRENT
FUNDING
RATES
FUNDING
COVERAGE
RATIO
6130/88
$ 4,944,000
?
?
?
?
6130/89
4,944,000
?
?
?
?
6130190
5,579,000
?
?
?
?
6/30191
87,522,317
17,060,997
X32€1= 6,876,147
3.34% / 3.70%
19.5%
6/30/92
87,522,000
21,966,000
"' X5,55 , Q(1: 4,905,000
3.34% / 3.70%
25.1%
6130193
87,522,317
21,966,380
,A 65rv5�a3T 5,354,000
<'
3.34% / 3.70%
25.1%
6130194
100,230,418
32,924,630&7`
$ 5,604,136
3.54% 13.79%
32.8%
6/30195
100,230,418
32,924,630ffi
0 8` 0
.-
3.54%13.79%
32.8
*The first percentage rate noted is the rate of payroll required to fund the current cost of health insurance for retirees.
* The second percentage rate noted is the rate of payroll required to amortize unfunded liability over thirty years.
MEMBERS PRESENT:
MEMBERS ABSENT:
STAFF PRESENT:
GUESTS PRESENT:
BUDGET ADVISORY COMMISSION
SPECIAL WORKSHOP
MAY 22, 1996 - 3:30 P.M.
SIXTH FLOOR CONFERENCE ROOM 1:? t
�r
Gene Brewer, Shirley McCracken, Jeff Farano, Dan'Van Dorp;e
Jimmie Kennedy, Phil Knypstra, Bill O'Connell
Bill Sweeney, Jeff Stone, Charyl McCully
Charles Ahlers, President, Anaheim/Orange County Visitor & Convention
Bureau, John O'Malley, Orange County Employees Association
The meeting was called to order at 3:45 p.m. by Chairman Brewer,
Chairman Brewer presented the draft letter to the City Council which indicated the Commission's support for the
budget. He stressed that time was of the essence, due to the impending City Council Workshops. In response to
Mr. Van Dorpe, Mr. Sweeney explained that the two workshops (June 4 and 11, 1996) are open to the public,
and would consist of presentations by each department. The Budget was set for adoption at the City Council
meeting of June 11. Ms. McCracken stated that, in comparison to previous years, there appeared to be no
controversial issues associated with the proposed budget. Mr. Sweeney suggested that this being the second year
of the two-year budget, there was less likelihood of controversy. Chairman Brewer deferred further discussion
regarding the letter of support until the end of the meeting.
Chairman Brewer introduced Charles Ahlers, President of the Anaheim -Orange County Visitor and Convention
Bureau. Mr. Ahlers stated that he has been in this position for approximately three years, having held the Sales
Manager position between 1972 and 1979. In the years between his two terms in Anaheim, Mr. Ahlers served with
convention bureaus in Phoenix, San Francisco, and Portland.
Mr. Ahlers explained that the Bureau is a private, not for profit trade organization (classification 501 C-6). The
City audits the Bureau annually. An annual audit of statements is also performed by an outside, independent CPA.
Another CPA firm prepares monthly statements. Mr. Ahlers reports to the Executive Committee, which, in turn,
reports to a Board of Directors of twenty five members. Greg Smith is an ex -officio member of this Board as is
the President of the Anaheim Chamber of Commerce. Board members serve staggered three-year terms. The
Bureau employs 40 people, with very few support staff, finding it cost effective to buy research. This is small
compared to comparable convention cities. An independent classification and compensation study, determined
the Bureau to be in the correct place in the industry for the area. Newer employees command lower salaries,
resulting in overall cost savings. The Bureau's retirement policy requires that employees work until age sixty five,
but there is no retirement health care plan. There is a health plan in place that offers a PPO with an HMO option,
and standard dental plan. Employees are covered by Social Security and Medicare.
Mr. Ahlers indicated that this is a critical time for Anaheim and, if all goes according to plan and we continue
move forward, Anaheim stands to be one of the premier convention sites in the world. The Disney second gate,
Convention Center expansion, and beautification projects are all crucial to Anaheim's future. In response to Mr.
Van Dorpe, Mr. Ahlers explained that current Disney plans are scaled down from the original expansion which
called for something similar to Florida's Epcot Center. Current plans call for an entertainment complex featuring
restaurants and nightclubs, the adult options that Anaheim lacks, and has been criticized for by convention goers.
Mr. Ahlers stressed Anaheim's competitive position with cities that have major trade show significance.
N
00
0
Budget Advisory Commission Workshop Minutes, May 22, 1996 Page 2
He attributes that position to our tourism infrastructure, including a large convention center, and about 17,000
hotel rooms. However the City lacks many important identifiers other cities possess, e.g. airport, beaches,
restaurants, quality shopping, art facilities.
In response to Mr. Farano, Mr. Ahlers explained that including "Orange County" in the organization name, is a
marketing tool, which helps promote the entire area, thereby helping Anaheim. "Anaheim" is still prominent in
the Bureau name. Other cities do not fund the Bureau. There are about 700 corporate members, who pay dues
according to their type of business, as governed by a fee scale. The Bureau has almost as many members outside
Anaheim as in the City. In fact, all but the $4.3 million from the City is from other sources. However, he stated
that Anaheim members get a higher level of service and more direct attention. The Bureau does its best to collect
money from outside sources for fees and advertising, and advertising revenues can be as high as $700,000. Still
75-80 percent of revenues is from Anaheim funding. The Bureau puts out about 21 publications, some of which
are supported by advertising, while some are not. They work closely with other city Bureaus and the Orange
County Tourism Consortium, which controls approximately half of the big citywide conventions, enabling
cooperative ventures with them to promote the leisure market.
Mr. Farano asked if the other area hotels are taking advantage of our promotional work, without paying their fair
share, and capitalizing on Anaheim's 15 percent TOT, while having to charge only 10 percent for this tax.
Chairman Brewer stated that in a free market economy, it's difficult to control those who capitalize on such
situations. He feels that encouraging people to stay in Anaheim is the best way to handle this. Mr. Farano
indicated that the City is spending a tremendous amount to improve the area, which benefits the surrounding cities
as well as Anaheim.
In response to Mr. Van Dorpe, Mr. Ahlers indicated that we should not consider raising the TOT further.
Anaheim is among the leaders in this area. San Francisco and Los Angeles both have a 14 percent TOT. Anaheim
hotels pay a membership fee to the Bureau in addition to the TOT.
The Bureau has a $5.8 million budget for next year, comparable to Los Angeles and San Francisco. Anaheim has
17,000 taxable rooms, while Los Angeles has 90,000 rooms in the area covering from LAX, to downtown, to the
suburbs. The Bureau can control most of the housing. Mr. Ahlers said pressure will help other hotels fill up, but
there is no way to chart this pressure. About half of the conventions that come to town have housing coordinated
through the Bureau's centralized reservation system. Two full-time and several part-time people work on this. The
Bureau's goal would be to spend more on imaging and leisure market, because trade advertising targets
entertainment, arts, shopping, culture, and airport accessibility. Ms. McCracken stated that there are many things
going on in Anaheim, that need to be publicized, including 48 sites of public art. Mr. Ahlers said the restaurant
issue is most critical in downtown Anaheim. There is a serious need for upscale restaurants in the convention
center area. Mr. Farano cited the convention center study that reported entertainment to be the number -one item
for convention attendees. The economic impact of a major convention is huge. Sixty-one large conventions have
put the City on notice that they will not return without improvement to facility and area. There are 148,000 people
in Orange County who are employed by the convention industry.
i
Budget Advisory Commission Workshop Minutes, May 22, 1996 Page 3
The Transient Occupancy Tax revenue is estimated to be over $43 million this year. Mr. Farano questioned
Anaheim's position as to its ability to collect TOT from hotels in surrounding cities who house Anaheim's
overflow. Mr. Ahlers indicated that collecting fees from members is the best way to recapture these monies. It
is unlikely that cities would agree to pay for TOT replacement. Chairman Brewer said that it is unlikely that City
Councils of surrounding cities would raise their Occupancy Taxes, nor would they be amenable to sharing a
portion of their TOT with Anaheim. Ms. McCracken said that, unlike San Diego and San Francisco where
counties and cities have a shared interest, cities in Orange County are different entities and have never been
inclined to help each other, and are, in fact, quite competitive.
Mr. Ahlers went on to say that tourism is increasing and more people are traveling. The economic impact of the
convention and visitor industry is approximately $5.2 billion, and it is expected to be the number one industry at
the turn of the century, up from its current number two position.
In response to Mr. Farano, Mr. Ahlers stated that there is an emergency plan in place to communicate with
convention planners should there be a major disaster. W. Sweeney stated that the new contract between the City
and the Bureau will be sent to the Commissioners as soon as it's available.
The proposed budget and letter of support were reintroduced. Mr. Farano indicated that the City is following
a good, conservative policy. Mr. Sweeney reported that most of the increase relates to Police and Fire. Two staff
members have been added to the City Attorney's Prosecution Office. Anaheim is the only city in Orange County
that, as a policy issue, prosecutes its own misdemeanors. As a tourist town it's important to prosecute these small
level crimes. Some items were removed from the City Council budget, and added to the budgets of the City
Manager and Finance Department. Only salaries already included in MOUs and approved by the City Council
will be raised this year. If, for instance, a raise for Firefighters is approved, the budget will be out of balance.
Monies will need to be found somewhere in the budget to offset these costs. Chairman Brewer indicated that
approval of the budget fixes the budgeted revenue, budgeted expenses can be changed later, but the monies will
need to be found. Mr. Sweeney stated that we cannot allow the budget to increase without finding new revenue
sources, which will probably grow slowly over the next few years. Chairman Brewer stated that the Commission
needs to provide the City Council with the Commission's position on the Budget. In the absence of any
controversial issues or problem projects, it was suggested that the letter to the City Council indicating Budget
Advisory Commission supportbe approved. The Commissioners' concerns about unfunded retirement benefits
should be conveyed at a later time. Mr. Farano reiterated his concern about the Convention Center expansion.
Chairman Brewer indicated that the Commission could serve as a forum to help move that project along.
Chairman Brewer moved that the letter to the City Council be approved. Seconded by Ms. McCracken.
MOTION CARRIED (4-0-3).
The meeting was adjourned at 5:55 p.m..
Resp ctfully submitted,
arylMX lly
Secretary
F/WPBAC/WKSH2M NCPW`/`21/96