Sacramento Budget and Audit Committee Meeting – December 5, 2017
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Sacramento Budget and Audit Committee Meeting
The Sacramento Budget and Audit Committee met on Tuesday, December 5, 2017, starting at 2:00 p.m. in the City Hall Council Chamber. Vice Chair Jay Schenirer presided; Councilmembers Angelique Ashby and Rick Jennings were present, and Mayor Darrell Steinberg was absent. The committee approved routine minutes and accepted the City Auditor’s Follow-Up Audit of the Golden1 Center Local Hiring and Business Involvement, forwarding it to the full City Council.
Consent Calendar
- Passed a motion approving the Budget and Audit Committee meeting minutes from June 6, August 3, September 19, October 3, and November 7, 2017 (File ID: 2017-01638). Motion by Member Jennings, second by Member Ashby; approved unanimously by the members present.
City Auditor’s Follow-Up Audit of the Golden1 Center Local Hiring and Business Involvement
The City Auditor’s office presented the follow-up audit. Key findings included:
- More than 1,600 workers who worked on the Golden1 Center lived in Sacramento County and received nearly $36 million in pay from July 2014 to July 2017. Sacramento County workers made up 43% of the project workforce, the most of any county.
- The project met its apprentice-hour goal, with 20% of building and construction trade hours performed by apprentices.
- The Golden1 Center achieved 130% of its priority apprentice program goal: 91 qualifying priority apprentices worked on the project, exceeding the goal of 70, including 21 who met the newer priority worker criteria. These apprentices contributed more than 67,000 hours and received more than $1.6 million in gross pay, averaging more than 700 hours per apprentice, $24.46 per hour, and more than $18,000 in gross pay.
- An additional 52 individuals meeting the priority apprentice criteria were hired for nearby construction projects but did not work on the Golden1 Center.
- Local small business involvement was estimated at 73% against a 60% goal; small business involvement met the 20% goal, with 92% of small businesses being local small businesses, exceeding the 75% goal.
- The audit relied on information from Turner Construction Company and the Sacramento Metropolitan Chamber of Commerce.
- A high-level economic indicator review, rather than a full economic impact analysis, found improvements in the downtown area. Since the Golden1 Center opened, development such as the Kimpton Sawyer Hotel and Downtown Commons has moved forward, though the audit did not conclusively tie all projects to the arena.
- Parking revenue grew from nearly $31 million in fiscal year 2013 to more than $37 million in fiscal year 2017, while the city also modernized its parking program.
- Property values in the central city area increased 58% relative to June 2006 values, although values also rose elsewhere in Sacramento and comparable cities.
- Transient occupancy tax increased from $23.8 million in fiscal year 2015 to $28.5 million in fiscal year 2017.
- The audit noted that a key contract provision protected the city from sharing in more than $80 million in cost overruns; the city’s contribution ended at approximately 45.6% of project costs instead of the original estimate of about 57.6%.
- Surveyed participants said the local hiring and business involvement goals were appropriate and challenging, and they would likely participate in similar goals for future city projects. Suggested improvements included clearer tracking procedures, defined roles and responsibilities, and a local/small business capacity study.
The city’s economic development department plans to conduct a more detailed economic impact report for the Golden1 Center in the coming year.
Committee Comments and Direction
- Member Jennings praised the audit as showing a positive impact and exceeding hiring goals, called the project a model for others, and moved to forward the audit to the full City Council. Member Schenirer seconded.
- Members asked about the planned economic impact analysis, including who would conduct it and its scope. They requested that the report to Council include sales tax data for the downtown core, particularly if favorable, and construction value changes since the Golden1 Center opened.
- The committee suggested running the scope of the economic impact study by GSAC and SACOG to ensure the data and reporting are robust and defensible.
Key Outcomes
- Approved the Consent Calendar item approving prior meeting minutes.
- Passed a motion accepting the City Auditor’s Follow-Up Audit of the Golden1 Center Local Hiring and Business Involvement and forwarding it to City Council for approval. Motion by Member Jennings, second by Member Schenirer; carried 3–0 with Mayor Steinberg absent.
- Directed staff to incorporate additional requested information into the Council presentation and consider external input on the future economic impact analysis.
The committee adjourned at 2:20 p.m.
Meeting Transcript
All right, I want to call this meeting of the budget and audit committee to order. Uh, please call the role. Councilmember Ashby here. Vice Mayor Jennings. Here. Chair Chinier. Here. And for the record, there are Steinberg is absent today. Okay. Doing good things, we assume. So uh we have two items. We have the consent calendar and one uh audit follow-up. Uh any thoughts, comments on the consent calendar. I'll move the consent code. I have a motion and a second. All those in favor signify by aye. Let's move to the city auditors follow-up audit on Golden One Center Local Hiring and Business Involvement. Something near and dear to all of our hearts. Oh, I was just gonna see if we could get the PowerPoint up. Thank you. Now that the project is near completion. The CWTA supplemental agreement also included a goal to ensure apprentices performed no less than 20% of the total number of building and construction trade hours performed on the project. The Golden One Center project also appears to have met this goal with 20% of hours performed by apprentices. Based on the information we reviewed, we created the following map, which identifies the number of workers and gross pay from each county. The yellow numbers are workers from the local county and the red are non-local workers. It is difficult to see here, but we found that over 1,600 of the workers that worked on this project lived in the Sacramento County and received nearly 36 million in pay from July 2014 to July 2017. This is by far the most impacted county with 43% of the workers for the project from Sacramento County. It appears the Kings made a great effort to hire local workers to work on the construction of the Golden One Center. We also found that the Golden One Center project achieved 130% of its priority apprentice program goals. This goal was to hire at least 70 priority apprentices with work on the Golden One Center. At least 20 of these apprentices must be the new priority worker criteria. We found 91 apprentices that worked on the construction of the Golden One Center that met the priority apprentice program criteria. This is 130% of the goal of 70. 21 of the 91 party apprentices met the new priority apprentice worker criteria. The priority apprentices contributed more than 67,000 hours on the construction of the Golden One Center Plaza and received more than 1.6 million in gross pay. On average, each priority apprentice worked more than 700 hours on the construction of the Golden One Center and Plaza with an average hourly pay of 24.46 cents and more than 18,000 in gross pay. SETA also informed us that there were an additional 52 individuals that met the priority apprentice program criteria but did not work on the construction of the Golden One Center. These individuals were hired by contractors to work on other construction projects in the area. Although these individuals did not work on the Golden One Center project, the priority apprentice program appears to have positively impacted the local area, and more than 91 priority apprentices were benefited by this program. Our second finding focuses on the local and small business involvement goals that were developed for the Golden One Center project. The program's goals was to award 60% of the biddable work related to the Golden One Center design, construction, and professional services to local business enterprises and 20% to small business enterprises, of which 75% must be to local small business enterprises. For this review, we relied on the information provided by Turner Construction Company and the Sacramento Metropolitan Chamber of Commerce Commerce to assess the LBE, SBE, and LSBE involvement as it was the best available information. Based on the information provided by Turner Construction Company and the Sacramento Metro Chamber of Commerce, it appears the project met its local and small business involvement goals. Specifically, local small business involvement is estimated at 73%. The goal was 60%. Small business involvement was met at 20%, and 92% of small businesses were local small businesses. The goal was 75%. Finding three covers our review of emerging capital projects and some economic indicators to determine whether the Golden One Center positively impacted the downtown area. Due to our limited time and resources, we did not perform an economic impact analysis, but rather a high-level review of emerging capital projects and some economic indicators. We attempted to highlight some of the subsequent projects that have moved forward since the Golden One Center project was announced.
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