Budget and Audit Committee Meeting Summary - September 6, 2022

The Budget and Audit Committee of the Sacramento City Council met on September 6, 2022, at 3:00 PM in the City Hall Council Chamber. The meeting was chaired by Vice Chair Eric Guerra, with Mayor Darrell Steinberg arriving at 3:03 PM. The committee reviewed and approved three consent calendar items, discussed two major agenda items, and forwarded recommendations to the full City Council. The meeting adjourned at 3:44 PM.

Consent Calendar

• Item 1: Approved the Budget and Audit Committee meeting minutes from May 31, 2022.
• Item 2: Accepted the City Auditor’s Recommendation Follow-Up Report for the period January 1, 2022, to June 30, 2022, and forwarded it to the City Council for final approval.
• Item 3: Accepted the City Auditor’s Activity Report for the 4th Quarter of Fiscal Year 2021/22, and forwarded it to the City Council for final approval.
• All consent items were approved unanimously via a motion by Councilmember Vang, seconded by Councilmember Jennings. Mayor Steinberg was absent for this vote.

Public Comments & Testimony

• No public comments were made on the consent calendar, discussion items, or matters not on the agenda.

Discussion Items

• Item 4: Amending the Master Fees and Charges Schedule for Building Electrification Infeasibility Waiver Fees

  • Bob Latz, Interim Chief Building Official, presented the proposed fees for the infeasibility waiver process required under the Building Electrification Ordinance (Phase 1, effective January 1, 2022). The waiver applies to new construction buildings three stories or less. Fees include a $492 administrative processing fee (based on $164/hour) and a $1,500 technical consultant fee (based on $250/hour), totaling approximately $1,992. Appeal fees are $1,640. The process relies on a technical consultant to review applications and provide recommendations to the Building Official.
  • Mayor Steinberg expressed concern about the fairness and transparency of the process, suggesting that businesses, especially restaurateurs, should have input into the selection of the technical consultant. He emphasized the need to avoid perceptions of unfairness.
  • Councilmember Jennings raised concerns about the fee burden on small and minority-owned businesses, noting that nearly $2,000 could be a hardship for smaller developments. He asked staff to explore options to reduce or bifurcate fees for such businesses before the item reaches the City Council.
  • Staff clarified that the waiver is expected to be rarely used before 2026 due to exemptions for restaurants and manufacturing, and that the fee and process will be reviewed before the 2026 cycle. The item will proceed to the Law and Legislation Committee on September 20, 2022, and then to the City Council on November 1, 2022, for final action on the ordinance, fee schedule, and guidance document.
  • The committee voted unanimously (4-0) to forward the proposed fee amendment to the City Council.

• Item 5: Audit of the City’s Financial Condition

  • City Auditor Jorge Oseguera and Principal Fiscal Policy Analyst Farishta Arrari presented the audit, which examined the city’s financial well-being in four areas: financial position, revenues and expenditures, debt, and capital assets. The audit used two models: the modified 10-point test (comparing Sacramento to six peer California cities) and the ICMA handbook.
  • Key findings: Sacramento scored 5 out of 10 in 2021 ("better than most"), dropping from "among the best" in 2020 due to pandemic impacts on short-term indicators. The city’s liquidity ratio improved to 6.3, but debt ratios were the lowest scoring: per capita debt burden was $2,790 (above benchmark average since 2016) and enterprise fund debt coverage was below peers. Net pension liability grew from $453 million to over $690 million over the period.
  • Discussion: Councilmember Jennings asked why other cities performed better on enterprise fund debt coverage and whether the city could learn from them. Mayor Steinberg asked if there were any red flags; the auditor and Treasurer Colville (via phone) noted that the debt issuance for the Golden 1 Center (2016) skewed ratios, and that the city’s investments in quality-of-life projects (e.g., Golden 1 Center, C3) are not fully captured. The auditor stated there is no specific threshold indicating a major problem, but ongoing monitoring is recommended.
  • The committee voted unanimously (4-0) to accept the audit and forward it to the City Council for approval.

Key Outcomes

• Consent Calendar: All three items (minutes, auditor follow-up report, activity report) approved unanimously.
• Item 4 (Building Electrification Waiver Fees): Motion to forward the proposed fee amendment to the City Council passed 4-0. The item will next go to the Law and Legislation Committee on September 20, 2022, with final City Council action expected November 1, 2022.
• Item 5 (Audit of Financial Condition): Motion to accept the audit and forward to the City Council passed 4-0.
• No committee comments or public comments on matters not on the agenda were made.