Budget and Government Efficiency Committee Meeting - May 24, 2017

The Budget and Government Efficiency Committee met on May 24, 2017, to consider four action items: an amendment to the banking services contract, additional funding for water main break remediation services, an amendment to the Hertz equipment rental agreement, and a new marketing partnership with Service Line Warranties of America. All items were approved unanimously.

Consent Calendar

• The committee approved the record of actions from the March 22, 2017 meeting by unanimous consent.

Public Comments & Testimony

• An unidentified public speaker expressed concern about the city's pension obligations, stating that pension funds are "hidden" in city funds and that fixing the pension would be easy if unspent funds were used. The speaker noted that a pension-related vote ends in 2018 and said the committee has the power to address the issue.
• Mr. Chipman, speaking on behalf of San Diegans for Safe Neighborhoods, urged a moratorium on all additional marijuana commercialization permits until state regulations are in place. He cited reports from Denver District Attorney Mitch Morrissey showing that every crime type increased in every Denver neighborhood after legalization, and argued that commercialization encourages lawlessness.

Item 1: Banking Services Contract Amendment (Bank of America)

• Kent Morris, Chief Investment Officer, requested approval to authorize the Chief Financial Officer to expend up to $9,050,000 for the Bank of America banking services contract, increasing the not-to-exceed amount from $5.75 million by $3.3 million. The increase is needed because 5,700 smart parking meters installed in fiscal year 2015 accept credit/debit cards.
• Morris reported that in FY17 the city averages about 200,000 credit card transactions per month, generating about $65,000 in merchant fees. Credit card usage rose from 54% to just over 60%, and parking meter revenue increased by an average of 19% over the last two fiscal years; Councilmember Gomez noted revenue increased by $1.7 million per fiscal year.
• Councilmember Gomez expressed discomfort with continuing to do business with Bank of America given its impact on the housing crisis, and asked about community criteria in contracting. Staff disclosed that a Responsible Banking Ordinance from 2012 created a committee that has never met; Gomez requested a copy of the ordinance.
• The item was approved with a motion by Councilmember Sherman, seconded by Councilmember Kate.

Item 2: Additional Funding for Remediation and Cleanup Services (Luth and Turley)

• Risk Management Director Julio Canistal and Claudia Castillo requested an additional $1.5 million to complete the current contract year, bringing the total to $4 million, plus a month-to-month extension through June 2018 with a not-to-exceed amount of $1 million.
• The request stems from a January 5, 2017 water main break in North Park, where a 50-year-old, 30-inch cast iron pipe ruptured under home plate at the baseball field at North Park Recreation Center. Approximately 82 claimants incurred property damage, with remediation costs estimated at about $3 million.
• The RFP for a new contract is expected to be issued within the next month; from responses to award typically takes about 65 days.
• Councilmember Kate asked how the contractor assists residents; Councilmember Gomez asked about RFP timing and general fund impact; staff confirmed funding comes from water and sewer funds, not the general fund. Councilmember Sherman asked about remaining cast iron pipe mileage; Tom Howard, Deputy Director of Water Construction, said he would provide that information.
• The item was approved with a motion by Councilmember Kate, seconded by Councilmember Sherman.

Item 3: Hertz Equipment Rental Agreement Second Amendment

• Purchasing Director Christina Peralta and Deputy Director Matthew Helm requested approval to exercise the second amendment to the Hertz Equipment Rental Company (HERC) contract, extending it through March 2018 and increasing expenditure authority to $11 million not-to-exceed through the contract life in 2019.
• The contract provides about 40% off retail prices and platinum-level pricing, and covers a wide range of equipment for day-to-day operations, including stormwater channel clearing and drought response. The original $3 million authority has been nearly exhausted due to wet weather and increased department needs.
• Councilmember Sherman asked about pricing guarantees and whether rentals are supplementing fleet deficiencies; Alia Corey, Director of Fleet Operations, confirmed the mill and pave machines are now in service. Councilmember Gomez asked about the large increase and general fund impact; staff stated most funding comes from non-general fund accounts.
• The item was approved with a motion by Councilmember Sherman, seconded by Councilmember Gomez.

Item 4: Marketing Partnership Agreement with Service Line Warranties of America (SLWA)

• Natasha Kalara, Executive Director of Corporate Partnerships, presented the second amendment to the SLWA agreement. The five-year partnership includes three mailings per year, is fully funded by SLWA, and provides the city an annual payment of $56,250 (minimum $281,250 over five years), estimated licensing fees of almost $500,000, and a one-time $150,000 donation to the H2O fund for low-income water rate assistance—totaling approximately $914,250.
• Over 8,000 San Diegans purchased home warranties under the previous contract; about 20% used the service, and the program has a 92% satisfaction rating.
• Councilmember Gomez asked about the H2O fund; Mike Vogel, Deputy Director for Public Utilities, said details will be presented to the Environment Committee next month. Councilmember Sherman noted the improved transparency with the city's phone number included.
• The item was approved with a motion by Councilmember Gomez, seconded by Councilmember Sherman.

Key Outcomes

• All four action items were approved unanimously by the committee.
• The committee approved the record of actions from March 22, 2017.
• The committee will reconvene on Wednesday, June 21 at 9 a.m.