Budget and Government Efficiency Committee Meeting - October 25, 2017
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Budget and Government Efficiency Committee Meeting - October 25, 2017
The Budget and Government Efficiency Committee of the City of San Diego met on October 25, 2017, from 9:01 a.m. to approximately 11:15 a.m. in Council Chambers. The committee reviewed and acted on several items, including revisions to budget and reserve policies, the FY2019 budget calendar, a licensing agreement with Mattel, a consultant contract code amendment, an amendment to the HP computer equipment agreement, and received informational reports on financial performance, business diversity, prevailing wage, and living wage compliance.
Public Comments & Testimony
- Roslyn Winstead (on Business Diversity Report): Expressed disappointment with zero percent African American participation in construction and AE contracts, a decline in women and Latino utilization. She argued the race-neutral SLBE program provides cover for institutionalized discrimination and called for a disparity study. She noted that the program's metrics are based on commitments rather than actual receipts, and criticized the lack of enforcement and decentralized EO functions.
- Emily Howe (Center on Policy Initiatives, on Living Wage Report): Encouraged continued support for living wage and prevailing wage programs, emphasized the need for proactive strategic enforcement, clear metrics on worker coverage and back wages, coordination with other agencies, and adequate resources for investigators.
Discussion Items
- Revisions to Budget Policies (CP 000-02) and Reserve Policy (CP 100-20): Financial Management staff presented proposed clarifications, including allowing the mid-year budget monitoring report to use up to six months of actual results, and adding language to reevaluate the general fund reserve funding schedule sooner if surpluses occur. For the pension payment stabilization reserve, staff recommended keeping the word "will" (mandatory) rather than changing to "may" as suggested by the IBA. The IBA supported all proposals but raised the option of softening the pension reserve language. The CFO argued that "will" reflects strong commitment important to rating agencies. Councilmember Gomez moved to approve staff recommendations with the IBA's suggestions except for changing "will" to "may"; the motion carried unanimously.
- FY2019 Budget Development and FY2018 Budget Monitoring Calendar: The IBA presented the proposed key dates calendar, noting changes such as a new online survey for council CIP priorities, a return to a December 11 five-year forecast presentation, and a week-later final budget modification date (June 11, 2018) due to the election recess. The motion to approve and forward to City Council passed unanimously.
- City of San Diego Licensing Agreement with Mattel, Inc.: The Director of Corporate Partnerships detailed the non-monetary agreement allowing Mattel to produce matchbox replicas of city fire rescue and police vehicles. The three-year term with two one-year renewal options was presented. The committee forwarded the item to council unanimously.
- Amendment to Municipal Code on Consultant Contracts (Section 22.3201-3202): Purchasing and Contracting staff explained that the amendment moves existing competitive process requirements from council policy into the municipal code to comply with Measure H (passed Nov. 2016), without changing current practice. The committee approved unanimously.
- Second Amendment to Agreement with HP, Inc. for Computer Equipment: The IT Department requested increasing the not-to-exceed amount from $3 million to $10.8 million to cover computer equipment needs through March 2020, driven by Windows 10 upgrade and five-year replacement cycle. The IBA noted that the staff report lacked a breakdown of general fund vs. non-general fund expenditures and details on the Windows 10 upgrade. Councilmember Kate moved to approve the increase but requested that the additional information be provided before the item goes to full council. The motion passed unanimously.
- Fiscal Year 2017 Year-End Financial Performance Report (Informational): Financial Management reported a $17.1 million excess equity, above the $4 million projected in May, due to $13.8 million in lower expenditures (vacancy savings, lower overtime, and reduced fringe benefits). Revenues matched projections, with sales tax $2.6 million lower offset by higher TOT and miscellaneous revenues. The IBA highlighted that actual salaries and wages were $1.9 million over the adopted budget, with vacancy savings offsetting overtime and special pay overages. Fire Rescue reached full staffing, reducing overtime. The report was received for information.
- Fiscal Year 2017 Business Diversity Annual Report (Informational): The Equal Opportunity Contracting Program presented data on the SLBE program. The city exceeded its 20% goal with 32% SLBE participation on construction contracts ($111 million in awards). However, the report showed zero percent African American participation in construction and AE, and declining trends for women and Latino-owned businesses. Councilmember Gomez expressed concern and requested a discussion on a disparity study at the next committee meeting. The report was received.
- Prevailing Wage Annual Report FY2017 (Informational): Staff reported that 284 projects worth over $1 billion were monitored, with $114,451 recovered in wages for underpayments. Nine contractors were referred to the Division of Apprenticeship Standards. New state legislation (SB 854) increases penalties and requires city registration and notification. Staff noted that site visits decreased due to vacancies. The report was received.
- Living Wage Ordinance Annual Report FY2017 (Informational): The report covered compliance activities: three reviews, two completed, resulting in $20,824 in back wages; six complaints investigated, five violations, $9,492 in restitution. Staff outlined planned improvements, including transitioning to a proactive monitoring system using PRISM software to automate payroll review. The report was received.
Key Outcomes
- Approved revisions to Budget Policy and Reserve Policy, retaining "will" for the pension payment stabilization reserve target (unanimous).
- Approved the FY2019 budget development and FY2018 budget monitoring calendar (unanimous).
- Approved the licensing agreement with Mattel, Inc. and forwarded to City Council (unanimous).
- Approved the municipal code amendment for consultant contracts (unanimous).
- Approved the second amendment to the HP agreement, increasing the not-to-exceed amount to $10.8 million, with a request for additional financial breakdowns before council consideration (unanimous).
- The committee directed staff to place a discussion on a disparity study for the SLBE program on the next meeting agenda (November 15, 2017).
- All informational items (FY2017 year-end financial report, business diversity report, prevailing wage report, living wage report) were received and filed.
Meeting Transcript
Okay. Good morning, everyone. It's 901. I will now call the meeting of the budget and government efficiency committee to order. A quorum is now president present, sorry, consisting of committee members Sherman, Kate, and Councilmember Gomez. And we also have City Attorney Brant Will and our new CFO, Rolando Sherval, and our IBA, Andrea Tevlin, and with the IBA team, Christiana Gogar. Gauger? Okay. Okay. I know. Okay. So moving right along, the committee record of actions from the August 7, 2017 meeting will be approved by unanimous consent unless pulled for discussion. No. Okay. And I definitely want to get to item number seven today, and we may move that up depending on how our time is going. So anybody here for non-agenda public comment? No. Okay. Nobody? Okay. Do we have any committee member, mayor, IBA, or city attorney comments today? Nope. Okay. Any requests to continue an item. No. Okay. We'll now proceed directly to the action agenda. Um, starting with item number one to uh review a report from financial management recommending council approval of revisions to the budget policies and reserve policy. Good morning, Chair Bree. My name's Tracy McCraner, Director of Financial Management, and with me are Vanessa Montenegro, budget coordinator, and Matt Vespe, Deputy Director. Uh before I hand it over to uh uh Matt to start, uh we've been meeting uh with the IBA staff uh on some changes that we've both wanted to do to the budget policy and the pension reserve, and this is a consolidation of those efforts and uh mostly uh minor uh clarification cleanup. So uh now I'll hand it over to Matt. Thank you, Tracy. Uh good morning, committee chair, members of the committee. Uh my name's Matt Vespey, Deputy Director of Financial Management. And as Tracy mentioned this morning, we're here to uh present recommendations for res revisions to two of the policies that are managed by the financial management department. Uh those are the budget policy and the reserve policy. So just uh some introduction background on the two policies. Uh first the budget policy. It's a it was established to set guidelines for budgetary decision making and to set standards for budgetary practices and fiscal performance. Uh this policy covers pretty much all facets of the budget process from uh budget development, budget monitoring, as well as the capital improvements program. Um then in the reserve policy, uh we document the city's approach to establishing and maintaining strong reserves across city operations. That includes uh not only the general fund, um three reserves, the pension reserve, the stability reserve, and the emergency reserve, but also reserves for uh all of our enterprise funds. Um, the policy establishes criteria for the use of reserves and the process for replenishing reserves. So with that, I'll turn it over to Vanessa to talk through uh the proposed uh adjustments to the policies. So this following slide uh highlights the proposed uh recommended changes to the budget policy. Uh the first recommended change is in the financial reporting and monitoring section. And this will this change will allow the mid-year budget monitoring report to use no more than six months of actual results versus the current six months of actual results that is included currently in the in the reserve. Uh this would allow the flexibility to complete the mid-year budget monitoring process earlier in the fiscal year. Um and the staff will be able to conduct more thorough analysis on both revenues and expenditures trends to incorporate adjustments in the upcoming fiscal year's budget process.
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