2019-01-31 Budget and Government Efficiency Committee Meeting

Budget and Government Efficiency Committee Meeting - January 31, 2019

The Budget and Government Efficiency Committee met on January 31, 2019, to review the fiscal year 2019 mid-year budget monitoring report, the Public Utilities Department's five-year financial outlook, a contract for IT consulting services, a master lease agreement for vehicle and equipment financing, city council budget priorities, the purchasing and contracting procurement plan, an update on animal services, and the committee's own priorities for 2019. The committee took several votes and heard public testimony on a range of issues.

Consent Calendar

• The committee approved the committee record of actions from the November 14, 2018 meeting by a vote of 3-0 (Councilmember Kate absent).

Public Comments & Testimony

• Martha Wells (non-agenda public comment) criticized the city's use of performance budgets instead of detailed line-item budgets, questioned the legitimacy of various fees (e.g., cable franchise fees, sales tax rates), and alleged that water bills are based on inaccurate readings.
• Mike Zucat (General Manager, San Diego Municipal Employees Association) expressed strong concern about the city's high vacancy rate (2,300 vacant positions, nearly 20% of budgeted positions) and argued that the city's non-competitive compensation is the root cause. He urged the committee to adopt a long-term policy on compensation competitiveness and to act immediately on special salary adjustments.
• Martha Wells (again, on item 1) argued that sales tax increases require a public vote, that franchise fees (e.g., San Diego Gas & Electric, cable) are passed to consumers without a vote, and that the city's fees are illegitimate.
• Tiffany Mittel (Chair of IROC) praised the Public Utilities Department's first five-year financial outlook, stating it provides early input opportunities for ratepayer representatives, and offered to serve as a resource.
• Sophie Wolfram (Climate Action Campaign) spoke in support of council budget priorities for CAP strategies 3 and 5 (biking, walking, transit, urban forestry) and urged adding staff capacity for equity in the Sustainability Department and using the forthcoming five-year CAP outlook to guide budget development.
• Dr. Whitesman (San Diego Humane Society) thanked the committee for the animal services contract, highlighted collaborative working relationships, and reported that the Humane Society has handled nearly 11,000 animals for the city, has 51 officers on patrol, and opened a new Center for Shelter Medicine.

Discussion Items

1. Fiscal Year 2019 Mid-Year Budget Monitoring Report

• Presentation (Sarah Mann, Jeff Peel, Jose Mendoza, Dept. of Finance): General fund revenues projected $41.2M over budget (led by sales tax and departmental revenue); expenditures projected $23.1M over budget (led by public safety overtime and contract costs). Projected excess equity of $30.7M, which the mayor recommends using for one-time FY20 expenditures. The report also detailed homeless service expenditures ($460K bridge shelter, $620K outreach team) and Clean San Diego costs. The mayor requested $11.9M in appropriation adjustments (e.g., disparity study, fire academy, immigrant affairs manager, police lateral incentives).
• IBA Comments (Chris Olsen): Noted that the mid-year ordinance allows council to approve or modify up to the $11.9M recommended by the mayor; cautioned that excess equity ($30.7M) must be used for one-time costs to avoid structural imbalance.
• Public Testimony: Mike Zucat and Martha Wells spoke (see above).
• Committee Discussion: Councilmember Moreno questioned the relationship between vacancy savings and overtime, requesting a closer financial trade-off analysis. Chair Breed responded that the administration prefers full staffing and noted efforts to fill vacancies (e.g., police recruitment package, fire engineer certification pay). Councilmember Montgomery asked about homelessness data system costs and park maintenance funding. The committee agreed to docket a discussion on the vacancy issue for the next meeting.
• Vote: The committee approved the report and appropriation recommendations unanimously (3-0).

2. Public Utilities Department FY20-FY24 Five-Year Financial Outlook (Information Item)

• Presentation (Matt Vespi, Charles Modica, Leanne Santos): First-ever five-year outlook for water and wastewater funds, highlighting the Pure Water program as a major cost driver ($1.4B of $3B capital program over five years, 70% of new operating expenditures). Water revenue projected to grow from $636M (FY20) to $813M (FY24); wastewater rates remain unchanged since 2010. Planned use of reserves for wastewater rate stabilization ($5M in FY20-21, $15M in FY22-23). Rate increases are preliminary; a full cost-of-service study will be brought to council in spring 2020.
• IBA Comments (Angela Colton): Commended the department for the outlook; noted that rates are preliminary and will be refined through the cost-of-service study; highlighted that Pure Water is the main driver of cost growth.
• Committee Discussion: Councilmember Montgomery asked about withdrawals from the wastewater rate stabilization fund (to meet financial targets). Chair Breed thanked staff and noted that Vice Chair Kate had requested the report. No vote required (information item).

3. Agreement with AvaCent LLC for IT Consulting Services

• Presentation (Jonathan Banke, Sean Kilpak): Request to approve a five-year, $650K not-to-exceed contract with AvaCent for consulting services to develop RFPs for upcoming IT service contracts (data center, application support, help desk, desktop support). The contract was competitively bid; no minimum spend commitment.
• IBA Comments: None.
• Public Testimony: None.
• Committee Discussion: Councilmember Montgomery asked if AvaCent's expertise covers the city's 380 custom applications (yes) and how the contract will help address recent IT audit findings (expected cost savings, similar to prior contracts). Chair Breed noted the contract encourages small and local business participation.
• Vote: Motion to approve (Councilmember Montgomery), seconded by Councilmember Moreno. Approved 3-0.

4. Master Lease Agreement with JP Morgan Chase for Vehicles and Equipment

• Presentation (Jyoti Pantlu, Alia Corey): Request to approve a master lease agreement up to $34.4M to finance fleet replacement (including police cars, fire trucks, garbage trucks, etc.) and fire breathing apparatus compressors. The agreement has a five-, seven-, and ten-year repayment terms, fixed interest rates currently 2.6-2.8%, capped at 6%. The city intends to reimburse itself for expenditures advanced.
• IBA Comments: None.
• Public Testimony: None.
• Committee Discussion: Councilmember Montgomery asked about confidence in the need for $34M in new vehicles (staff expressed high confidence, citing fleet age and audit recommendations) and whether procurement timelines would improve (yes, average decreased from 87 to 54 days). Safety of motorized scooters was briefly mentioned.
• Vote: Motion (Councilmember Moreno), seconded by Councilmember Montgomery. Approved 3-0.

5. Fiscal Year 2020 City Council Budget Priorities

• Presentation (Chris Olsen, IBA): Reviewed the process of compiling council member priorities. Unanimous priorities: homelessness/housing programs, parks and rec infrastructure, and transportation safety (Vision Zero). Majority priorities: arts/culture funding, Clean SD, CAP strategies 3 and 5, filling vacant positions, 311/Get It Done app, library improvements, public safety retention/recruitment, and lifeguard positions.
• Public Testimony: Sophie Wolfram spoke (see above).
• Committee Discussion: Councilmember Montgomery highlighted police reform and accountability. Chair Breed noted significant overlap among all nine council members' priorities.
• Vote: Motion to approve and forward to full council (Councilmember Montgomery), seconded by Councilmember Moreno. Approved 3-0.

6. Fiscal Year 2019 Purchasing and Contracting Procurement Plan (Information Item)

• Presentation (Christina Pralta): Presented the work plan for upcoming contracts over $3M requiring council approval (up to 23 contracts). The plan is updated from prior years and aims to keep council informed.
• Committee Discussion: Councilmember Moreno requested that documents be provided earlier than the day of the meeting to allow review. Chair Breed thanked staff for creating the work plan, noting it helps with advance review.
• No vote (information item).

7. Six-Month Update on Animal Services Contract with San Diego Humane Society (Information Item)

• Presentation (Christiana Gagger): Provided performance data: live release rate for city animals 98.85% (second quarter), 3,600+ calls for service by humane law enforcement officers, improved animal shelter maintenance and customer amenities, and a new Center for Shelter Medicine. A fund for unrecoverable veterinary services was established.
• Public Testimony: Dr. Whitesman (see above).
• Committee Discussion: Councilmember Moreno raised the need for a South Bay presence (drop-off location) since the county's Benita facility is no longer accessible. Staff acknowledged the issue and said it will be part of future discussions when coming to council for additional funding (expected by end of 2019). Councilmember Moreno expressed willingness to engage with the county.
• No vote (information item).

8. 2019 Budget and Government Efficiency Committee Priorities (Information Item)

• Discussion: Chair Breed summarized common priorities: contract scheduling, equal employment opportunity improvements, small business access, vacancy factor management, and operational efficiencies. Councilmember Moreno added his priorities: using redevelopment tax funds for economic development/affordable housing, controlling outside consultant costs, managing vacancies, and exploring cost savings from insourcing (e.g., slurry seal). Councilmember Montgomery highlighted disparity study follow-up and small business assistance programs.
• No vote (information item).

Key Outcomes

• Approved (3-0): Committee record of actions from 11/14/2018.
• Approved (3-0): FY19 mid-year budget monitoring report and appropriation adjustments.
• Approved (3-0): Contract with AvaCent LLC for IT consulting services ($650K, five-year term).
• Approved (3-0): Master lease agreement with JP Morgan Chase (up to $34.4M) for vehicle and equipment financing.
• Approved (3-0): FY20 City Council Budget Priorities resolution to be forwarded to full council.
• Docketed: A discussion on vacancy management and compensation competitiveness will be added to the next budget committee meeting (March 6, 2019).
• Future Reports: Public Utilities Department will bring a full cost-of-service study to council in spring 2020; animal services contract funding and performance review to come before end of 2019 calendar year.

All votes were 3-0 (Councilmember Kate absent for the entire meeting).