San Diego Budget and Government Efficiency Committee Meeting - November 13, 2019

The Budget and Government Efficiency Committee met on November 13, 2019, to review the FY 2020 first quarter budget monitoring report, the five-year financial outlook, and several contract and policy items. The committee approved all action items unanimously. The meeting was chaired by Councilmember Bree, with Vice Chair Kate, Councilmembers Montgomery and Moreno present. Councilmember Montgomery arrived after the meeting began. The committee approved the October 16, 2019 committee record unanimously.

Consent Calendar

• No consent calendar items were on the agenda.

Public Comments & Testimony

• Rich Ryle, a public speaker in opposition to the budget monitoring report, argued that the city must address pension liabilities for employees hired since 2012. He proposed a 10% salary cut for city hall officials, a 100% salary increase for the mayor and city council next year (as a historical reference), and selling city-owned land or negotiating the stadium sale to pay the pension fund.
• Beth Cransberger spoke in support of the disparity study, noting the last one was in 1993 and that the study is critical for assessing meaningful access to city contracting for all San Diegans. She thanked staff and the CEOC for their work.
• Dr. Whitesman of the San Diego Humane Society spoke in support of the animal services contract amendment, praising the partnership, the reinstitution of the spay/neuter voucher program, and continued options for a South Bay shelter facility.
• Durrell Sackett of the Spay Neuter Action Project (SNAP) expressed support for the spay/neuter voucher program, noting its past success and financial importance for low-cost surgeries.
• Masada Dizenhouse of San Diego 350 spoke in favor of changing the city's investment policy to divest from fossil fuels, firearms illegal in California, private prisons, and immigration detention centers, citing climate risks and precedent of other cities.
• Laura Walsh of the Surfrider Foundation also spoke in favor of divestment, stating that a draft divestment strategy affecting about $30 million in city bonds had been developed with Councilmember Ward's office and that divestment can be financially sound.
• Shauna Patton of CGI spoke in support of the CGI contract amendment, highlighting savings of almost $9 million, local employment, volunteer contributions, and small business partnerships.

Discussion Items

• FY 2020 First Quarter Budget Monitoring Report: Presented by Sarah Mann (Assistant Director, Department of Finance), Adam Jones, and Jose Mendoza. Major general fund revenues are projected to exceed budget by $5 million, driven by property tax and sales tax each coming in $2.8 million over budget. Fire rescue is projected to exceed overtime budget by $4.9 million, and police by $1.5 million. The report included a requested appropriation increase for the seized asset fund for police vehicles. The IBA did not plan a separate report but would incorporate revenue issues into its five-year outlook. Councilmember Montgomery asked about the joint violence reduction plan; Chief Neslite stated it was confidential but could be discussed privately, and noted violent crime increased citywide. Montgomery also asked about the navigation center; Keely Halsey said tenant improvements are scheduled to be done before Thanksgiving, with staff possibly starting the week before Thanksgiving or December 3. Councilmember Moreno noted the fund balance is projected to be $22.1 million in the black and reserves at 16.5%. Vice Chair Kate clarified a change in the access equity piece. The committee passed the recommended action unanimously.
• FY 2021-2025 Five-Year Financial Outlook: Presented by Tracy McCraner (Finance Director/Comptroller), Adrian Delreal, and Nicole Chalfont. The outlook projects a $21.15 million shortfall in FY 2021, growing to $84 million after critical strategic expenditures. It includes $62 million and 161 FTEs for critical strategic expenditures, with the largest being $18.8 million for homeless services. Potential mitigation actions include use of homeless housing assistance funds (~$20 million), excess equity (~$22 million), and departmental budget reductions. The outlook assumes no MOU amendments, no changes to ADC, no sale of stadium site, and no recession. A 1% salary increase equals approximately $6 million. The IBA is reviewing the report and will issue its report the week of December 2. Councilmember Moreno asked the IBA to include a recession analysis. Vice Chair Kate asked about a 1% across-the-board cut (~$15 million) and cumulative cuts from prior years (~$45 million). Total departmental requests were $105 million, with $62 million included. Kate asked about fire staffing, police overtime for clean SD and neighborhood policing, and parks facility costs. Chair Bree gave a statement criticizing the mayor's fiscal leadership, citing the Ash Street asbestos issue, a no-bid contract, rape kit testing, trash subsidies, and called for transparency and tough decisions. This item was information only; no vote.
• Disparity Study Contract with BBC Research and Consulting: Presented by Christina Pratt (Purchasing & Contracting Director) and Christian Silver. BBC scored highest of three proposals; contract amount not to exceed $477,000 for a five-year term. The study will be legally defensible per Prop 209 and includes participation of three MWBE subcontractors. IBA noted ongoing costs if the study leads to program changes. Councilmember Montgomery moved the item, noting historical participation of minority/women-owned firms below 1%. Councilmember Moreno seconded and expressed support. The motion passed unanimously.
• Second Amendment to Animal Services Agreement with San Diego Humane Society: Presented by Christiana Gauger with Christina Peralta and Angela Rico. The amendment funds the remaining 3.5 years of the contract, includes a spay/neuter voucher program, and continues review of a South Bay shelter facility. The fee schedule adjustment brings fees in line with other jurisdictions; the Humane Society can waive fees for adoptions. Over 10,000 animals were adopted, 18,447 sheltered, and 14,893 calls for service (with corrections). Live release rate was 91% against an 85% target. Public speakers supported. Councilmember Moreno asked about South Bay shelter review and spay/neuter voucher details. She moved the item, seconded by Vice Chair Kate; passed unanimously.
• San Diego Junior Lifeguard Program Fee Increase: Presented by Assistant Chief Chris Weber, Lifeguard Chief James Gartland, and Program Coordinator James Murphy. Proposed tuition increase from $525 to $573 effective July 1, 2019, and revised refund policy to prevent empty seats. The program offers 60 scholarships, and the Bridges to the Beach outreach brings about 1,500 kids to the beach. Councilmember Moreno asked about demographic breakdown; staff said they don't currently track but focus on diversity through scholarships and outreach. Councilmember Montgomery asked about scholarship awarding processes. Vice Chair Kate asked about IT capacity for registration; staff acknowledged past portal crashes and work with Active. The program is projected to become 100% cost recoverable with the increase. Motion by Councilmember Moreno, second by Montgomery; passed unanimously.
• City Treasurer's Investment Policy and Delegation of Authority: Presented by Liz Cray (City Treasurer), Manny Labrinos, and Kent Morris. The pool had a market value of $2.15 billion and an annualized yield of 2.43% as of September 30, 2019. Proposed minor policy changes include removing the broker receipt form and the requirement for a single-A credit rating for broker-dealers, while maintaining the $100 million capital requirement. The Investment Advisory Committee unanimously approved the changes. Public speakers requested divestment from fossil fuels and other industries. Councilmember Montgomery asked about the broker-dealer change; staff explained DVP settlement mitigates risk. Motion by Montgomery, second by Moreno; passed unanimously.
• Second Amendment to Benefits Consulting Contract with Buck Global LLC: Presented by Julio Canisal (Risk Management Director) and Gwanel Allen. The amendment provides additional funding of $150,000 for actuarial consulting services to evaluate pension impacts during labor negotiations, bringing the total not to exceed to approximately $1.8 million. IBA supported. Motion by Moreno, second by Vice Chair Kate; passed unanimously.
• Second Amendment to Master Services Agreement with CGI Technologies: Presented by Jonathan Banke (CIO) and Sean Kilpak. The amendment increases the not-to-exceed by $9.2 million to $153.4 million to cover the 12-month disentanglement period while the city completes an RFP for IT services. CGI employs 54 local staff and provides application development for over 300 applications. IBA noted the hourly rate of $64 is below market but future contracts may cost more. Public speaker Shauna Patton supported. Councilmember Montgomery moved the item after noting underrepresentations in Latino and female categories but that EOC reported improvements. Motion seconded by Vice Chair Kate; passed unanimously.
• Third Amendment to NASPO Value Point Agreement with Verizon Wireless: Presented by Jonathan Banke and Denise Meckinally. The extension is needed because Verizon was not operationally ready to migrate to a new NASPO contract; the state of Nevada extended the existing contract. The city requests $11.65 million through December 2020 for cellular services. The city has nearly 6,000 lines with Verizon, which accounts for 72% of all cellular spend. IBA noted the city will reevaluate options next time. No public speakers. Motion by Chair Bree, second by Vice Chair Kate; passed unanimously.

Key Outcomes

• All action items were approved unanimously by the committee.
• The FY 2020 first quarter budget monitoring report was accepted with the recommended action.
• The five-year financial outlook was received as information; IBA will issue a detailed report by the week of December 2, 2019.
• The committee approved the disparity study contract with BBC for $477,000.
• Approved the animal services contract amendment and fee schedule.
• Approved the junior lifeguard fee increase and refund policy change.
• Approved the investment policy with changes and delegated authority to the City Treasurer for one year.
• Approved the Buck Global contract amendment for $150,000.
• Approved the CGI contract amendment for $9.2 million.
• Approved the Verizon NASPO contract amendment for $11.65 million.
• The committee will reconvene for a special meeting on December 12, 2019 at 1 p.m.