San Diego Budget & Government Efficiency Committee Meeting Summary - September 16, 2020

The Budget and Government Efficiency Committee of the San Diego City Council met on September 16, 2020, via teleconference due to the COVID-19 pandemic, to discuss fiscal impacts, budget processes, and technology contracts. The committee reviewed an informational update on major general fund revenues, set key dates for the FY2022 budget, and approved four contracts related to parking meters, SAP consulting, SAP licensing, and Microsoft software. All votes on actionable items were unanimous.

Consent Calendar

• Approved the minutes from the July 29, 2020, meeting unanimously (motion by Councilmember Campbell, seconded by Chair Brie).

Public Comments & Testimony

• Non-agenda public comment: Martha Wells expressed concerns about the city's budget management, stating that without proper financial audits, budgeting is not transparent. She called for better financial oversight.
• Item 6 (Revenue Update): Martha Welch testified, claiming that the city is misleading the public about cable franchise fees, stating that Spectrum does not pay fees on cable and that the 5% fee amounts to about $12 million, which she said raises bills unfairly.
• Item 1 (Budget Dates): Joy Sanyata praised the IBA's work and suggested that appropriation dates be included in the key dates calendar, as they are important for public tracking.

Discussion Items

Item 6: Major General Fund Revenue Informational Update

• Matt Vesby (Director of Finance), Adrian Del Rio (Assistant Director), and Nikki Shalfont (Financial Operations Manager) presented an update on the four major revenue sources: property tax, sales tax, transient occupancy tax (TOT), and franchise fees, which together comprise about two-thirds of general fund revenues.
• FY2020 Results: Actuals came in less than 1% above projections made during the height of the pandemic. Sales tax was under budget by $15.6 million, TOT lost over $90 million citywide, and property tax collection rates declined from 99.2% to 98.6%. Franchise fees performed better due to increased refuse tonnage.
• FY2021 Revisions: TOT projections were revised downward by $48.3 million (including $25.3 million to the general fund) due to extended group travel cancellations and lower room rates. Sales tax and franchise fee projections were unchanged. Property tax collection rates are assumed at 97.6% for the first six months.
• The IBA agreed with the assumptions but emphasized independent monitoring. Staff noted a total revenue loss of approximately $300 million compared to pre-COVID projections.
• Vice Chair Kate raised concerns about the convention center's financial viability and the potential need to extend the homeless shelter beyond November. CFO Rolando Sherval noted that CARES Act funding for the shelter is currently projected to last through November, and options for extension are under review.
• No vote was required as this was an informational item.

Item 1: FY2022 Budget Development and FY2021 Budget Monitoring Key Dates

• Angela Colton (IBA) presented proposed key dates for the FY2022 budget process, developed with input from multiple departments. Highlights include:
  • Council CIP priorities due October 16, 2020 (extended from the original date).
  • Five-year financial outlooks and first quarter FY2021 report released November 4, 2020.
  • FY2022 budget released April 15, 2021; council approval scheduled for June 14, 2021.
• Vice Chair Kate noted that the December 15 council meeting will include new members.
• The committee unanimously approved the proposed key dates and forwarded the item to full council.

Item 2: Contract with IPS Group Inc. for Parking Meters

• Deputy Director Didi Alari and Parking Program Manager Jonathan Carey requested approval of a five-year contract with IPS Group for parking meter operations and maintenance, consolidating two existing agreements. The not-to-exceed amount is $12.1 million.
• The city operates about 5,700 metered spaces; parking revenue fell from $11.6 million in FY19 to $8.4 million in FY20 due to suspended enforcement. Enforcement resumes October 1, 2020.
• Councilmember Montgomery Stepp asked about the selection process and the use of vehicle detection sensors; staff explained the sensors provide utilization data for rate setting.
• Councilmember Montgomery Stepp also noted underrepresentation in ELCP categories and asked for follow-up on workforce diversity improvements.
• The contract was approved unanimously.

Item 3: SAP Consulting Services Contract (22 Vendors)

• CIO Jonathan Bankey and Deputy Director Arlo Magpanty presented a five-year contract for as-needed SAP consulting services with a not-to-exceed amount of $23 million (later corrected to $21 million in presentation, but the motion reflected staff recommendation).
• The contract replaces an existing agreement with 14 vendors; no minimum spend is required. Historical average spending was $4.4 million per year.
• Councilmember Montgomery Stepp asked about minimum spending; staff confirmed there is none.
• The contract was approved unanimously.

Item 4: Third Amendment with SAP Public Services (Software Licensing)

• Presented by Jonathan Bankey and Arlo Magpanty. The ordinance authorizes a five-year contract for SAP software licensing, maintenance, and support with a not-to-exceed amount of $30.5 million.
• The presentation noted SAP R3 end-of-life in 2027 and included an 18% contingency for modernization to S4/HANA.
• Councilmember Montgomery Stepp asked whether the system can fully interface with the ELCP software for DBE tracking; staff indicated current capability is limited and promised follow-up.
• The ordinance was approved unanimously.

Item 5: Dell Marketing Microsoft Software Contract

• Presented by CIO Jonathan Bankey and Sean Kilpak. The resolution authorizes a three-year cooperative contract with Dell for Microsoft software subscriptions and services, not to exceed $14.032 million.
• The contract covers 12,000 computers, 800 servers, and 44,000 emails daily. It includes volume pricing and new cybersecurity enhancements.
• Councilmember Campbell asked about support for remote workers; staff noted CARES Act funding will provide teleworking bundles.
• The contract was approved unanimously.

Key Outcomes

• Unanimous approval of the consent calendar.
• Unanimous approval of the FY2022 budget key dates calendar (forwarded to full council).
• Unanimous approval of the IPS Group parking meter contract ($12.1 million over 5 years).
• Unanimous approval of the SAP consulting services contract ($23 million over 5 years).
• Unanimous approval of the SAP licensing amendment ($30.5 million over 5 years).
• Unanimous approval of the Dell/Microsoft contract ($14.032 million over 3 years).
• Staff will provide follow-up on the convention center shelter extension timeline and ELCP/SAP interface capabilities.
• The committee adjourned to its next meeting on October 14, 2020, at 9 a.m.