San Diego Budget and Government Efficiency Committee Meeting – November 18, 2022
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San Diego Budget and Government Efficiency Committee Meeting – November 18, 2022
The Budget and Government Efficiency Committee of the San Diego City Council met on November 18, 2022, from approximately 9:00 AM to discuss several key financial items. The meeting included a first-quarter budget monitoring report, two five-year financial outlooks (general fund and public utilities), revisions to the city's reserve policy, and an update to the user fee policy. The committee approved the reserve policy revisions and the user fee policy update unanimously, while the budget reports and outlooks were informational items.
Consent Calendar
- The committee unanimously approved the minutes from the November 3, 2022 meeting (Council President Ila Rivera absent).
Public Comments & Testimony
- Non‑Agenda Public Comment:
- Kathleen Lippitt expressed concern about the city attorney’s memo on redistricting and cannabis, arguing that the city attorney’s office should not suggest ways to increase cannabis outlet caps. She also criticized the marijuana industry’s influence on city decisions.
- Lori Seldanium congratulated committee members on their re‑election, urged funding for oversight staff to ensure compliance with lobbying rules, and cited the Midway Rising project as an example where lobbying reports were filed late, affecting council decisions.
- On Item 3 (Budget Monitoring Report):
- Joyce Sanyata thanked the finance team, stressed the importance of trust and transparency, and asked about the quality of service levels given vacancies.
- Lori Seldanium linked public safety overtime costs to responses to homelessness and argued that criminalizing homelessness is inefficient, urging investment in housing and social services.
- Kathleen Lippitt criticized the city’s reliance on cannabis revenue, stating that it comes with significant costs to public safety and staff resources, and cited the Rancho Bernardo example of a project ignoring buffer ordinances.
- On Item 4 (Five‑Year General Fund Outlook):
- Joyce Sanyata appreciated the outlook’s explanation of factors shaping the budget, but questioned how to balance a structural deficit.
- Lori Seldanium emphasized the need to address homelessness disparities and the high cost of SDG&E’s franchise, called for diversifying revenue sources beyond tourism, and advocated for local public power.
- On Item 2 (Reserve Policy Revisions):
- Joyce Sanyata praised the adjustments as positive and understandable.
- Lori Seldanium warned against repeating past mistakes of cutting social services during recessions, noting that the city’s homelessness crisis is a major drain on the budget.
- On Item 1 (User Fee Policy Update):
- Lori Seldanium criticized the antiquated process for challenging fee increases, which requires in‑person attendance or paper submissions, and requested an electronic option to improve accessibility.
- On Item 5 (Public Utilities Five‑Year Outlook):
- Lori Seldanium highlighted the high cost of water and power for low‑income residents, called for on‑site solar generation at pump stations, and questioned the cost of tourism on water and power.
- Michael Dwyer noted that the proposed water pass‑through rate had been reduced from 3% to 2.5%, and asked the committee to confirm this reduction.
Discussion Items
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Item 3: Fiscal Year 2023 First Quarter Budget Monitoring Report
- Presentation by Department of Finance: Major general fund revenues are projected to exceed the budget by $35.4 million, driven by higher property tax (+$14.2M), TOT (+$14.7M), and sales tax (+$5.7M). Cannabis business tax is projected to fall short by $4.1 million. Public safety overtime is projected to have a net impact of $19.2 million (fire rescue $9.3M net, police $9.9M net). The report noted risks from inflation, recession, and the ongoing SDSERS decision on Prop B.
- IBA Comments: The IBA highlighted the need to better anticipate public safety overtime and noted a $5 million underfunding in the public liability reserve.
- Committee Discussion: Councilmember Moreno expressed concern about police vacancies (213 officer vacancies) and attrition outpacing hiring. Chief Neslage confirmed that the department is not keeping pace, with 197 officers short of budgeted strength and 116 civilian vacancies. Council President Pro Tem Montgomery Steppe called for alternative response methods to reduce officer burden. Chair Kate asked about confidence in revenue projections: staff expressed confidence in property tax, but cautiously optimistic about sales tax and TOT due to potential recession.
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Item 4: Fiscal Year 2024–2028 Five‑Year Financial Outlook (General Fund)
- Presentation by Department of Finance: The baseline forecast shows a $50.5 million deficit in FY24, with deficits continuing through FY26. The outlook includes $52.1 million in remaining ARPA funds and $72.1 million in excess equity to help cover early deficits. Above‑baseline needs (new facilities, homelessness programs, stormwater debt) increase the FY24 deficit to $75.9 million. The report assumes 3.05% salary increases for pending MOUs and notes the need for ongoing revenue sources to address structural deficits.
- IBA Comments: The IBA considered the revenue growth assumptions reasonable for the medium term, but stressed that to expand services, new revenue sources are critical. Measure B (if certified) could free up general fund dollars from residential trash pickup.
- Committee Discussion: Council President Ila Rivera emphasized investing now to reduce future costs (e.g., housing to reduce shelter costs) and diversifying revenue. Councilmember Moreno thanked staff and noted the importance of the reserve schedule. Council President Pro Tem Montgomery Steppe appreciated the breakdown of plan commitments and new facility costs. Chair Kate asked about fire rescue staffing and the relief pool; Chief Stole (or Assistant Chief) stated that the department expects to be fully staffed by end of FY23, with a third academy helping to build a relief pool. The committee also discussed the SDSERS board’s positive move toward a 20‑year amortization of Prop B transition costs.
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Item 2: Revisions to the City’s Reserve Policy (Council Policy 100‑20)
- Presentation by Department of Finance: The proposed revisions extend the timeline to reach the 16.7% general fund reserve target from FY25 to FY2030, acknowledging the impact of the pandemic. The FY23 budget includes a $1.5 million reserve contribution, with contributions increasing to $5 million in FY24. The pension payment stabilization reserve would be funded after the general fund reserve is fully funded. The emergency reserve component would be phased in at lower percentages initially.
- IBA Comments: The IBA supported the approach but noted the committee may wish to ask about the reduction in emergency reserve percentage in early years. The IBA also noted that the proposed policy balances the speed of reaching the target with maintaining service levels.
- Committee Action: Motion by Council President Ila Rivera, seconded by Councilmember Moreno, to approve the resolution. Passed unanimously.
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Item 1: Council Policy 100‑05 User Fee Policy Update
- Presentation by Department of Finance: The update memorializes process improvements and incorporates recommendations from the city auditor’s performance audit. Key changes: comprehensive user fee study frequency changed from every 2‑5 years to every 3‑5 years; special revenue funds included; benchmarking with other jurisdictions; identification of fees not updated in five years; and a single consolidated report for city council.
- IBA Comments: The IBA thanked DOF for collaboration and supports the item.
- Committee Action: Motion by Councilmember Moreno, seconded by Chair Kate, to adopt the resolution. Passed unanimously.
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Item 5: Public Utilities Fiscal Year 2024–2028 Five‑Year Financial Outlook
- Presentation by Public Utilities Department: The outlook covers water and wastewater funds. Key drivers: Pure Water Program, dam repairs, regulatory compliance, and purchased water costs from the San Diego County Water Authority (projected to increase from ~$1,900 to over $2,000 per acre foot). Water sales volumes are projected to decline due to drought and conservation (7% reduction from FY21 levels). The outlook assumes cumulative water rate increases of up to 17.6% over FY24‑25, with a cost of service study coming before the committee. Wastewater rates are assumed to increase 5% in January 2023, with additional increases through FY28. The utility plans to use rate stabilization reserves to smooth rate increases.
- IBA Comments: The IBA noted that a more detailed review will be conducted with consultant Stantec, and that the cost of service study will be presented to the full council.
- Committee Discussion: Chair Kate confirmed that the water pass‑through rate increase scheduled for January 2023 has been reduced from 3% to 2.5%, as noted by a public commenter. The committee deferred detailed questions to the next month’s cost of service study presentation.
Key Outcomes
- Approved: Revisions to the Reserve Policy (Council Policy 100‑20) – unanimous vote.
- Approved: Update to the User Fee Policy (Council Policy 100‑05) – unanimous vote.
- Informational: The Fiscal Year 2023 First Quarter Budget Monitoring Report, the General Fund Five‑Year Outlook, and the Public Utilities Five‑Year Outlook were received and filed; no votes required.
- Next Steps: The committee will meet next on December 7, 2022, at 9:00 AM. The Public Utilities Department will present the water cost of service study at a future meeting. The IBA will release detailed reviews of the general fund and public utilities outlooks before they go to the full council.
Meeting Transcript
Good morning. Until further notice, the budget and government efficiency committee committee meetings will be conducted pursuant to the provisions of California Government Code Section 54953E, added by Assembly Bill 361, which allows the city to use teleconferencing and to provide the public an opportunity to address the city council committee via a call-in option or an internet internet-based service option during a proclaimed state of emergency. While the public is allowed to attend the meetings in person, we encourage you to maintain six feet of social distance as well as California mask guidelines where masks are strongly recommended. In addition to being able to attend in person, this meeting is being televised and live streamed on the city's website, and the clerk and council committee liaison will continue to make arrangements for the public to comment using the Zoom webinar platform. Additionally, members of the public who wish to provide virtual testimony must enter the virtual queue by raising their hand before the queue closes. The queue will close when the last virtual speaker finishes speaking or five minutes after in-person testimony ends, whichever happens first. This will allow for better meeting management between the two platforms and ensure this the council is able to manage and conduct city business. We appreciate the public's cooperation. Councilmember Montgomery Step. Here. Councilmember Moreno. Present. Also in the meeting is Charles Monica, our independent budget analyst, Matthew Vespie, our Chief Financial Officer, Matt Yayagan from the Mayor's Office, and Brett Barrelata from the City Attorney's Office. Tyler, please proceed. Thank you, Chair. If you are in person, please complete a speaker slip located at the entrance of chambers and place it on top of the box indicated. If you need to participate by telephone, you may dial 1669-254-5252 and input webinar ID 161-771-9874-pound. This information is also available on the agenda and will appear on the screen during the public comment period for each agenda item. As noted by the chair, members of the public who wish to provide virtual testimony must enter the virtual queue by raising their hand before the queue closes. The queue will close when the last virtual speaker finishes speaking, or five minutes after in-person testimony ends, whichever occurs first. Please note that if you are watching via C TV 24 or online, there may be a delay, so please participate via the audio on your phone and mute your TV or computer when it is your turn to speak. If you wish to speak on a particular item, wait for that item to be called and then raise your hand to speak by tapping the raise your hand icon, or if you're a call on participant, star nine on your phone. If you raise your hand during a non-comment period, your hand will be lowered. Chair. Thank you very much for reviewing those instructions. A quorum is now present. We will now dispense with the approval of the committee actions of November 3rd, 2022. Mr. Birch, please proceed. Thank you, Chair. The public comment period for the committee actions is now open if you've already joined the Zoom webinar online or by phone. Please raise your hand if you wish to speak on the committee actions of November 3rd, 2022. Uh Chair, we do not have anyone in chambers that submitted a speaker slip for the committee actions, and we have no one in the virtual queue indicating they wish to speak. So that'll conclude public testimony. Now I retain a motion on the minutes moved by Council President Pro Tem Montgomery Step. Happy to second. Second by Councilmember Moreno, and we'll go by voice vote, starting with Councilmember Moreno. Moreno, yes. Council President Pro Tem. Yes. And I am also yes. And that motion passes with Council President Yorivera absence. We'll now proceed with non-agenda public comment. Thank you, Chair. Per rule 2.6, non-agenda public comment is an opportunity for members of the public to come on items that are not on the agenda but within the subject matter jurisdiction of the committee. Each speaker will have two minutes. The public comment period for non-agenda public comment is open. If you've already joined the Zoom webinar online or by phone, please raise your hand if you wish to speak. If you're in person, please come up to the reserve seats at the front of the room when your name is called and be prepared to come up to the lectern in the order called. Members of the public who wish to provide virtual testimony must enter the virtual queue by raising their hand before the queue closes.
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