Budget and Government Efficiency Committee Meeting – October 18, 2023

The Budget and Government Efficiency Committee of the San Diego City Council met on Wednesday, October 18, 2023, to consider several agenda items including a major IT contract amendment, the city treasurer's investment policy, revisions to the transient occupancy tax (TOT) policy to advance arts funding, FY2025 council budget priorities, and a year-end financial report. The committee voted unanimously on all action items.

Consent Calendar

• The committee unanimously approved the committee actions of September 13, 2023. No public comment was received on the past actions.

Public Comments & Testimony

• Non-Agenda Public Comment:
  • Joyce Sanyada (District 3) urged the committee to revisit the structural budget deficit, suggesting replacing the word "deficit" with "implementation" in budget principles.
  • Blair Beekman raised concerns about data sharing and privacy related to the city's smart streetlight and automated license plate reader programs, asking for more transparency and public review.
  • Terri Ann Skelly thanked the committee for internship programs for youth and voiced opposition to marijuana advertising targeting young adults.
  • Dan Schmikowski supported a ban on flavored tobacco, linking it to public health and vaccination issues.
  • The Original (speaker name not given) announced a vaccine injury support group (We Care For You 99) and invited attendees to a November 2 meeting.
  • Judy Strang, a retired social worker, encouraged the city to partner with San Diego Unified School District to provide life skills training to youth to prevent homelessness.
• Item 1 – Zensar Contract Amendment:
  • Kim Miller (Zensar) highlighted the company's equity and community engagement work, including 5,800 recycled computers donated to residents and nonprofits, and partnerships with local small businesses.
  • Dagesh Watakovel (Zensar) noted customer satisfaction over 90%, transformation of the network (10x speed increase), and support for digital equity (SD Access for All).
  • Ed Arguelles (IMG Networks, small SLBE partner) thanked Zensar for subcontracting opportunities that allowed his business to grow.
  • Jay Hariprian (JH Tech Inc.) described growth from a startup to three employees thanks to Zensar's partnership.
  • Blair Beekman (virtual) encouraged consideration of human rights and privacy in AI and IT practices.
  • The Original (virtual) criticized using COVID as an excuse for contract increases while basic services like road repairs are underfunded.
• Item 2 – Investment Policy:
  • The Original (virtual) criticized the city for investing in bonds while neglecting basic needs, alleging waste and fraud.
  • Blair Beekman (virtual) expressed hope that the investment policy would support community development in 2024-2025.
• Item 3 – TOT Policy Revisions:
  • Bob Lehman (San Diego Museum Council, representing 70 museums) supported the Penny for the Arts plan, noting arts as an economic driver.
  • Carlos Cristiani (Fleet Science Center, Arts and Culture San Diego) thanked councilmembers and asked that tangible funding be provided via policy.
  • Fernando Ramirez (Japanese Friendship Garden) stressed that arts funding is as important as other city priorities, citing his military background.
  • Kim Thomas (San Diego Civic Youth Ballet) described serving 1,000 youth and 15,000 patrons, and asked for reliable funding.
  • Peter Kamiski (Balboa Park Cultural Partnership) noted that arts funding in inflation-adjusted terms is at 2016 levels, urging progress.
  • Felicia Shaw (San Diego Regional Arts and Culture Coalition) highlighted that other cities look to San Diego's arts model, and asked for sustained support.
  • Jacole Kitchen (La Jolla Playhouse) emphasized arts as a human right and therapy, and thanked council for support.
  • Valentina Lunati (Moxie Theatre) acknowledged council's work and promised continued advocacy.
  • Michael Angelo Camacho described how arts provided a safe outlet for him growing up in a gang-impacted area, supporting Penny for the Arts.
  • German Rojas (Art of Pride) spoke as a learning-disabled artist who benefitted from arts, asking for funding to provide secure futures.
  • Christy Martinez (Arts and Culture San Diego, via phone) called for sustainable funding so organizations don't have to beg annually.
  • The Original (virtual) criticized the city for prioritizing large arts organizations over independent artists (e.g., buskers) and for requiring permits.
• Item 4 – FY2025 Budget Priorities:
  • Joyce Sanyada thanked the IBA and noted that five council districts did not support a particular (unnamed) homelessness and housing item, urging attention.
  • Barbara Gordon (virtual) urged prioritization of public safety enforcement on flavored tobacco sales and increasing the tobacco retail license fee.
  • The Original (virtual) criticized the city for perpetuating homelessness problems and for climate policies based on what they called lies.
  • Blair Beekman (virtual) urged minimal additional surveillance tech purchases for public safety and a December timeline for reviewing the Ubiquiti contract.
• Item 5 – FY2023 Year-End Report (Information Item):
  • The Original (virtual) alleged that reported savings are actually uncompleted projects, and accused the city of negligence and money laundering.
  • Blair Beekman (virtual) encouraged using general fund dollars differently to advance equity and reimagination.

Discussion Items

• Item 1: First Amendment to Master Service Agreement with Zensar Technologies Inc.
  • Department of IT CIO Jonathan Banke and Deputy Director Maureen Medvedev presented a request to increase the 10-year, 3-month contract not-to-exceed amount by $79.6 million (total $159.2 million) for network and voice services. They detailed how Zensar modernized end-of-life infrastructure pre-pandemic, enabling remote work, shelter-to-home operations, virtual meetings, and vaccine site connectivity. The amendment also covers ongoing cybersecurity, public Wi-Fi expansion (300+ locations, with 200,000 unique users in the first year), and a two-year disentanglement period. Fixed monthly fees remain unchanged. Councilmember Lee noted the contract's criticality and praised the small business enterprise outreach. Councilmember Lacava asked about the RFP timeline; the city will develop the next RFP in the final term year (about 3 years out) and award during the two-year disentanglement. Committee members expressed support for Zensar's equity efforts. The motion to approve passed unanimously.
• Item 2: Annual Presentation of City Treasurer's Investment Policy and Delegation of Authority
  • City Treasurer Liz Correa and Chief Investment Officer Manny Labrinos presented the 2024 investment policy. As of September 30, the investment pool had a market value of $2.34 billion with an annualized yield of 1.8%, generating $41.1 million in income in FY23. The policy's primary objectives are safety, liquidity, and yield. One minor change improves clarity by correcting a state code reference (from §53646 to §53607) regarding reporting requirements. The Investment Advisory Committee unanimously approved the policy on September 8, 2023. Councilmember Lee moved approval, and Councilmember Lacava seconded, asking about fossil fuel divestment; the city has not invested in fossil fuel companies since 2021. The motion passed unanimously.
• Item 3: Proposed Revisions to Council Policy 100-03 (Transient Occupancy Tax)
  • Vice Chair Moreno introduced the item, noting that the council's discretionary 1% of TOT (from Municipal Code §35.0128B) has no clear mechanism to communicate council's preferred use. Kevin Smith (Chief of Policy for Councilmember Moreno) presented the proposal, which would: (a) state council support for the Penny for the Arts goal (9.52% of TOT); (b) require annual council recommendation to the mayor on use of the 1%; (c) request additional reporting during budget hearings; (d) require policy amendment if TOT rate changes. The Penny for the Arts goal has never been achieved since its 2012 adoption; FY24 funding is 4.67% of TOT vs. the 9.52% goal. The arts sector generates $1.1 billion in economic activity annually. IBA Charles Monica noted the proposal could pressure general fund flexibility and that the final budget modification may require trade-offs. Councilmember Moreno stressed that the recommendation is not binding and could be for any purpose. Councilmember Lacava expressed support while acknowledging difficult budget trade-offs (e.g., streets, libraries). Councilmember Lee asked about ensuring equity in arts distribution and the need for additional revenue. The committee voted unanimously to forward the proposed revisions to the full city council, with the expectation that council districts 7 and 8 work with the city attorney on final revisions.
• Item 4: FY2025 City Council Budget Priorities
  • IBA Charles Monica, Amy Lee, Erin Noel, and Sergio Alcalde presented the consolidated list of priorities from all nine councilmember memos (over 160 pages). Majority-supported (5+ members) operating priorities include: homelessness/housing (e.g., $7.5M for housing instability prevention, $2M for LGBTQ+ youth shelter, $4.5M for eviction prevention, $5M for old central library redevelopment, $3.3M for affordable housing preservation); environment (urban forestry, CAP implementation); public safety (lifeguard vessel fund, police recruitment); libraries (unanimous support for materials and youth librarians); arts (Penny for the Arts, with 6 members supporting at least 6.5% of TOT). Infrastructure priorities: pedestrian/bicycle safety, streetlights, street repaving, sidewalks, stormwater, ADA compliance, and facilities improvements (parks, police, fire, libraries). Resources: no majority for specific mitigation measures; $56.7M in excess equity from FY23 may be available. Councilmember Moreno highlighted parks equity, middle-income homebuyer assistance, unimproved streets, and a new park in Otay Mesa. The committee unanimously approved transmitting the priorities (as amended by inclusion of items supported by 4 members) to the mayor for consideration.
• Item 5: FY2023 Year-End Financial Performance Report (Information Item)
  • Director of Finance Ben Bitalia and Financial Operations Manager Chris Purcell presented unaudited results. General fund revenues were $4.3M below third-quarter projections, largely due to lower sales tax ($11M) and TOT ($1.8M), partially offset by higher property tax ($6M). Expenditures were $10.2M below projections, primarily from non-personnel savings (contracts, capital, transfers). Net projected activity increased from $46.1M to $52.0M, resulting in $128.9M excess equity; $72.2M of that was already programmed for FY24, leaving $56.7M available for FY25. Personnel costs slightly exceeded projections due to overtime in police and fire. IBA Charles Monica noted that trends were anticipated and that his office will release a full analysis on October 24. No committee action was taken as this was an information item.

Key Outcomes

• Item 1 (Zensar amendment): Approved unanimously. The contract not-to-exceed amount is increased to $159.2 million.
• Item 2 (Investment policy): Approved unanimously, with delegation to the city treasurer for one year effective January 1, 2024.
• Item 3 (TOT policy revisions): Approved unanimously to forward to full city council for consideration, with staff to finalize language with the city attorney.
• Item 4 (FY2025 budget priorities): Approved unanimously to transmit the priority list to the mayor, including both majority-supported items and those supported by four councilmembers.
• Item 5 (FY2023 year-end report): Received as information; no vote taken.
• The next regular meeting of the committee is scheduled for Wednesday, November 8, 2023, at 9:00 a.m.