Budget and Government Efficiency Committee Meeting - March 5, 2025

The Budget and Government Efficiency Committee met on March 5, 2025, to consider a consent agenda, a discussion item on a contract amendment for equipment rental, and an informational item on the fiscal year 2024 business diversity annual report. The committee also heard non-agenda public comment on topics including cannabis tax collection, water rates, and the structural budget deficit. All votes were unanimous.

Consent Calendar

• Approved the committee minutes from February 5, 2025.
• Approved an ordinance approving a six-month extension to an agreement with NeoGov for recruitment and applicant tracking software.
• Approved an ordinance authorizing an extension of the end-of-life computer hardware donation program with the San Diego Futures Foundation and authorizing execution of the First Amendment to the contract.
• Motion passed 4-0.

Public Comments & Testimony

Non-Agenda Public Comment:

• A speaker (name not provided) urged the committee to recognize the financial impact of the illegal cannabis market, support local law enforcement efforts, and consider health risks to citizens.
• Becky Rapp encouraged the city to request a full and transparent audit of the marijuana industry, citing challenges in tax collection and underreporting.
• Blair Beekman expressed hope for good policy practices and discussed the need to address "ghostwater" issues and subsidy planning with the water department.
• A speaker (phone number ending in 870) discussed the structural budget deficit from an algorithm perspective, linking sales tax decreases to algorithmic entrenchment.
• A speaker (the original) criticized the water rate increase, arguing that large entities skip paying water bills while small families face shutoffs, and called for more council members to stand up for constituents.
• Judy Strang expressed concern about employment opportunities for young adults (ages 18-25), noting they have not returned to full employment post-COVID, citing mental health issues and substance use (particularly marijuana).

Consent Agenda Public Comment:

• Phone number ending in 870 spoke in favor of all three consent items, praising the handling of minutes, the NeoGov extension, and the computer donation program.
• The original speaker commented on all three items: requested more descriptive minutes reflecting speakers' feelings, raised concerns about overlapping contracts for NeoGov, and questioned the transparency of San Diego Futures Foundation, asking for more information on their finances and equipment distribution process.

Discussion Item 5 (HERC Rentals):

• Cesar Javier (in-person) commented that rentals are used to save time and resources, and asked for the balance sheet.
• Phone number ending in 870 expressed disappointment that item 4 was pulled, and urged attention to essential needs and budget appropriations.
• The original speaker expressed concern about fraud, waste, and abuse, questioning the repeated contract extensions and the high spending increases, suggesting the city could have purchased vehicles instead.

Discussion Item 6 (Business Diversity Report):

• Phone number ending in 870 asked about policies on race and equity regarding contracting, and called for an expert to advance equity work.
• The original speaker criticized DEI efforts, claiming they promote racism, and asked for a race and gender neutral tool, asserting that hiring should be based on merit.

Discussion Items

Item 5: Seventh Amendment to Cooperative Agreement with HERC Rentals Inc.

• Staff presented a request to increase expenditure authority by $9 million (total $41.3 million) for equipment rental and related services, highlighting that the contract is used citywide, primarily by Environmental Services, Parks and Recreation, Public Utilities, Transportation, and Stormwater departments. Reasons for rentals include new staff without vehicles, delayed vehicle orders, emergency needs, and temporary projects.
• The Independent Budget Analyst (IBA) noted that without the increase, only about $850,000 would remain, and recommended evaluating vehicle procurement practices to reduce reliance on leases. The IBA also suggested comparing terms with an alternative cooperative contract (Sourcewell).
• Councilmember Ilo Rivera made a motion to approve staff's recommendation with an amendment requesting staff work with the IBA and impacted unions to develop a financial and operational cost-benefit analysis comparing leasing versus purchasing light to heavy duty vehicles and equipment, with a presentation to the committee by the end of the year.
• Councilmember Lee seconded the motion, noting the need to understand the strategy for in-house maintenance and fleet management.
• Councilmember Moreno discussed the city's fleet maintenance audit, noting only 20% of preventive maintenance was on time, and asked for data on the cost and duration of rentals related to repair delays. She supported the motion and requested the analysis be incorporated.
• Councilmember Foster noted that the carve-out provision for local vehicle purchases may be brought to committee later.
• The motion passed 4-0.

Item 6: Fiscal Year 2024 Business Diversity Annual Report (Informational)

• Staff presented the annual report, showing that in FY24, the city awarded $116.9 million to SLBE/ELBE firms out of $704.1 million in city-funded contracts. The city's aspirational goal for SLBE participation was 20% and was met. However, minority and women-owned businesses accounted for 11% ($109.1 million) of all city contracts ($949.8 million), compared to a 31% aspirational goal. Staff noted a discrepancy in the report: the value for SLBE awards should be $116.9 million, not $113.2 million.
• Staff highlighted enhancements: creation of a citywide aspirational goal (15% for FY25), revision of income caps, and ongoing collaboration with the Department of Race and Equity for oversight.
• Councilmember Foster expressed concern about the decline in certified firms (from 600 to 400), the lack of action attached to the report, and the need for accountability at the department head level. He noted that small business participation is crucial for competition and sustainability of the capital improvement program.
• Councilmember Ilo Rivera asked about accountability for meeting goals and the intersection with the Department of Race and Equity. Staff responded that they are partnering with Race and Equity for oversight, but the work is still developing. Councilmember Ilo Rivera also expressed frustration with contractor performance, specifically a project in City Heights, and noted that lack of accountability blocks opportunities for diverse businesses.
• Councilmember Foster asked if department heads have performance evaluations tied to small business contracting goals; staff indicated they do not, which he noted as a potential issue.
• No action was taken on the informational item.

Key Outcomes

• Approved consent agenda (items 1-3) unanimously (4-0).
• Approved item 5 (HERC Rentals contract amendment) with an amendment to develop a cost-benefit analysis of leasing vs. purchasing vehicles and equipment, with a presentation to the committee by end of 2025. Vote: 4-0.
• Item 6 was received as information; no vote taken.
• Item 4 on the discussion agenda was returned to staff.
• The next regularly scheduled meeting is April 16, 2025, at 9 a.m.