All righty.

Good morning, and welcome to the budget and government efficiency committee meeting of February fourth, twenty twenty-six.

Our committee liaison, Natalie Kessler will provide information and instruction for the public to participate in today's meeting.

Thank you, Chair.

Well, members of the public are able to attend the meetings in person.

This meeting is being televised and live streamed on the city's website, and council administration will continue to make arrangements for the public to comment using the Zoom webinar platform.

Members of the public who wish to provide virtual testimony must enter the virtual queue by raising their hand before the virtual queue closes.

The queue will close when the last virtual speaker finishes speaking or five minutes after in-person testimony ends, whichever occurs first.

This will allow for better meeting management between the two platforms and ensure the committee is able to manage and conduct city business.

We appreciate the public's cooperation.

I will now call the meeting of the budget and government efficiency committee meeting of February 4th, 2026 to order.

Natalie, please call the role.

Vice Chair Marino.

Council President Pro Tem Lee.

Councilmember Elo Rivera.

Chair Foster.

Here.

Also attending the meeting today is Charles Modica and Lisa Byrne from the Office of the Independent Budget Analysts.

Deputy Chief City Attorney Brett Bartelata from the City Attorney's Office.

Rolando Charvel, Chief Financial Officer, Matt Yagan, Director of Policy from the Office of Mayor Todd Gloria, and Daniel Horton, Chief of Staff.

If you're in person, please complete a speaker slip located at the entrance of chambers and place it on top of the box indicated at the speaker's lecture and near the public comment microphones.

Please do so in a timely manner to ensure proper meeting management.

In-person testimony will conclude before virtual testimony begins.

Members of the public can join the webinar by computer, tablet, or smartphone by accessing the link listed online in the preamble language of the agenda on the city's webpage.

If you need to participate by phone, please dial 1669-2545252.

The webinar ID is 16040838 pound.

This information is also available on the agenda.

Please note that if you're watching via City TV Channel 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 callant participant, press star nine on your phone.

If you raise your hand during a non-comment period, your hand will be lowered.

Chair.

Thank you for that.

A quorum is now present.

We will now take up non-agenda public comment.

The council members respect and appreciate the public's input and are fully committed to protecting every participant's free speech rights at council and committee meetings.

Natalie, please proceed with not agenda public comments.

Parole 2.7 non-agenda public comment is an opportunity for members of the public to comment on items that are not on the agenda but within the subject matter jurisdiction of the committee.

Each speaker will have two minutes.

And we have not received any speakers' lists from individuals here in chambers.

We'll move to the virtual queue and I've started the five-minute timer.

We have four hands raised in the virtual queue.

Okay, we will move to Francine Maxwell.

Please unmute and begin.

Can you hear me?

Yes.

Thank you so much.

France Maxwell, um, Southeastern resident.

I want to start by thanking the IBA.

Your doors are always open all year, not just during the budget uh season.

I want to specially um give appreciation to the weekends and the evenings that your staff will come out when the community sits and um gathers dates and times and locations to get educated about the budget.

I'm hoping that given our season right now, that the council or the CFO or the mayor's office will host community meetings to teach people about the budget, especially given the deficit, so that they truly understand it is very taxing to pay for parking to come down to the chamber, the people's chamber, and and give one minute to tell you about their budget ideas when you could actually help us and um get locations in every district.

They can combine and pick one location and two districts can go to one location to really speak and talk to the people.

Again, connection, engagement is the only thing that's going to move our city forward as it pertains to any taxes that the diocese plans to introduce.

Again, to build trust, you have to be in the same space and begin to hear something and feel safe to have an uncomfortable conversation.

We trust our CFO.

We trust the IBA.

Let's get in some spaces together and discuss, discuss the real issues here in San Diego and come to a happy medium.

You are the decision makers elected by us.

This is election season for a lot of our seats, and it's time for us to come together as a city and not worry about parties and different things like that.

So again, we get two night meetings where we have to come down, pay for parking, only get one minute.

So again, we get two night meetings where we have to come down, pay for parking, only get one minute, got to bring a ton of people with us, so it's more of a show.

Again, come to the community and let's talk numbers.

Thank you.

Thank you.

Our next speaker is Madison.

Please unmute and begin.

Hi, good morning, budget committee.

Um, I'm here today because the city's cannabis business tax shortfall reveals a deeper issue than just a missed revenue projection.

It shows why marijuana should never have been treated as a dependable budget solution in the first place.

Earlier this year, the city raised the cannabis business tax from 8% to 10% to help fill a budget hole.

Yet, despite higher taxes, the city is now projected to fall 1.5 million dollars short of expected revenue.

And this is a warning sign because the independent budget analyst points to declining sales, oversupply, and competition from the illicit market.

In plain terms, marijuana revenue is unstable, unpredictable, and highly sensitive to price.

That makes it a poor foundation for funding essential city services.

But beyond the budget math, there's a bigger concern.

When cities become financially dependent on marijuana sales, there is pressure, subtle or direct to expand access, loosen zoning, extend hours, and normalize a product that is not harmless, especially for youth and developing brains.

As a parent, I worry about what message we send when we plan our budget around increased marijuana consumption.

Every dollar projected assumes more use, more outlets, and more exposure in our communities.

And yet, even with all of that, the revenue still comes up short.

Meanwhile, the illicit market continues to thrive, meaning more unregulated products, fewer age checks, and greater risks to public safety, all while the city counts on money that never fully materializes.

Marijuana businesses should not be relied upon to close the budget gaps.

It creates volatility and public health trade-offs that we don't deserve in San Diego.

Thank you.

Thank you.

And with 20 seconds to go in the five-minute timer, we have four hands remaining in the queue.

We will take no additional callers other than these four.

Zoom user, please unmute and begin.

All right.

A sheriff up in or a cop up in Oakland just got 450,000 in overtime pay in one year.

We need to institute the overtime watchdog program and see who's whose city employees are getting like 100,000 a year in overtime.

It's out there.

The Somali guys are ripping us off blind.

So we gotta institute the doge team.

Car de Mayo is doing the California doge.

And they just in in LA, they uncovered all these uh illegal companies clustered in one area, and they're just ripping off the feds for a lot of money.

And also no money to the illegal aliens at all, period.

We don't need no money going to lawyers for them, no more food stamp money, no more section eight.

They have to re-verify section eight now.

So anybody's harboring those guys, even the landlords are going to be held to account.

So it's getting it's it's just starting.

You know, the guys that are living here illegally, we have no money in the budget for them.

That's ridiculous for you guys giving those guys money.

Just pass out money to the homeless guys a hundred dollars a pop, and no administration fee to the NGOs.

One percent of their budget is administrative.

The rest is pass out the money to the poor guys, just right on the street, 100 bucks at a time.

No more NGO money, even the YFCA is in on the scam.

You know, it's it's just they're just padding their pockets with the administration guys.

This concludes your time.

Thank you.

Our next speaker is Judy String.

Please unmute and begin.

Good morning, budget and government efficiency committee.

I want to add my voice to those of us who would find it very difficult to come down to City Hall to speak to budget issues and tell you how much we appreciate these small opportunities.

And would echo the previous comments about coming into the community rather than vice versa.

It is a very difficult job getting into City Hall and to park the time it takes on both ends of the day, a working day for many of us, most of us I would guess.

And I worry that we don't look at what really costs money in this world we live in here in San Diego.

It probably comes as no surprise to you, and it certainly didn't to me the cost of untreated alcohol, tobacco, marijuana, and other drug addiction.

Estimates range anywhere from 18% to 22% of the American population who experiences addiction of what we call substance abuse these days.

And what's even sadder, the rate of treatment is so low sometimes between about 10% and 12%.

This untreated addiction cost us money.

Unfortunately, it's money that you can't see in large sums, and except maybe through first responders.

So when we make policy decisions, and money is at the top of the list of concerns, let's ask ourselves carefully will this policy just make addiction worse and more expensive and costly.

And let's not put policies in place than enable substance use.

Thank you.

Thank you.

Blair Beekman, please unmute and begin.

Blair Beekman, I've asked you to unmute.

Blair Bit.

Um candidate's really bad today.

I'll try it really quick.

Thank you a lot for your item.

People work with San Diego in the future.

Um I made a need to make a clarification on work towards less tech.

And that can uh do just as well towards public safety.

But uh council persons are really and data collection.

And I'm really hopeful that we can be working together to address these concepts in our near future in San Diego and work together to the federal government.

I think we'll be impressed.

And that's the way we build our future.

Thank you.

Thank you.

And our final speaker is Becky Rapp.

Please unmute and begin.

Good morning.

My name is Becky Rapp, and I come out of concern for the city's um continual budget crisis as we face mid-year deficits.

The city's lack of tourism revenue should prompt us to look closely at what visitors and residents are experiencing on our streets every day.

San Diego is already one of the most expensive cities in the country, and visitors are paying higher taxes, new fees, and added costs in public spaces.

But cost alone isn't what deters people, it's what they see and feel when they arrive.

Driving downtown through Pacific Beach or near other high tourism areas, people encounter visible drug use, homelessness and crisis, and frequent emergency responses.

At the same time, these same streets are lined with obnoxious marijuana billboard advertising, reinforcing the perception that drug culture is normalized.

This is not the message of a healthy, well-managed city.

This has real financial consequences.

Street level drug activity drives repeat emergency calls, strains first responders, and increases public health and safety costs.

If we want government efficiency, we must stop relying on emergency response as our strategy and priority, prioritize prevention and cleanup.

Residents must come first.

A city that is safer and healthier for families is also more attractive to visitors.

Today I asked the city to clean up our public spaces, remove offensive billboards, and replace them with family-friendly messaging that highlights the best San Diego has to offer from Hoya Shores to Old Town to Balboa Park.

Let's see, let's send a clear message to out-of-towners that San Diego prioritizes prevention, public health, and quality of life.

And our residents are our top priority.

Thank you.

Thank you.

And Chair, this concludes non-agenda public comment.

Thank you so much.

We will now move to committee members, mayoral staff, city attorney, and IBA comment.

Do we have any comments?

Hearing none, any request for continuance.

Hearing none, we will now dispense with the approval of our consent agenda.

Natalie, please proceed with any public comment.

The public comment period for the consent agenda is now open, and the consent agenda includes item one approval of the committee minutes from January 14th, 2026.

And Chair, we do not have any slips submitted, and we do not have any hands in the virtual queue, so this will conclude public comment.

Alrighty, thank you so much.

I'll now turn it over to committee members for questions or comments and entertain a motion.

First by pro temp, second by council member Ilo Rivera.

We would now call for the vote.

And the consent agenda passes 30 with Councilmember Moreno absent.

Thank you so much.

We will now move on to our discussion agenda.

Natalie, please introduce item two.

Item two, authorization for the public facilities financing authority of the City of San Diego water revenue bonds.

And if you're watching City TV or the live stream online and would like to call in to item two, the phone number is 1669 2545252, and the webinar ID is 1604308338 pound.

Chair.

Thank you so much.

Staff, please introduce yourselves for the record and let us know how much time you'll need for your presentation.

Thank you.

Good morning, Chair Foster and members of the committee.

Kyoti Pantlu, Assistant Director with the Department of Finance, and I'll need about 10 to 12 minutes.

Thank you.

This morning we are seeking authorization for the issuance of the public facilities financing authority, City of San Diego Water Revenue Bonds.

As background, the water utility issues revenue bonds periodically to finance its capital improvement program.

At this time, the Department of Finance has determined that there is an opportunity to capture savings by refunding or refinancing certain outstanding water revenue bonds.

Currently, two series that were issued 10 years ago in 2016 are eligible for current refunding and meet the city's debt policy thresholds.

For ongoing water CIP, the city uses commercial paper to finance expenses on an interim basis between bond issuances.

Since we will be in the bond market for the refunding, we are planning to take out any outstanding commercial paper at that same time.

We expect we may reach up to 150 million in expenses covered by commercial paper by June 2026.

Approximately 98% of the funds are go towards pipeline projects.

The proposed 2026 water bonds will pay down the outstanding commercial paper program and reset the capacity.

The issuer of the bonds will be the public facilities financing authority of the city of San Diego, and the structure will be the same legal structure as prior existing water bonds.

The repayment source for the bonds is the net system revenues of the water utility fund.

The final maturity of the new portion will be 30 years, and that of the refunding component will match the maturity of the existing bonds.

The ordinance authorizes either senior or subordinate bonds, but currently the expectation is that these bonds will be issued on a senior lien.

The legal documents included in the docket and materials include the forms of and the supplements to the indenture, the master installment purchase agreement, the assignment agreement, bond purchase agreement, and the continuing disclosure certificate.

This slide describes a financing team that was selected to support the transaction.

The municipal advisor is Prague or Public Resources Advisory Group.

The bond and disclosure council is Hawkins Delafield and Wood, and the trustee and escrow agent is U.S.

Bank.

All these were selected through competitive competitive processes.

The selection process for the underwriters is currently underway, and we will see council approval of the selection in conjunction with the approval of the POS in May.

Subject to market conditions, we are aiming to fully refund both the 2016A and 2016 B water revenue bonds.

The following are estimates based as of interest rates on January 21st, 2026 and are subject to change.

So we currently estimate 46.4 million in total savings, with the amounts varying year to year as described on this slide.

We estimate this provides 13% in net present value savings, which is well above the debt policy threshold.

For the new money component, it is anticipated to provide 150 million in bond proceeds to pay down the commercial paper notes.

The estimated interest cost of this series will be is expected to be 4.23% and the annual debt service in fiscal 27 at 4.3 million, followed by 8.8 million in average annual debt service for the remaining life of the bonds.

The total debt service is estimated at 269 million.

The bond issue is supported by approved water rates.

The water utility has an affordability test called the additional bonds test, which we must pass when we enter into a new debt obligation.

And there are also requirements to maintain or increase water rates at levels sufficient to achieve minimum annual coverage ratios as long as the debt is outstanding.

The covenants of outstanding bonds and loans require the water utilities net system revenues to be at least 120% of the senior debt service and 110% of all annual debt service for the life of the water utility bonds and loans.

The projected revenue from the approved rate case through 2027 will allow the water system to meet these covenants.

But additional rate revenues will be needed beyond the approved rate cases due to ongoing capital improvement program and operations and maintenance costs.

The level of those rate increases will be evaluated under future cost of service studies.

Subject to committee approval this morning, the ordinance and the companion PFFA item is expected to be presented to the full council for the first reading in late February, followed by the second reading in March.

In May, we will bring the disclosure document or the preliminary official statement for council approval.

We anticipate the bond sale to occur in early June with closing later that month.

To conclude, this slide lists the requested actions, authorization via ordinance to issue the authorities 20 26 water revenue bonds in an aggregate principal amount not to exceed 150 million and to refund outstanding water revenue bonds to achieve debt service savings.

Execution of related financing documents, establishment of one or more special interest bearing funds for the proceeds of the bonds, and finally authorization via resolution to declare the official intent to use proceeds from debt obligations to reimburse itself for eligible capital expenditures.

That concludes our presentation.

Please let me know if you have any questions.

We also have Adam Jones from Public Utilities, Brett Bardalado, Chief Deputy City Attorney, and Christian Silva from Economic from Equal Opportunity Contracting available should you have any questions.

Thank you.

Alrighty, thank you so much.

I don't believe we have any comments from the IBX, so we will move on to uh public comment.

The public comment period for item two is now open, and we have not received any speaker slips in chambers.

We'll move to the virtual queue.

We have one hand, we have two hands raised in the virtual queue.

Each speaker will have one minute to speak to item two.

Blair Beekman, please unmute and begin.

Blair, we are having trouble hearing you.

We'll move to the next speaker.

Zoom user, please unmute and begin.

Thanks for taking my call in your pilot question, uh couple question.

What happens if we don't do anything?

And just instead of paying all the fees to do this.

What if we just pay off our obligations as they are in the old money that we we took out?

And then uh I was gonna say what's the collateral for this loan?

And it's the ratepayers.

Gotta pay more money.

It's not like you're putting up 40 pines to pay these bonds off.

So you can raise our rates to pay the bonds off.

That's that's the collateral here in this transaction, I assume.

Those are the two questions.

Thank you.

Thank you.

Blair Beekman, I see you've raised your hand again.

We'll give you another opportunity.

I've asked you to unmute.

Okay, you have you're having technical difficulties.

So, Chair, this concludes public.

Oh, okay.

Please begin.

Oh, we're gonna try one more time.

All right, can you hear me okay?

Yes.

If you can hear me, uh yeah.

Awesome.

Thank you.

All right, you're quickly off.

We vote.

Blair, sorry, Blair, we cannot hear you.

You can submit a comment to council committee at Sandiego.gov.

Chair, this concludes public comment.

All righty, thank you so much.

I will now turn it over to committee members for questions and comments, and this is a discussion item, and I will entertain a motion.

I'm not seeing any one on the okay.

We have a motion by councilmember Ilo Rivera, a second by Council President Pro Tem.

Um, just thank you for bringing the item forward.

Um, appreciate identifying the savings and also re-establishing capacity, right?

Giving us our ability to continue on with our project.

So thank you so much.

And I believe that brings oh let's call for the vote.

And that passes 3-0 with Councilmember Marino Aphthen.

Thank you so much.

This concludes item two.

Natalie, please introduce item three.

Item three is fiscal year 2026 mid-year budget monitoring report.

Chair.

Staff, please introduce yourself for the record and let us know how much time you will need for your presentation, and feel free to begin.

Good morning, Committee Chair Foster and Committee members.

I'm Ben Batalia, Director of Finance.

With me today is Chris Purcell, Financial Operations Manager.

We're here today to present the fiscal year 2026 mid-year budget monitoring report.

We'll need about 20 minutes today for our presentation, in addition to a presentation from the police department, uh, which will provide an update on overtime and their neighborhood policing division.

This is the second budget monitoring report for the fiscal year.

In December, we presented the first quarter budget monitoring report to the city council, and this was based on only three months of financial activity.

It also had a limited focus, uh, primarily on major general fund revenues and overtime projections for the police and fire rescue departments.

The mid-year budget monitoring report was developed in coordination with all departments based on five months of financial activity.

It includes a full analysis of projected revenue and expenditures for all general fund departments as well as several non-general funds.

The development of this report was truly a team effort.

I'd like to thank all departments for their valuable contributions.

We've also requested departments to attend today to assist with any questions you might have.

I'll now turn it over to Chris to walk through the specifics.

Thanks, Ben.

At a high level, general fund expenditures are currently projected to exceed revenues by 16.8 million.

This comprises a projected 13.6 million decrease in revenues and a slight 3.2 million increase in expenditures.

The decline in revenues is within both the major general fund revenues category and departmental revenues.

While the increase in expenditures is primarily due to personnel expenditures.

Bottom line, without improvements in revenues or further reductions in expenditures, the general fund would end the fiscal year with a 16.8 million deficit requiring the use of reserves to end balanced.

The primary drivers of this decrease are in transient occupancy tax and other major revenue categories.

For transient occupancy tax revenues in the general fund are projected to end the fiscal year 7.4 million under budget due to a significant decline in international travel and tempered growth in both leisure and business travel.

For other major revenues, these are projected to end the fiscal year 6.7 million under the current budget due to reduced interest earnings and a decrease in the one cent TOT transfer driven by the noted decrease in TOT revenues.

These are partially offset by projected increases in property tax of two 2.0 million due to increased collections, 2.1 million in sales taxes, actual receipts have come in higher than assumed in the budget, and 2.8 million in franchise fees, primarily due to increased tonnage at the sycamore landfill.

Departmental revenues are projected to decrease by $6.4 million, and this slide reflects the departments that have variances exceeding $1 million.

The reduction includes lower Balboa Park parking revenue in parks and recreation due to shifts in the program's implementation timelines and adjustments in the fee structures.

Reduced wayfinding, telecom and lease and concession revenue within economic development, reduced parking citation and parking meter reimbursement revenue within stormwater, and a continued decline in cannabis business tax revenue and city treasure.

These decreases are partially offset by increases in fire rescue for reimbursements related to the junior lifeguard and paramedic programs, as well as strike team deployments.

Police also anticipates additional reimbursements for work performed primarily on special events.

Here we have a breakdown of expenditure categories tied to city staffing.

When combined, personnel expenditures and fringe benefits are projected to exceed the budget by 15.1 million.

The overage in personnel expenditures is mainly attributed to increased overtime cost of 12.9 million.

This is primarily within three departments.

Fire rescue to maintain constant staffing, dispatcher training, and deployment backfill.

As noted earlier, the increase is anticipated to be partially offset by increased reimbursements.

Police's increase is due to support higher activity at special events and parking enforcement.

Again, as noted earlier, this is projected to be partially offset with increased reimbursements.

And transportations increase is primarily to support emergencies and callbacks.

As in prior years, I want to note that the projections include an estimated historical savings adjustment of $3 million combined across salaries and fringe benefits.

This is to account for anticipated differences between what a department may project and year end actuals.

For non-personnel expenditures, when excluding fringe, these are projected to be under budget by $11.9 million.

This includes a $2.8 million net decrease in contracts, primarily due to a decrease of $9.5 million in contributions to the public liability fund, as that fund received insurance proceeds at the beginning part of this fiscal year that will be available to support current year payments.

These savings are offset by higher contractual equipment, maintenance, and service costs across transportation, police, parks and recreation, and fire rescue.

There's a $1.9 million decrease in information technology due to the IT fund's operational efficiencies and the use of available fund balance to offset non-discretionary costs.

And a $1.4 million decrease in debt due to timing of the helicopter leases in fire rescue and police, which reduced the anticipated number of payments in the current year.

Offsetting these savings is an increase of $3.4 million in energy and utilities, primarily within parks and recreation due to water rate changes.

Lastly, similar to the last slide, we analyzed recent mid-year reports against year and actuals and incorporated an estimated $10 million historical savings adjustment, which is approximately $1.7% of projected expenditures.

Here we have the requested appropriation adjustments.

For the general fund, we are requesting a reallocation of budget among departments with no bottom line impact.

The savings are tied to the previously mentioned reduced contributions to the public liability fund, and reallocating those savings will ensure continuity of operations and that required obligations are met.

For non-general funds, each of these requests is supported by available fund balance in those funds.

To conclude, this report projects general fund revenues to come in under budget while expenditures are projected slightly over budget.

If these projections do not improve, the general fund would need a draw from the stability reserved in the fiscal year balanced.

We are requesting the reallocation of appropriations between general fund departments to ensure continuity of operations and to meet required obligations without a bottom line impact.

Mitigation efforts will continue to be implemented by departments, and future reports will include updates on those efforts.

I do want to take a moment now to mention that we were informed late on Friday after the release of this report about the anticipated receipt of approximately $8 million in insurance proceeds tied to flooding damage at the old central library.

This should be received in the coming weeks and is unrestricted revenue that will be available to help address the projected deficit.

The Department of Finance will continue to monitor revenues and expenditures and will release the fiscal year 2026 third quarter budget monitoring report on May 13th, 2026.

That concludes the presentation on the mid year report, and now we will turn it over to the police department so they can provide an update on their overtime and neighborhood policing as requested in the fiscal year 2026 appropriation ordinance.

All right, good morning, budget chair Foster and honorable committee members.

We are here today to provide an update on two important areas required under the FY26 appropriation ordinance.

First is our police overtime spending, and second is the work that is being done by our neighborhood policing division.

I don't always get to be the bearer of good news, but today we have some.

For fiscal year 26, our non-cost recoverable overtime is on budget.

We did that in part by putting each commanding officer on a budget and by shifting our focus to cost recoverable overtime areas, areas like grants and special events.

We anticipate seeing a $3.4 million over uh being $3.4 million over budget in those cost recoverable areas, but remember those areas are reimbursable.

All told, we're projecting a reduction of $6.5 million in overtime spending compared to last year, the largest year-over-year decrease in more than a decade.

Importantly, we were able to do it without negatively impacting our response times.

This reduction didn't happen by chance.

We knew if we were going to cut overtime costs, we needed to take a hard look at how we track and how we manage those funds.

That increased transparency allows for real-time oversight and better decision making.

And the result is a leaner overtime budget and better stewardship of our employees.

When I restructured the department, one of my goals was to strengthen our efforts in the area of homelessness.

To accomplish this, I immediately shifted each academy class to spend three months working with our NPD officers, learning their craft and supporting them in their work.

Homelessness remains one of the top concerns in the community, and it requires a consistent and coordinated response.

When people are offered help repeatedly and understand there are consequences for refusing services, we see better outcomes.

It is about using every part of the system to connect people to long-term solutions.

That strategy helped contribute to a decrease in the number of unsheltered individuals in the 2025 point-in-time count, the first decrease since 2020.

Most importantly, the division is projected to be on budget this fiscal year, while at the same time delivering measurable results for the community.

NPD isn't working.

I'm sorry.

MPD uh MPD's work isn't always the most visible, but it is very impactful.

It was NPD that took the lead on enforcing the oversized vehicle and vehicle habitation ordinances.

So far, they have referred over 400 individuals to the safe parking program at HBORCS, resulting in 94 successful placements.

They've also helped complete 245 abatements and removed more than 176 tons of waste from freeway on and off ramps in downtown.

And many of you have seen how out of control those areas had become.

And with that, I would be happy to answer any questions.

All righty.

Thank you so much.

Before we go to public comment, we will turn to the IBA.

Thank you, Chair Foster and committee members and staff for the presentation.

I'll shift back to a more general comments.

As the mid year was only released on Friday, my office has not yet completed a full analysis of it, but we will be going through the mid-year and releasing that full analysis in two weeks on February 18th in advance of this being heard by full council.

That said, I do have some preliminary comments this morning, largely reiterating some of the key takeaways that you saw in the Department of Finance presentation.

The trends that you see on both revenues and expenditures that were present in the first quarter are persisting now at the mid-year, with revenues coming in under adopted budget amounts and expenditures coming in above them, leading to a total net fiscal position of $16.8 million in the red in the current fiscal year.

On the revenue side in major general fund revenues, which are property tax, sales tax, franchise fee, and hotel taxes, we do see some moderate increases in property sales taxes and franchise fees, around $2 million each.

But there is a significant decline in hotel tax revenue, with our direct TOT projected to end the year $7.4 million under budget.

When the budget was adopted, we noted the volatility our tourism sector has been experiencing, especially given the impacts of our Federal Government's posturing towards other countries and the impacts that could have on international travel.

Unfortunately, we now see to seem to be seeing this being borne out in our actual revenues.

Beyond those major revenues, the other major decline you see in the mid-year is an $8.9 million decrease in projected revenue from parking fees at Balbill Park due to delays of implementation and paid parking and changes to the paid parking program that were made during its development.

Clearly, this item remains in flux.

We will look more closely at this as we go through our analysis.

But I would note that the budget that was adopted in June did rely on those revenues in order for it to remain balanced, and it is worth reiterating the importance moving forward of budgeting against revenues that are more certain and fully developed.

On the expenditure side, overall there is a smaller variance, $3.2 million or 0.1%, although within expenditure categories there are larger swings.

Particularly noteworthy are overtime expenditures in fire rescue, police, and transportation.

As you just heard, the police department is currently projected to be over budget and overtime by $3.4 million, although this is likely to be offset by also by reimbursements and other small changes, and this is considerably closer to the department's actual adopted overtime budget than we have seen in the past several years.

Fire rescue, however, is now projected to end the year $6.8 million above budget in overtime, with a net overage of $5.3 million after reimbursement.

And notably the Transportation Department is also expected to end the year above its overtime budget, potentially by as much as $4.6 million.

When departments exceed their budgeted levels, this can have an impact on the city's overall operations, especially if other programs need to be paired back to cover those overages.

It is usual and expected to see some variance in expenditure category, but that said it is also still important to both budget those amounts as accurately as we can and for departments to stick to their budgets, particularly in times of constrained resources as we are operating under today.

Altogether, you are seeing projections that show the general funds finances will end the year, $6.8 million in the red absent any changes.

To the extent that the city can mitigate this through the remaining four months of the fiscal year, either through revenue generation or expenditure cuts or both.

It should, although opportunities to identify any significant new revenue sources that could impact the current fiscal year is limited.

And the administration has indicated that many of the potential mitigation actions under expenditure side that we would usually implement, such as suspending non-essential spending and hiring, have already been put in place.

Consequently, avoiding the need to draw on the city's general fund reserve will likely require more immediate programmatic cuts to city services.

Beyond that, I will again note we will have our full analysis of the mid-year released on the 18th.

That will include an analysis of these issues as well as updates on items that council added to the budget during its adoption and the status of positions that were added or eliminated in the adopted budget.

If there are any particular areas or questions that the committee members have that they would like us to cover in that analysis, please feel free to let me know that this morning as well.

And with that, we are also available for questions.

Alrighty, thank you so much.

Natalie, do we have any public comment?

Thank you, Chair.

The public comment paper item three is now open, and we have not received any speakers lips for individuals in chambers.

We'll move to the virtual queue.

There is one hand raised in the virtual queue.

Blair Beekman, please unmute and begin.

You'll have two minutes.

Blair, I have asked you to unmute.

Can you hear me now?

Yes.

Can you hear me now?

All right.

I'm really sorry.

I'll make it very short.

Blair, we cannot hear you.

You can submit a comment to council committee at Sandiego.gov.

You're still unmuted if you want to try again.

Um I'm right in and thank you.

We cannot hear you.

Chair, this concludes public comment on item three.

All righty.

Thank you so much.

I will now turn it over to committee members for questions and comments and entertain a motion on item three.

I don't see any members on the lights.

Um with that, um, I guess I will just uh lead in with some initial um comments.

Um, first, um, just thank you to staff for all the work that you guys have done in this process.

I know it's been a challenging process.

Um, I think the news that we have received some reimbursement, I think is um very good news as we are looking at um what we need to take care of to maintain a balanced budget for FY26.

Um with that, um, this mid-year report um shows the city is still under real financial pressure and how we respond, not just for the numbers, but for the people and communities who feel the impact of these decisions.

This is going to require leadership and communication from all partners and stakeholders, as this will be a very tough budget monitoring process, and as we are moving into the FY27 uh budget development process.

Um at the end of the day, I truly do feel it's time for some tough decisions.

Um as we move forward, um, I just want to be clear that we must stay true to our mission and that it is to make sure we can deliver deliver our core services.

Um, communities like District 4, 8, and 9 have faced decades of disinvestment, and we cannot continue to balance the budget on the backs of these communities.

And when it comes to staff adjustments, staffing changes should be proportional across frontline, supervisory, supervisory, and management levels, and the city must clearly communicate any changes in service impacts to the residents.

Any reductions should preserve core services to facilitate a smooth transition as the city's financial condition improves.

Um, also I just want to say I appreciate the mayor's mitigations, which includes the rest the request to field process and a reason reassessment of conditional offers.

Um I think that's key as we are still uh seeing a nine million dollar deficit as we are looking at this budget monitoring process.

Um but with that I must say we may need to look at doing an actual hiring freeze.

I do have concerns as we continue to move forward and just making sure that we are consistent with our direction and there's clear understanding amongst a 10,000 member organization.

Also, I think we need to take a hard look at what I term discretionary spending with all departments.

I think items such as non-essential travel.

I think when you hear us talk about recruitment and retention, I think we have finally come to terms that utilizing overtime to supplement, we're paying a premium.

And the taxpayers are paying for that premium.

And there is a question on is that premium relating to delivery of services in the manner to meet the public's expectations.

Right?

I will always say what we do, we should do well.

So with that, I just want to make sure that we truly focus on core services.

Also, um I want to make sure we're aligning spending and focusing on eliminating or reducing non-core services or programs that are not required per city, state, or county mandates, the city charter or the municipal code.

Um I believe this was also in the mayor's uh memorandum.

So I think it would be good to have some public conversations about what that is and what that looks like as we continue to move forward.

Um I also um want to say um just as we are having um the conversations that we are having, I think we really need to look at expanding the use of zero-based budgeting to more departments.

I think is the one thing that we need to do.

We need to make sure we have the frontline employees that are responsible to provide those core services.

And so I think we need to really focus on that.

Um with that again, I'd like to say uh my expectation is um that as we move forward and and we try to um ensure that we balance um our FY26 budget, that we do it responsibly, that we're not doing across the board cuts, and that equity and transparency um will also guide um in that process as we um work to end this fiscal fiscal cycle.

Um but with that, um, I'll close with my door is always open to the mayor's office, um to the IBA's office, um, and any stakeholder um that would like to have a conversation about um core services and what that looks like.

As I took on um budget chair, one of the first things that I tried to do was to have the city attorney come in and to um give an overview of just exactly what core services are.

Um and I must say I do think over time, over years, um and a lot of it has to do with public sentiment and what the public's expectations are that we have eroded what our true core services are.

And so I think um I think it speaks to um the the um perception when you hear the public say that we uh need to rein in our expenditures.

And I must say I agree with that concept and the need to do so.

Um also I think it's important as we look at building continuing to build trust with the public.

I think we will all agree um that the steps we have taken, that we have certain challenges, I guess I will say, um, in regards to implementation of of various initiatives that we move forward with in efforts to um balance our budget and to increase revenues, and I think that's very unfortunate.

And so I do understand the public's frustration in and I am committed to work every day to see what we can do to um one um repair that trust and to make sure that we are doing the best we can to be as responsible as we can as we are expending taxpayer dollars.

So um with that, um I will move um this item uh to councillor Moustaff's report, and then um we will turn to council member Pro Tem Lee.

Thank you, Chair Foster.

And uh I'll start by seconding the motion.

Um I want to thank the Department of Finance for the tremendous amount of work it takes to piece together all these components of the city's um financial status, and then also try to project out where we're going to land at the end of the year.

Um I think everyone seems to share the same concerns about um general fund revenues and the a continuation I think of the softening that we've seen in a couple of areas.

Um and I think we're certainly fortunate that in other areas like property tax revenue, we have continued to see that outpace um outpace our projections.

Uh though to me that is also a maybe a gentle reminder that that also reflects a housing market in San Diego that continues to be extremely challenging for San Diegans to afford.

A couple things that I think have stuck out in this in this report that I I did want to reference.

One is, you know, I I think there's a some analysis done by the IBA that explains that the overage that we're still seeing on salaries here at the mid-year and projected for the end of the year is largely because before the request to fill process was fully implemented again that a number of vacancies have been filled.

And I am sort of torn on this sort of two-sided coin where, on one hand, we have these vacancies that I think we do need to be able to address as a city to continue providing the services we have.

And also the struggle of staring at a at a financial projection that shows that despite the city knowing all of its woes, that on even just our general salary line, that we're seeing a projected overage.

And say that we're facing these financial challenges and yet see our regular salary line continue to exceed the budget.

Just something that I I think we need to be cognizant of.

I recognize the what's been pointed out from an overtime standpoint.

And so one of the questions I think I have on that front is that we you know we just heard from Chief Wall.

Um we did hear a little bit from uh Chief Logan and the team earlier this week about um fire rescue overtime.

And I think some of the components of that overtime projection, uh, as the IBA noted, are also balanced out by um funds that are expected to come back to help um alleviate some of that.

And so, how how do we account for that when we make some of these projections for the year and because again, the IB has acknowledged that that's out there.

PD has, for example, noted that on on their tracking, they're currently on track for their overall budget, but on the report that we're putting out projecting year end, we're actually projecting a deficit on that front.

And I I just want to be realistic about it because if they are on track to if they are on track to meet the budget, and we do think that is um showing to be the case based on the reimbursements that we expect.

That is something we should applaud and be able to applaud, but the numbers that we're putting out to the council and to the public don't reflect that, so there are two components of this projection.

The first is the actual expenditures for overtime.

You're seeing that there is uh some over budget items on the overtime line item on the expenditure side, both for um the police department and the fire rescue departments.

However, these projections also do include uh updated increased revenues as well.

So that's kind of a separate, we don't net that out when we're um projecting out the overtime.

Uh so you'll see that um increased revenue projection in the revenue categories.

Thank you, because even I needed that helpful reminder.

Um because again, on paper, I think it's easy to look at just the expenditures line and um get lost on the fact that that seems to show uh an increased um overage when I think we we're hearing that there is really this intentional effort to address that challenge.

And I just don't want that message to be lost when this goes to the public because that is I've I came into this year expecting that the the commitment that we were hearing to meet over time uh budgets, especially from Sandy PD, in my honest opinion was a very ambitious goal and was a reduction from what we were seeing in last year's actuals.

And so I just again don't want that to be lost in the the broader discussion.

Um I share Chair Foster's um comments, especially relating to frontline employees.

I think we are uh in this year's um mid-year report and as we head into this next budgeting cycle.

I I think we all share this recognition that frontline employees as we see it are being asked to do more, um, if not the same, then even more in some cases when it turns to the services that we're providing the public, and we're doing so with less staff as we have available, and that is simply not a sustainable model that we have moving forward.

And I appreciate that we're not offering mid-year cuts in this action item at the moment because as you shared, sometimes things shift very quickly, and even some of the funding that's come in since Friday changes this discussion quite a bit.

Um but at the end of the day, the quality of the services that we provide to residents is really dependent on the strength and the morale of our city's workforce.

And um, I think we we simply we are going to have to keep that in mind.

Um and that does mean that ultimately we have some right sizing to do when it comes to programs.

I continue to believe that we cannot simply do that right sizing with frontline employees.

That that's not a responsible way to deliver upon the services that we have.

That's what we need to protect because that is exactly what our residents see and feel every single day.

One of the last items that I think has been glaring in every report, and of course the media has has chosen to take it up.

The narrative as well is the reduction in revenue expectations for Baobo Park parking.

And one of the pieces that I'm a little bit perplexed by when love the explanation for is that in the analysis, it is suggested that Balboa Park parking revenues reductions are due to a couple of factors.

I understand the factor, the amount that's been attributed to changes that have been made to the program.

I think have always been in response to what we are hearing from residents, and we do need to balance that.

That cannot be something that we simply ignore.

But one of the big numbers is a suggestion that 4.4 million dollars of revenue uh was lost in the city's delay of the program from October to January.

Um I'll note that in the original budget projections that the city was provided, the council was provided that the original draft budget proposed 11 million dollars in revenue from Balboa Park Parking.

Um this has been a fun part of the conversation, but it has been suggested that the council over budgeted for Bob Park parking when we made changes to the assumptions.

We added an additional 1.5 million dollars asking that the timeline be pushed from January to October.

That's what the council added.

And now we're seeing that that shift from October to January reduced revenue assumptions by 4.4 million dollars.

So I know there's members of the team here, so I don't know who's best to answer that, but I think we do need to reconcile uh where this is coming from.

Yeah, we have we have park and rec here.

Morning, Councilmember Conrad, where program manager parks and recreation department.

I think part of the discrepancy that you're seeing is um we had a 12.5 at the end of the budget cycle, 12.5 billion allocated for Baobo Park.

When you then extrapolate that over nine months, it looks about a 1.38 million dollars per month of revenue.

So assuming that that was consistent throughout the entire nine months, if you lose three months of that revenue, that's what gets you to that four million, um, that four million dollar number.

So when the budget was originally proposed to the council and it was suggested that half a year was only 11 million dollars.

How is it that three months is now 4.4 million dollars?

It was simply just an accounting adjustment um for the for the entire program.

So you can use take that 12.5 divided by nine.

The assumption then is that you're losing that money for those for those three months in the in the entire projection.

So I get the math component of that.

That's actually sort of what I extrapolated as well.

Um I think what probably doesn't make sense to us is if the council takes an action to add 1.5 million dollars for three months, uh, but the loss of it is now projected to lose 4.4 million dollars.

That's a massive disconnect between what this council has tried to take in action and what we're actually seeing from the administration.

So it's it's not anyone's fault here in terms of how we calculate it.

Um but I point that out because there's also additional funding that's suggested to have been lost because of the changes to the program.

We're not gonna argue that because I think we're all have we're trying to have those discussions now.

Um but there was a lot of I think he did back and forth over the timeline and what the push on that timeline caused.

And I think I'm willing to say that uh it's not sufficient just to say that the council's push uh to speed up the timeline led to these losses because as everyone seems to be acknowledging now, that's that's everyone's shared responsibility.

So thank you, I don't know, for answering that question.

I think that's all I've got at this point.

Um I think we'll have more in the next item for discussion as well, Chair.

So thank you for uh the time and again I'll second the motion.

All righty, thank you, Council President Pro Tim Um Lee, and I agree is um you know we are having our discussions.

It is important that we are um accurate um in the information that we are providing to the public.

Um so with that, um we will now turn to council member Ilo Rivera.

All right.

Uh thank you, Chair, and uh I appreciate your questions and and comments as well as Council President Pro Tim Lee's.

Um thank you for the um the report here for the analysis, Charles Um.

Um I would there's not gonna be a surprise in the question I ask and the focus here.

Um it's where my attention is largely focused during the almost the entire uh budget conversation.

Uh but uh recognizing that there's a um there will be early implementation of proposed FY2027 reductions.

Um one of the questions that I would be asking and will be asking is how equity um is is going to be informing the decisions that are being made.

And um if we're going to begin that implementation sooner than July 1st, um I want to make sure that there's that analysis being done, the rockiest most tense moments um in the budget discussion the last couple of years, at least from me to the administration has have been on that front of wanting to know that we are being as thoughtful as possible about who will feel the impacts and what the consequences of those impacts will be when we have to make reductions.

So there's no no doubt, there's no doubt on my end at least that we're in a situation where we have to make tough decisions and that those tough decisions will have consequences.

Um, but as always, I want to make sure we're being thoughtful about where those consequences are felt.

So can you talk to us about how you all are thinking about that and ensuring that um those who will be would be most harmed by reductions are being protected to the greatest extent possible from those harms.

Sure.

Thank you for the question, Councilmember Elo Rivera.

Uh so the administration will be taking equity into account as we have in some years past uh related to adjustments in the budget.

What I will say for this upcoming year, we are very interested in including some additional uh threads of data as it relates to services that are offered in our community and then the outcomes that are generated from that.

One example that I can give you is that when evaluating adjustments to uh recreation facilities or libraries, we'd be in we're interested in evaluating other data sets such as literacy rates in communities, crime rates, potentially the conditions of those facilities as we evaluate how hours change, how staffing changes, how programming changes, and all of that.

Our goal is to bring as much of that together uh into a tool uh that uh the council can use, that the administration can use um to really have that tough conversation about what the adjustments should actually be in our communities.

If I could add uh Councilmember Iler Rivera, the the other thing, just in terms of process, we have committed to have a more inclusive process this time around.

Uh I think there were a lot of lessons learned from last year.

Uh we have included Charles and Kim in the discussions uh for the executive budget review process that we typically go through where departments are presenting information.

We plan on having meetings with uh whoever in this council is interested to bring directors and explain the impact.

So we are definitely committed to transparency and and making it a more open uh discussion as we go through the decision process.

I could make one additional note is there is an expectation on our side um per our budget principles that if there is a reduction in the current year that needs to be communicated to this council in writing, and then this committee needs to take that up at the next available committee meeting after that.

Um so that should give you the opportunity to ask those questions.

I I appreciate all of that.

Um that's good to know that that we're going to attempt to be as data informed as possible.

And I I hope that as we're doing that, or I'd say I think I believe that I we need to, as we do that, take into consideration the context of the world that we're living in today and the slashes to um safety net programs and resources that communities are experiencing as a result of the cruelty of the Trump administration.

Um what options there are for communities, what options there may or may not be for communities if the city is not providing that service or that access.

Um that's again been a uh uh a topic of contention in previous years.

That you know, simply looking at the number of people who uh utilize a facility isn't necessarily uh indicative of the value of that um of that facility or that resource to the community or of what the impact would be of it going away.

Um so again, I I have there's there's no illusions on my part that we're not in a tough situation.

There's no illusions on my part that we aren't going to have to make difficult decisions and that there will be consequences to those decisions.

I just want to make sure we're being as thoughtful as possible about um what those impacts will be.

And I also do hope that as part of this conversation, we're able to better demonstrate to the public the push and pull of what reductions in revenue on run one front mean.

Um I appreciate the questions that uh Council President Pro Tim asked about the Boa Park Parking, and um, I think one of the things that's been very difficult to untangle from untangled during this conversation is the overwhelming desire we heard from the public to protect library hours, to protect parks and rec hours, to protect some of the services that we did.

The council took action to uh to um attempt to preserve um those services, those resources, uh access to lakes and the revenue that is being utilized to to hold uh to have prevented those cuts is now obviously there's significant frustration about that revenue.

And so whether it's as part of the reduction conversation or you know, as we get to the the next item, um drawing a clear line of what revenue pays for and doesn't pay for and allows us to do or not do and what those trade-offs are, I think would be really incredibly important in this moment.

Um so uh again, I appreciate uh this conversation, appreciate um that we're we're having this conversation in the way that we are.

And uh my my expectation is going to be that we we do this in a way that is um as as straightforward and honest as possible and with an unrelenting commitment to ensuring that we do the least harm possible whenever we're uh making the reductions that need to be made.

Thank you, Chair.

Alrighty, thank you for that.

Um I would just like to add that I think um if we can as this item is going to um move, I believe, to council if we can possibly.

I know there were um as we developed the FY26 budget, there were items that um as we finalize the budget that um council um I'm going to say um cut a few positions um or certain things if we can get into update as to what's been implemented, what hasn't been implemented, and where that stands and any um impacts and any plans as they're working their way through this, but through this current monitoring process, I think that would be helpful to add to the conversation as well.

We'll make sure that we include that, council member.

We do in our quarterly budget monitoring report so you'll see an update on the mid-year and where those are.

All righty.

Thank you so much.

So with that, we have a motion on to move staff's recommendation by myself with a second by council president pro Tem Lee.

Now, let me please call for the vote.

And the motion passes 3-0 with council member Marino Aphenology.

All righty, thank you so much.

We will now move on to our last item.

Uh item number four.

Natalie, please introduce item four.

Item four is fiscal year 2027 updated city council budget priorities.

And if you wish to speak to item four.

All righty.

Staff, please introduce yourself please introduce yourselves for the record and let us know how much time you will need for your presentation.

I feel free to begin.

Thank you, Chair Foster.

I'll kick things off and then turn it over to the team.

Um, what you have before you is the update to your city council budget priorities for the upcoming fiscal year.

Uh, as you're aware, each year council goes through a process of developing those items that it believes should be included in upcoming budgets, both on the revenue and expenditure side.

Um, in many cases, those are maintaining existing services or uh the importance of new services.

Clearly, this is a year where we are in particularly constrained times.

Um, so to the extent that this um kind of priorities resolution can be useful being able to identify those items that are critical to maintain, or think is likely of particular importance.

That said, this is a document that council repairs that is then submitted to the mayor's office to indicate to him those items that are of high priority to this council.

You did your initial stab at this last year, towards the end of that year.

Since then we've gotten some additional financial information, which you just saw during the mid-year, and a number of the budget priority memos that your office has submitted to mine reflected that.

With that, I'm happy to turn this over to Lisa Byrne and Sergio Alcalde from the IBA's office to walk you through those updated priorities.

Thank you, Charles.

I'd like to begin with some brief background information.

Council approves its initial budget priorities resolution, which includes its one cent TOT recommendation in the fall.

For fiscal year 27, it was approved last November.

Now the council has the opportunity to update its priorities resolution.

Today, this committee will forward its recommendation for the updated resolution to the full city council.

Once council approves the updated budget priorities resolution, it will be submitted to the mayor for consideration in the development development of the fiscal year 27 budget.

Last December, budget uh committee chair Foster issued a call memo requesting council members submit their priorities updates to our office, which they submitted January 9th.

Notably the call memo referenced to future presentation on zero-based budgeting or ZBB, and requested that each council member identify departments they would like included in related discussions.

Based on their January 9th member memos, two council members maintain the recommendation of homelessness strategies and solutions and transportation departments for ZBB consideration.

Two other council members supported exploring this approach, and we understand that the Department of Finance is going through a ZBB exercise for external contracts in the current budget development process.

In light of the currently projected 105 million dollar baseline revenue shortfall, we anticipate that city services for fiscal year 27 will be reduced, as there are not enough near-term revenue increased revenue opportunities to address the shortfall.

We also stress the need for the city to address its structural budget deficit and not rely on one-time resources to fund ongoing services and related expenditures.

Without resolving this issue, the city will remain unable to use increases in ongoing resources to enhance services, putting it in a position of having to continually explain to the public why increased revenues do not produce enhanced services.

We also stress the need.

Sorry.

Most of the council members' January 9th memos highlight concerns with this structural budget deficit and related funding constraints.

Our report on council priorities provides decision makers with insight into which priorities are currently ranked highest.

There may be additional factors to consider and rankings of priorities included in the budget priorities resolution could change as the budget process unfolds.

This slide outlines several components in our report.

Additionally, our report highlights council members' collective support for expenditure priorities and the potential for updating council's recommendation for the use of the one cent transient occupancy tax revenue.

I'll now turn to Sergio Alcal Calde to cover these items.

Thanks, Lisa.

The tables in this slide and the following slide list priorities included in the initial budget priorities resolution that retain support from four or more council members based on the January 9 memos.

These include homelessness and housing operating priorities shown in the left table and other operating priorities shown in the right.

Here on the left are additional operating priorities, and on the right are infrastructure priorities.

I'd like to note that the descriptions and the initial number of mentions for each priority can be found in IBA report 25 TAC 32 REV.

Um, I'd like to make a clarification that the lifeguard wellness program uh shown in the bottom of the slide notes that it has no longer support from four council members.

Um I'd like to clarify we actually got support from four council members.

I'll now go over newly supported expenditure priorities, two of which obtain majority support.

First is the Office of the City Auditor.

Six council members support restoring $55,000 in ongoing nonpersonal expenditures and budgeting this amount as a one-time reduction for fiscal year 2027.

Four council members also noted that independent offices like the city auditors should be reasonably funded to implement mandated requirements.

The second priority that obtain majority support is brush management.

Five council members prioritize additional funding for brush management and Bateman and Canyons and open space areas to reduce the risk of wildfires.

Because these two priorities are majority supported, they will be included in the updated budget priorities resolution unless council chooses not to moving to new priorities supported by four council members, of which there are three.

First is recruitment, retention, and employee related compensation.

Next is the avoidance of a cross-board cuts.

Four council members addressed how these types of cuts negatively and disproportionately impact underserved and vulnerable communities.

And third, unapproved streets and alleys.

Since these three priorities are not supported by a majority of council members' memos, they will not be included as part of the updated budget priorities resolution unless council designates them as such.

I'll now turn to the one cent TOT recommendation.

Or estimated to be $13.5 million for arts, cultures, and community festivals or penny for the yards, with the remaining funds estimated to be $16.6 million to help balance the general fund.

As Lisa mentioned, Council may update its one cent TOT recommendation as part of the updated resolution.

For reference, council members support for penny for the yards based on the January 9 memos is divided into these levels.

Six council members support the partial funding at 4.28% of TOT, which is the same percentage allocated in fiscal year 2026.

Two council members support full funding at 9.52% of TOT, and one council member did not note funding for penny for the yards in their January 9 memo.

Lastly, we would like to go over the next the next steps with you.

Our office recommends this committee recommend the fiscal year 2027 updated budget priorities resolution to the city council for adoption, including updated expenditure priorities based on our report with any desired modifications and any desired update to council's one cent TOT recommendation.

Our office will present this committee's actions to the full council for consideration next week on February 9th.

Council's approved resolution will then be submitted to the mayor's to the mayor for consideration in the fiscal year 2027 proposed budget.

That concludes our presentation, and we're happy to take any questions.

Thank you.

Alrighty, thank you so much for your presentation.

Natalie do we have any public comment on item four?

Thank you, Chair.

The public comment period for item four is now open, and we have received one speaker slip from an individual in chambers before we move to the virtual queue.

Christine Martinez, please approach the electron.

You'll have two minutes to speak to item four.

Good morning.

Thank you so much for having me.

My name is Christine Martinez.

I'm from Arts and Culture San Diego.

I represent more than 150 arts and culture groups throughout the city.

Um thank you for being a part, letting us be a part of this process.

Uh it was especially enlightening to hear the um mid-year budget review.

I understand we're in difficult times, and the budget deficit, while it's not as big as it was, is not completely closed.

And that's why I'm here today to especially thank the eight city council members who included us as a priority.

You all understand that arts and culture is an economic engine.

So we understand that it's a difficult budget budget cycle, but we ask that you please keep us at 4.82% of TOT so that we can continue the programming that's so valuable in your communities.

Um arts and culture fuels TOT, it fuels job creation, it supports small business, it builds communities, and it sparks wonder in adults and children alike.

Um please help us retain our flat funding at 4.28% so we can continue the good work throughout without interruption and and keep these valuable programs in all nine districts.

Thank you so much.

Thank you.

This concludes in-person public testimony.

We will now move to the virtual queue.

I've started the five-minute timer.

We have four hands raised in the virtual queue.

Ian Grooms, please unmute and begin.

Thank you.

Good morning.

My name is Ian Grooms.

I would encourage this committee to insource more stormwater emergency capital improvement projects in fiscal year 2027.

According to an investigation from NBC San Diego, the city's emergency construction expenses rose by 84% in three calendar years.

In fiscal year 2024 alone, the city's stormwater emergency projects experienced a 10.5 million dollar budget overrun because corporations continue to raise costs for the city.

The city should not overpay for projects, especially when we have an enormous budget deficit.

Please reduce spending on outside stormwater contracts so that we can complete projects in a fiscally responsible manner.

Thank you.

Thank you.

The next speaker is Circulate San Diego, please begin.

Good morning.

My name is Arya Grossman, and I'm the policy manager at Circulate San Diego, and I'm here to comment on the vision zero funding priorities outlined in the memo.

As we saw, bike and pedestrian safety was named as a priority for eight of nine out of the nine council members.

It's great that you all acknowledge this as a priority, but if you earnestly want to make progress, you will support and fund the specific requests that Vision Zero Advocates citywide have come together and identified as measures that will do so.

Again, we are asking you to fix the Fatal 15, the 15 deadliest intersections in the city, lower speeds in school zones, and implement daylighting laws.

The transportation department has named the Fatal 15 and speed management as priorities for funding in this upcoming fiscal year.

This means that both advocates and city traffic engineers are saying that funding these fixes will save lives.

The transportation department estimates that fixing the fatal 15 will cost around 551,000.

That is such a small amount of money to make sure that the most deadly areas of our streets are made safer.

I understand that funding is tight, but much of the transportation funding that the city receives comes from state and federal sources that must be spent on transportation, which is a wholly separate bucket from other city funds.

Yesterday, around a hundred people gathered in Pacific Beach to honor the life of a six-year-old that was killed.

He was biking on the sidewalk with his family doing everything right.

How many children need to die before we decide to treat traffic violence as the public safety crisis that it is and make investments to write our course?

I call on you to make Hudson the last one and fund these priorities.

Thank you.

Thank you.

Our next speaker, Connor Robbins, please unmute and begin.

Good morning, Council.

My name is Connor Robbins, Chief Steward for Teamsters Local 986, representing San Diego Life Guards.

I want to thank you all for taking on the difficult task of building the FY27 budget and for thoughtfully considering input from your stakeholders.

I'm especially grateful for the support many of you expressed for city lifeguards in your budget memos.

And I'm hopeful those items with support will be reflected in the final budget.

One item I'd like to highlight is funding for lifeguard wellness participation.

This program is available to every firefighter, but not every lifeguard.

Although lifeguards are part of public safety, we do not receive many of the presumptive injury and illness protections afforded to police officers and firefighters, which makes access to wellness services even more critical.

These services focus on injury prevention and early detection, helping keep experienced lifeguards healthy on the job and serving the public.

I understand the fiscal constraints the city is facing, and I appreciate the support this item received from council members von Wilpert, Campillo, Moreno, and Ilo Rivera.

I remain hopeful that we can prioritize this investment in the future.

Thank you for your continued support of our city lifeguards.

Thank you.

Thank you.

Our next speaker, Andrew Hollingworth, please unmute and begin.

Okay, we can come back to you.

John Stump, please unmute and begin.

John Stump.

I've asked you to unmute.

Yeah, I'm sorry.

Um You're faced with a budget yet again.

And when you're doing budgeting, you should begin with the charter of San Diego, the city of San Diego.

And what that charter calls out as your primary responsibilities.

You know, we have advocates who are calling for continued funding of arts and lifeguards and other great things.

But what the citizens are paying a very high tax for those things that were laid out and called out specifically in the charter of the city of San Diego.

Focus on your basics.

And when the basics are all met, then you can talk about extras.

You know, it's do the meat and potatoes before you talk about cake and ice cream.

Thank you very much.

Good luck.

And oh, one thing else that I've noticed.

In the newspaper reporting, others, they talk about the shortfall in tourism or the shortfall in some other special fund.

The charter doesn't call for tourism.

That was a sales job by the hotel industry.

Focus on the meat and potatoes, and worry less about dessert.

It's not you're not a revenue-based budget.

You're a service-based budget.

Thank you very much.

Thank you.

And Chair, this concludes public comment.

All righty, thank you, Natalie.

I will now turn it over to committee members for questions and comments and entertain a motion.

We will start with Council President Pro Tem Lee.

Thank you, Chair.

First off, thank you to Lisa and the office of the IBA for your work on this report.

I I think I want to start off by looking at the broader budgetary picture that we are facing.

And I think some of the information that I think we will need as we head into this budget cycle to best really understand where our city stands in terms of the services we're providing with the revenue that we have and how we can best meet the challenges that we have.

I know in my memo and in many discussions, I've often um focused on our need to fund systemic underinvestment when it comes to citywide infrastructure.

Uh we're talking about streets, but also facilities that we know that have been deferred, uh not just for years, but in some cases for decades.

Um we have all discussed um trying to protect, and frankly, our responsibility to protect the uh needs of public safety and health.

Um, these are all items that we have continued to, I think sought to address, and we're trying to do so with limited resources.

Uh in my memo as well, I I think we often talk about the challenges that we face on providing housing uh and ensuring that we keep housing affordability um as the top sort of item in mind when we think about the cost of living for all San Diegans.

We all recognize that we're trying to do this with limited resources, uh revenues that are not uh increasing at the same rate as costs are uh in many of the same ways that our residents are facing each day as well.

So one of the things I I thought I'd ask um from the IBA's office is that something you have done in the past is really to look at the city's revenues, um, our general fund uh from a benchmarking status uh compared to other major cities.

And I don't think just in California, I think if um if you don't mind what my office might put together is a a small detailed request, I think of some data that might be helpful as we look forward because I think for the public we should have a an earnest conversation of where our city stands when it comes to our revenue and expenditures uh per capita as it compares to others.

Um and I think there are things that we can be proud of that we've been able to accomplish with our limited resources, um, but that also allows us to have an earnest conversation about the resources that we have available and how we're going to meet the moment um in the face of the challenges we've mentioned.

So I don't know that you have any comments to that, Charles, but certainly want to make you aware of the request.

Happy to take the request.

Um I think that we took a look at that about five years ago or so.

Um certainly happy to update that.

By and large, it's I think I'm gonna put this in the two categories.

One in terms of comparable benchmarking cities.

I know you mentioned national cities, not just cities in California.

I think both are important.

I think both are important, California in particular, because costs here for everything are slightly higher than in other parts of the country.

So to that extent, comparing the revenue we have coming in per peer um city where there are similar costs of doing business is worthwhile.

Um that said, we can certainly expand that to other large cities.

By and large, as a municipal entity, municipal corporation, at least what we saw five years ago, it was that we are bringing in less on a per capita basis than other comparable cities, um, especially when you look at areas that are of high cost of doing business areas.

Um that said, happy to update that analysis and happy to have that presented more formally as well.

Thank you.

I think we all have this suspicion.

I think when we've talked about other measures in the past, we've often discussed how San Diego's region is actually under resourced uh compared to some of our uh other entities within the region within the state, and I'm gonna suspect even when you look at some uh major cities across the country.

So um yeah, so that would just be helpful.

Um when it comes to these budget priorities, um, I appreciated that we had a better chance to understand where the city's finances were uh after the first quarter report.

As you might recall in my first um budget memo in September, uh I cautioned that we should wait to see where some items stood.

Um and this opportunity gave us a chance to really focus in on um some of the priorities that we have.

I'm gonna go ahead and make a motion um to support the the recommendation um to move this to the full council um with an addition that the IB has identified new priorities supported by four council members, and I believe that those should also be included as we have in the last uh and other actions as well.

Um let me just comment on that.

That of those priorities with four council members, uh, I think to me, one of the most important ones is the uh general consensus that we seem to have that across the board cuts is not how we should be approaching cuts um through the city.

Um in my report, I and thank you to the IBA for calling it out, specifically talked about consulting panda to to look at the programmatic uh utilization of services that we have through the city, so that as we're looking to make any reductions, that we are also keeping in mind that all of our residents through different areas of the city utilize our services differently, and that we do need to at least be able to acknowledge that and to make any cuts that we have commensurate to that as well.

Um so again, uh my motion would be move the item forward with the one recommendation to include the new priorities supported by four council members as identified in the IBA's report.

Thank you.

All righty.

Can we do a quick clarificate clarifying question?

Um, I want to be clear that um there was a miscount on the uh lifeguard wellness program, so that was supported by four continually.

Um but two there are items that had four support or support from four council members back in September, October of last year, retain four support or support from four council members.

Those are not new priorities that are supported by four council members, but I presume you would also like to maintain those in the budget priorities resolution as well.

Yes, yeah, we'd like to include both.

And um since you're addressing it as well for the lifeguards item, uh, if that was a miscount, then it would be nice to include that as well.

Great.

Thank you.

All righty, thank you for that clarification.

We have a motion on the floor by Pro Tem Um Lee to move um staff's recommendation with the amendment to include the items identified by four council members.

We will now turn over to Councilmember Ilo Rivera.

Thank you, Chair.

Um thank you, Charles Z and your team for all the the work on this.

Um appreciate Council President Pro Tems Um comments and questions as well.

Um I said almost everything I have to say in the um in the budget priority memo.

Uh I'm glad to see the additional um priorities that there seems to be a bit more consensus around.

Um definitely glad we caught the um the the count the counting error um on the wellness program for lifeguards um as we heard directly from them.

Um despite being frontline public safety workers, they do not receive many of the uh presumptive or automatic um coverage of the impacts of their job that firefighters and and police officers receive and uh the the wellness program is an important way of making sure we take care of people who are risking their lives uh and saving lives on a on a uh daily basis here in San Diego.

Um so glad to see that.

Um I spoke already about the the importance of emphasizing um impact and and the and being thoughtful about impact as we make the tough decisions that will be need to be made.

Um and and I am very much hoping that we can start that conversation in a better place uh this year than we have in the past couple of years.

Um so uh with that I am happy to second and uh we'll pass it back to you, Chairman.

All righty.

Um thank you for that.

Um I think um as as as always um I think there's going to be continued conversations um as we move forward.

Um it's my understanding that the mayor and his team are currently going through their um executive budget reviews um and and hopefully some uh meaningful productive conversations will happen um through that process.

Um, as always, I cannot stress enough equity is very important to me.

Um, ensuring that we are providing some facilities and access in in my district, um also in um eight and nine um are very critical um to me, and so I just want to make sure um that that just to reiterate no across the board um cuts.

Um I am not looking for that, and I think um part of this difficult conversation we really need to uh take a hard look and acknowledge that there is a clear difference between high resource areas and low resource areas and uh proceed accordingly.

So we have a lot of work in front of us.

Um, with that, we have a motion on the floor.

Um Natalie, um please call the vote and the motion passes 3-0 with council member Moreno Apsey.

All righty, thank you so much.

This concludes item four, and this brings us to the end of today's agenda.

Thank you to members of the public and staff for your participation.

I will now adjourn this meeting of the budget and government efficiency committee to our next regularly scheduled meeting, which is on Wednesday, March 4th, 2026 at 9 a.m.

We are adjourned.