Good morning, and welcome to the budget and government efficiency committee meeting of April 8th, 2026.

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

Thank you, Chair.

While 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 under the virtual queue by raising their hand before the virtual queue closes.

The queue will close when the last virtual speaker finishes speaking, or 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.

Chair.

Natalie, please call the roll.

Vice Chair Moreno.

Present.

Council President Pro Tem Lee.

Here.

Councilmember Ela Rivera.

Chair Foster.

Here.

Also attending the meeting today is Charles Modica and Lisa Byrne from the Office of the Independent Budget Analyst, Deputy City Attorney David Powell from the City Attorney's Office.

Rolando Charbell, Chief Financial Officer, Matt Yagin, Director of Policy from the Office of Mayor Todd Gloria, and Catalina Civuentes, Associate Policy Advisor.

If you're in person, please complete a speaker slip located at the entrance of the committee room and place it in the box indicated at the front of the room.

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 16692545252.

The webinar ID is 16040-8338 pound.

This information is also available on the agenda.

Please note that if you are watching via City TV channel 24 or online, there may be a delay, so please participate participate via the audio on your phone and meet your TV or computer when it is your turn to speak.

If you wish to speak on a particular item, wait for that item to be called.

And then raise your hand to speak by tapping the raise your hand icon, or if you're a call participant, press star nine on your phone.

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

Chair.

Each speaker will have two minutes.

And we have currently received one speaker slip here in the committee room, and there are currently six hands raised in the virtual queue.

We will begin with those in the committee room.

Blair Beekman, please approach the electoral.

Obviously, step one is learning to ask San Diego Council presents how they can better schedule their events to not interfere and to allow for plenty of time for San Diego Council meetings.

Um next step uh is to talk about things like the original DRA had a very clear point uh that uh the public can help facilitate the remainder of a public meeting if there is no quorum according to Robert's rules.

Council President Lacava at the meeting yesterday replied that the Brown Act is California state law and may possibly, if not probably supersede Robert's rules of order.

Um so we were at a bit of an impasse.

Um council person Lee offered back in uh November 2025.

If there's not a quorum at the end of a council committee meeting, uh, then the uh an item the public forum can be rolled over to the next uh council meeting where public speakers uh who were uh previously registered to speak at open forum can speak at that time.

Uh we need to be considering these ideas and other options and have a very clear path for the future uh to allow public forum if if there's no quorum.

It was really unacceptable what happened yesterday, and you guys have created a really bad habit that uh you gotta work on.

I want to be talking about the importance of how we can be addressing war and talking about peace and best practices in times of war.

Please allow those things.

It's positive good things.

Thank you.

Thank you.

This concludes in-person public testimony.

We will now move to the virtual queue.

I've started the five-minute timer for all those in the queue to indicate that they have non-agenda public comment by raising their hand.

Catherine Rhodes, please unmute and begin.

Hello, this is Catherine Rhodes.

And three weeks ago on March 18th, um, at the Rules Committee hearing, the rules committee forwarded our ballot propositions or two ballot propositions to uh the um a future rules committee um for consideration on to the November ballot.

The thing is that it's been three weeks, and no one from the mayor's office, no one from the IBA, nobody from the city attorney's office, nobody from the rules committee has called us to schedule a meeting so that we could go over and meet also with the um with the people from booking.com, the online travel agencies, and the San Diego County lodging industry, who was also there and was also very positive at least of our measure one, um, so that we could come up with new language to bring forth to you for your full city council consideration.

So, my question is when is somebody going to be calling me?

It's been three weeks so far, and so far I've heard nothing.

Um, if if you could forward this to um the mayor's office, I would appreciate that.

And then I wanted to mention um what it is.

The first one is just a clarification on um language in the municipal code for the definition of operator and writ.

That will give you um should give you about a hundred and twenty million dollars that you're currently losing.

And so I would like this to also be brought forward to your um this committee, the budget committee, so you guys could actually look at the um the budget info yourself and see if we could get some type of um amount of money that this possibly could give you so that you could literally solve all your budget problems totally.

And the other thing uh on this is our measure two, where the convention center tax of 3.5 is going to end in nine years unless a convention expansion expansion is built.

Thank you.

Thank you.

Our next speaker, Terry Ann Skelly, please begin.

Good morning, budget and government efficiency committee chair foster.

My name is Terry Ann Skelly.

As a planning group member, we've talked often about the enormous costs associated with the complex issues associated with the unsheltered.

That includes physical handicaps and chronic diseases, mental health problems, and drug addictions often co-occurring, and the expensive impact on our first responders.

As a parent, and after spending countless hours on parent and community boards, I'm well aware of the unfortunate health outcomes, especially mental health issues that drug use causes for all ages, but especially youth and young adults.

I wonder if we really comprehend what the financial consequences of having marijuana storefronts here in our city with its persuasive signage and advertising and billboards.

This visibility and promotion and availability threatens sabotages and diverts the lives of young people who will may decide that their anxieties and depression or confusion can be solved by smoking, vaping, ingesting high potency THC marijuana products.

Because after all, that is what is primarily sold at and delivered by these pot shops.

Good health is precious, and the city should only involve themselves in those business activities that will enhance good physical and mental health and decrease the cost for the city's first responders, the cost of homelessness solutions, and the cost to our neighborhoods and families from the many diseases and addiction caused by smoking, vaping, ingesting high potency THC marijuana products.

Prevention saves money.

Thank you for hearing my concerns this morning.

Thank you.

Our next speaker, Francine Maxwell, please unmute and begin.

Francine Maxwell, Southeastern San Diego residents.

When truth dodgers sit in a room together, our city public liability fund gets hit again.

This city council, you know that there are no pathways for African Americans, police officers.

You know that there's no pathways for black women and black men that are employed by the City of San Diego pathways to move up the ladder when you look at the disparity.

And so this council in our budget deficit should be mentioning to the community and giving us a presentation on the city public liability fund, especially since Mr.

Carter was just approved.

Everybody sat still when he rang the alarm about things that were occurring in the city of San Diego.

You had a chief race and equity officer, but now you have a director of race inequity that you have conveniently covered in the IBA.

So again, we keep spending more money, but you never discuss and you never share with the city constituents, our city public liability fund.

Time for the false misleading allegations that this city council continues to manifest.

You have your own city council members and their staff complaining about each other, knowing that the lower range employees could lose their position.

You're trying to take food off of people's tables.

People in this city need to stand up.

We need bold leadership at this time.

We can no longer continue payout after payout.

It's time for you, as you're leaving some of you and those that are remaining to stand up and let's expose what is happening to our city workers because you're excited about the unions, but everybody is not a union member.

Thank you for allowing me to speak.

Thank you.

The five-minute timer has concluded.

We have six hands remaining in the virtual queue.

We will take no additional callers after these six.

Becky Rapp, please unmute and begin.

Good morning, budget committee.

My name is Becky Rath, and I'm here today to raise some serious financial concerns about implementing the proposed social equity cannabis program.

Within the framework of the proposal, 36 equity permits would be issued.

Based on the city's own permit fitting structure and comparable programs across California, a program of this magnitude is estimated to cost the city between five and ten million dollars.

That includes staff time, environmental review, hearings, and appeals, which we know are common with marijuana projects.

These permits can cost 100,000 or more each in staff processing alone.

The program also includes direct financial assistance, administrative staffing, consulting, and ongoing support, which adds millions more.

So the question is at a time when San Diego is facing real budget pressures on infrastructure, public safety, flooding response, and basic services.

Is this the best use of limited public resources?

We're not talking about a self-sustaining program.

We're talking about a program that requires ongoing public investment with uncertain returns and a significant administrative burden.

This is a budget decision, and from a financial standpoint, this program is difficult to justify.

Thank you.

Our next speaker, Peggy Walker.

Please unmute and begin.

Good morning.

As a public health professional, I too asked this committee to take an anekal analytical look at the proposed seed program in terms of real outcomes.

We need to understand real costs for staff, administration, and social and treatment costs related to what has been called an American cannabis problem by repeated national studies.

The National Academy of Science, Engineering, and Medicine, which was chartered to advise government officials on pressing scientific matters.

For one, has warned that the message of marijuana's grave impact on health is not getting through to the public in spite of research studies documenting severe consequences of use.

The Academy reports that legalization with minimal oversight has allowed THC content to increase more than tenfold and irresponsibly allowed manufacturers to downplay cannabis harms and to exaggerate therapeutic uses.

It blames peace field, piecemeal legislation for fostering an unregulated industry focused on sales and revenue instead of mitigating health impacts.

The Academy is calling for urgent action to protect the public from the adverse effects of marijuana use, ranging from lower IQ and youth to increased rates of psychosis, suicidal ideation, cancer stroke, heart disease, and cannabis hypermesis syndrome.

Please consider.

Do we really want to add more costly marijuana businesses that only add to an unhealthy situation?

I join those who say no.

This does not justify the use of limited public funds.

Thank you for hearing my concerns.

Thank you.

Our next speaker, phone number ending in 870.

Please press star six and begin.

This is a repeat.

Last year, at the beginning of the budget cycle, I chose the word resilience as my guiding principle.

This year I chose the word opportunity because for me, the best way I can be resilient is to look for the opportunities in the challenges.

Right now, governments on all levels are uncertain in so many, many ways.

City, state, federal, and global.

Uncertainty provides a big challenge.

Yet the other side of that, which is always present, which is always present, is opportunity.

It was a bumpy ride.

Yet San Diego people seize the opportunity to participate and fight for a consensus-based budget.

Many voices were loudly heard.

Thank you.

Please keep speaking.

Please keep being heard.

You're heard.

Please remember that.

And you are so appreciated.

I find the best thing about opportunity is the chance to do it better together.

Let's do it better with our FY27 budget.

Thank you, everybody.

It's going to be a great day.

It is a great day.

Love you all.

Thank you.

There are three hands remaining in the queue.

Madison, please unmute and begin.

Hi, thank you.

As you consider the 2027 budget, I urge you to prioritize investments that reduce long-term city costs by strengthening public health now, especially when it comes to youth cannabis exposure.

The public health institute announced findings from a major longitudinal study published in JAMA Health Forum.

The study followed 463,000 young people and adolescents.

At teens who reported past year cannabis use had double the risk of developing psychotic disorders and double the risk of developing bipolar disorder in young adulthood.

They also face significantly higher risks of depression and anxiety.

On average, use preceded psychiatric diagnoses by nearly two years.

That strengthens the evidence that adolescent exposure is not just correlated with serious mental illness, it is actually a contributing factor.

Untreated mental illness shows up everywhere in our local spending.

Behavioral health services, homelessness response, emergency room visits, law enforcement interactions, and lost productivity.

Prevention efforts would be fiscally responsible.

The study also found higher rates of cannabis use among youth enrolled in Medicaid and those living in more socioeconomically deprived neighborhoods.

If we are serious about equity, we cannot ignore policies that may widen mental health disparities and increase long-term public costs.

Some ideas to shape the budget would be to ensure strong enforcement of local regulations that reduce youth exposure and high potency product promotion.

And also to evaluate cannabis related impacts through a public health cost lens, not just projected revenue, especially when it comes to the seed program.

If we want to reduce city costs over time, we must reduce preventable harm now.

Thank you.

Thank you.

Kathleen Lippitt, please unmute and begin.

Thank you.

Good afternoon.

My name is Kathleen Lippett.

And as a public policy researcher, I'd like to provide an often forgotten background of Proposition 64.

Written and funded by the marijuana industry, it is often in vote to justify equity and social justice, which was never mentioned in Prop 64.

It was the California legislature that passed the Cannabis Equity Act two years after Prop 64 passed.

It authorized the State Department of Cannabis Control to and provided funding and technical assistance available to local jurisdictions, often red meat to our local city governments who are run in the red.

Social equity is not a state mandated requirement.

The law only allows and encourages local governments to create their own equity initiatives using state funds.

It does not mandate it.

But providing exclusive licensing opportunities, fee waivers, financial support are provided by equity applicants who verbally assert that they were harmed by past criminal drug convictions.

Equity programs provide preferential treatment for applicants that self-report being of harm and criminal drug convictions.

The concept is discriminatory on its face.

And since discrimination for one category simultaneously discriminates against another.

Please do not waste any more taxpayer money.

Funding a program that is going to only harm your residents.

The last thing that our residents need, especially the homeless, homeless population, is more availability of high potency drugs.

Thank you for letting me speak.

Thank you.

And Chair, this concludes non-agenda public comment.

All righty.

Thank you for that.

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

Do we have any comments?

Hearing none, do we have any requests for continuance?

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

Natalie, please proceed with any public comment.

Thank you, Chair.

The public comment period for the consent agenda is now open.

The consent agenda includes item one, approval of the committee committee minutes from March 4th, 2026.

And item two, Fourth Amendment to vendor agreement and first amendment to sole source number 4249 between the City of San Diego and Risk Connect Incorporated.

We currently have one speaker who has submitted a speaker slip in the committee room, and there are two hands raised in the virtual queue.

Each speaker will have one minute per item for a total of two minutes.

And Blair, we have a speaker slip from you here in the committee room.

Please approach the lecture.

You've indicated that you wish to speak to both items one and two, so you will have two minutes to manage.

Hi, thank you.

I will try to uh keep my uh comments to one minute for one item.

Uh about the meeting minutes of last time.

It was about uh an introduction to um the equity department and what they'll be doing.

Um you had a few really good um committee meetings, uh council meetings last month on uh equity items.

It would kind of re- uh addressed uh what the future of the equity department will be doing.

Um I think they made incredibly good examples for um the future of our city, and I hope we can work with the last non-agenda public comment to address concerns.

Um there's a lot of hope for the future of the equity department, how they how we talk about the future of our surveillance technology, that we can still have those conversations in times of war, how we develop those conversations, the best practices.

It's it really develops peace for everyone.

Thank you.

Thank you.

This concludes in-person public testimony on the consent agenda.

We will now move to the virtual queue.

There's one hand raised in the virtual queue.

Phone number 870.

Can you please unmute and indicate which item or items you wish to speak to?

Thank you, Natalie.

I will speak to number two, please.

Great.

One minute, please begin.

Thank you.

Uh, under representation, African American, Latino, female, in professional.

45 employees, all professional in just that one category.

30 of 45 are white.

It is fairly balanced in that category between the male and the female.

Transition on this item, transition to a new claims management system.

Clear AI.

Excuse me.

Uh oh, current system is 24 years old.

So the system preserve the system.

I gotta say this.

System supports workers' comp, long-term disability, public liability, loss recovery.

Yes to these amends.

Yes to these amends with risk connect.

This is a biggie.

I I really appreciate it, and I'm glad it's being done.

Thank you, love to all.

Thank you.

And chair, this concludes public comment on the consent agenda.

Thank you so much.

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

Do we have a motion to approve the consent agenda?

We will start with Pro Tim Lee.

I'll move approval.

All right.

Second by uh council member uh the vice chair uh Moreno.

Um seeing no other members on the lights.

Um we have a first and a second, and we will now um have each member register their vote.

And that passes unanimously 4-0.

All right, thank you so much.

We will now move on to our discussion agenda.

Natalie, please introduce item three.

Item three, extension of the Duncan Solutions contract.

All righty, staff, please introduce yourselves for the record and let us know how much time you'll need for your presentation, and feel free to begin.

Hello, good morning, committee members.

My name is Bethany Nokan.

I am the parking program manager with the Office of the City Treasurer, and with me today I have Jonathan Carey.

He is the deputy director of revenue collections with the office of the city treasurer, and we will need about five minutes for our presentation.

Um good morning.

We are this presentation is to uh seek approval of an ordinance for a contract extension with our parking citation vendor um Duncan Solutions.

Um just wanted to cover a little bit of background about our program, our parking administration program that we handle internally.

Um so our program, we process parking citations, uh payments, appeals, permits, low-income payment plans, and answer calls from the public.

Last fiscal year, we processed approximately 514,000 parking citations, 446,000 citation payments, 30,000 parking appeals, 13.4,000 residential parking permits, answered 48,000 calls from the public, and mailed approximately 500,000 parking notices.

And all of that was made possible through our vendor, uh Duncan Solutions, which ultimately provides our software for our parking citation processing system.

Um, through the system, they provide real-time updates, compliance with the California Vehicle Code, 24-7 customer access for payments, appeals, permits, etc.

Um, they provide us custom reporting and DMV integration for the parking processing of parking citations.

And just a little bit of background on this RFP.

So the uh city initially issued this RFP back in March of 2021.

Through this process, the vendor Duncan Solutions was selected, and the contract was issued for an initial five-year term with five optional one-year extensions into that contract.

The initial five-year term is set to expire this November, November 9th, 2026.

Uh, so ultimately today we are just seeking approval of an ordinance to execute uh the extension of that contract of the optional five one year extensions, and it can um increase the not to exceed amount to approximately six million dollars.

And it can increase the not to exceed amount to approximately six million dollars.

And through the remaining five years of this contract, that will be the remaining of that not-to-exceed amount, which is approximately $3.1 million.

And that concludes our presentation, but we are happy to answer any questions.

Thank you so much.

Natalie, do we have any public comment?

Thank you, Chair.

The public comment period for item three is now open, and we have received one speaker slip from an individual in the committee room, Blair Beekman.

Please approach the lector, and you'll have one minute to speak to item three.

One minute.

Cool.

Hi, Blair Bakeman.

Uh thank you for this item.

Um I guess you know, with parking issues that we're having, so many of them now.

Uh this would be bound to come up.

And it seems like you guys have been trying to plan this low key.

You know, with the great success we've had with towing issues of the downtown area, and that you're trying to address a more equitable idea of towing.

I hope this, you know, we were reminded the importance of uh ticket ticketing is should be limited as much as possible for our future.

It's the best way to be working.

I'm also interested in how there is the idea for the Balboro Park parking issues.

Where is uh parking allocation money actually going?

Um, I think a little bit maybe going to the uh general fund still, and we have to be clear on that.

And we don't have to be afraid of that conversation.

I hope we can that can be an open conversation to learn how that can be an open conversation.

We do that those steps together.

Thank you.

Thank you.

This concludes in-person public testimony.

We will now move to the virtual queue.

I've started the five-minute timer.

We do have one hand in the virtual queue.

As a reminder, each speaker will have one minute.

Phone number ending in 870.

Please unmute and begin.

Uh thank you, Natalie.

Uh Joyce and Yata.

Uh contract expires November 9th of 26th.

Thank you for adequate time.

About six million dollars with current change.

And then for me, with current change in parking fees, are they prepared for increase in citations and customer service complaints?

Do they provide adequate metrics for evaluation of the transition period for the new parking fees?

Um, let's see the backup uh great EOCP uh report, 13 pages on the program.

Love that.

Um, they are exempt from an EOC evaluation report because they only have 15 employees.

So, yes to this item with Duncan.

Thank you.

Thank you.

And chair with no additional hands in the queue.

This concludes public comment on item three.

Thank you so much.

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

Happy to have a first.

We have a second.

Second by Pro Tim Um Lee.

Seeing no other um members on the lights, we will now have each committee member register their vote.

And the motion passes unanimously 4-0.

Thank you.

This concludes item three.

Natalie, please introduce item four.

Item four, ordinance approving contract with ask reply incorporated, doing business as B2G now for contract and labor compliance software.

Chair.

Thank you so much, staff.

Please let us know how much time you need for your presentation and feel free to begin.

And of course, introduce yourselves, please.

There we go.

Good morning, everyone.

Good morning, Chair Foster and members of the committee.

My name is Aaron Leah Endra Lunis.

I am a deputy director with the Office of the City Treasurer.

I'm joined today by Christian Silva, EOC program manager.

I'll need approximately five minutes for our presentation.

Today's item requests authorization to approve an agreement to provide contract and labor compliance software services for a five-year term from the date of award with five additional one-year options.

I'll provide a brief overview of the system, operational needs, and contract terms.

This system supports multiple city programs responsible for contract and labor compliance.

Within the Office of the City Treasurer, the labor and wage division includes the Office of Labor Standards and Enforcement and the Citywide PLA program, which enforce cities' living wage and prevailing wage ordinances and monitor compliance with city, state, and federal laws.

In purchasing and contracting, the equal equal opportunity contracting program admitters that administers the SLBE program and overseas subcontractor participation, payment compliance, and certification.

This procurement was coordinated effort across these programs to develop a unified system that reflects expanded operational needs and aligns with best practices.

The system is necessary to support compliance with a wide range of city, state, and federal requirements.

The city currently utilizes PRISM compliance, which has been in place since 2009.

Services are provided under a sole source agreement.

The current agreement expires on June 30th, 2026, with a planned extension into fiscal year 2027 to support a phased transition and ensure continuity of operations.

The proposed system provides a unified approach to managing four key areas of contract and labor compliance.

First, labor compliance and certified payroll management.

It supports awarding body requirements for collecting, reviewing, redacting, securely storing, and maintaining certified payrolls submitted by contractors and subcontractors.

It also helps flag potential violations such as underpayments and supports enforcement activities through site visits and worker data, compliance documentation, and tracking of enforcement notices.

Second, workforce and diversity data management.

This allows the city to track workforce participation, including worker demographic data and local hire outcomes, which are required for PLA compliance and other city, state, and federal reporting.

Third, contract compliance management.

The city supports pre and post award EOC compliance activities, including subcontractor participation tracking, payment monitoring, workforce reporting, and equal employment opportunity compliance.

And fourth, the SLB pro SLBE program certification management, including a City of San Diego branded portal for certification applications and a real-time directory of certified firms.

Additionally, the system includes secure document management, integration with city systems such as e bidding and ERP, and will serve as a shared system of record across OLSE PLA program and equal opportunity contracting.

The system will allow the city to improve data accuracy, reduce manual processes, and support a more efficient data-driven compliance monitoring.

On February 25th, 2025, the city issued a competitive request for proposals.

Four proposals were received and three were evaluated based on responsiveness to the RFP.

The evaluation process based on criteria established in the RFP included a review of written proposals in system demonstrations.

Based on this evaluation, B2G Now was determined to best meet the city's operational and technical needs.

Today's requested action is to move this item forward to council and authorize an agreement with B2G Now for contract and labor compliance software services.

The agreement includes an initial five-year term with five additional one-year options for a maximum of 10 years.

This agreement will authorize expenditures not to exceed 1,303,899 for the initial five-year term.

The agreement also includes five additional one-year options increasing by 5% annually for an additional potential amount of 1.6 million, resulting in a potential contract amount not to exceed 2.9 million over 10 years.

Funding for the agreement will be shared by the Office of the City Treasurer and the Purchasing and Contracting Department.

This concludes our presentation, and we're happy to answer any questions you may have.

Thank you.

Thank you for your presentation.

Nellie, do we have any public comment?

Thank you, Chair.

The public comment period for item four is now open, and we did receive one speaker slip here in the committee room.

Blair Beekman, please approach the elector and you'll have one minute to speak to item four.

Hi, thank you.

Uh Blair Bakeman.

Um this is a really nice item.

Or my voice, my chest in my voice.

Um thank you for it.

It introduces what you'll be talking about for items six and seven, I think.

So um thank you.

This is like our good stuff.

This is the fun stuff to work on.

Thank you.

Um I hope overall in these good accounting practices and being accountable with ourselves.

Um, we really take the time and care to consider uh our own city council how they can be more accountable within the public meeting process, and then we can be working on good procedures for the future of the process.

What you'll be talking about prevailing wage and living wage issues that can very nicely fit into this to the work here.

And uh thank you for these sort of good uh accountability practices.

Thanks.

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 one hand raised in the virtual queue.

Phone number ending in 870.

Please press star six and begin.

Uh how much time, Natalie?

One minute.

Okay, thank you.

Uh uh Joyce and Yata.

I can see why an ordinance is needed.

This sums it up to provide contract and labor compliant software.

That's a biggie.

Uh EOC, 137 employees under representation, female in tech, Latino in management and financial, professional and sales.

Hey, no workforce agreement.

Yet the EOC says it was submitted on April 4th of 25.

I tried to find it, yet the contract is 289 pages.

And I wondered if this is a red flag.

I'm starting to look at company reviews on these items.

There was nothing for Ask Ready.

And for the B2G now, there was one, but the review was not very good.

So I don't know if you we can trust these company reviews.

So thank you for listening.

This is a very important item.

Thank you.

Thank you for it.

This does conclude your time.

Thank you.

Thank you.

And chair with no other hands in the virtual queue.

This concludes public comment on item four.

Okay, thank you so much.

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

We will start with council member Ilo Rivera.

Thank you, Chair.

Thanks for the presentation and work on this.

Um I know we've got some items later on.

We'll get into kind of the broader issue here, but I just want to make sure that I understand from a kind of day-to-day perspective.

You're we've talked about this before, you all are overwhelmed with the work that you have to do.

Um, you're not resourced as well as you should be, et cetera, et cetera.

Um so on a day-to-day basis, how is this going to help you all with that problem that you face on a day-to-day basis?

I can take those questions for OLSC and PLA and Cresh and wants to answer for his team.

Um, this will expand our ability to be able to identify wage theft on our city contracts by opening up some of my staff's time, because right now um our staff is doing a lot of vendor trainings to actually train the contractors of how to utilize a system.

They do a lot of troubleshooting on how to use a system.

Now that is going to be part of this contract, that they are going to have that customer service available.

So that frees up my staff's time to actually be doing the audits and compliance monitoring that's required.

We are moving away from having kind of a fragmented process of having a system and a shared drive.

This will allow the compliance documentation rather than be shared on a folder in a shared drive, but also using a system.

It will be attached directly to the contract so that we can look in real time whether these contractors, multiple subcontractors, have submitted this documentation.

Also, for us, it um has an expanded ability to be able to flag potential violations, whether it's apprentices working alone, overtime, miscalculations.

The system will is more robust and allows our staff to really focus on those audits.

Um so that's just some of the things.

One of the features that I really enjoy is there is a cross um analysis when my staff goes out and does site visits and may interview someone working as a plumber and then goes and looks at the certified payroll and it says that they are actually getting paid as a laborer.

This system actually will cross analysise.

I don't know if that's the word, but that data and be able to flag those types of violations.

So it takes a lot of those manual auditing processes and puts it in real time.

So for us, it really gives my staff um a stronger enforcement tool.

Great.

Um that's how I I understood it.

Sometimes we reference efficiency as kind of a I don't know, like a kind of a vague concept and um efficiency is generally good, but like in what like what are we trying to be more efficient in and what is the end result of that efficiency?

And in this case, if it's um expanding the ability for you all to do the work that you are um that that is your mission, um that that is a objectively good thing.

The last thing because I I always think this is important to ask whenever we're um moving toward uh additional automation.

Um I assume that there are safeguards in place to ensure that we're double checking that the flagging that is happening within the system is is accurate.

Um I think it's completely understandable for uh a set of folks who are kind of drowning in their work to um want and appreciate assistance that comes from automation and it's important to ensure that we don't let accuracy slip uh in that process.

And so you all are going to be taking those those measures.

That's a great point.

The system doesn't just say, hey, there's a violation, press a button and and move on.

It is a tool that our staff can utilize to be going to be able to go in there, actually verify whether those violations are occurring.

I always refer to source documentation.

So not only are they submitting the contractors and subcontractors, submitting certified payroll to our office, we use source documentation such as actual requesting itemized wage statements, verifying with worker interviews, and having a comprehensive audit.

So it is a tool in our tool belt rather than a complete violation automation.

Yeah, appreciate that.

That uh distinction between uh being a tool and being a substitution uh is super important.

Uh with that, Chair, I'm happy to uh move uh SAP recommendation here.

Thank you so much.

We have um a motion by council member Ilo Rivera.

I will now turn to uh Pro Tim Lee.

All right, we have a second um by Pro Tim Um Lee.

I don't see um anything.

Um I do have just a couple of um uh I guess I'll say questions.

Um but we currently have an automated or online system now, correct?

This is not a new process to the city of San Diego, correct?

No, we've been using the system PRISM compliance since about 2009, and there are individual model modules within that system that speak to some of the services that are within this RFP.

Okay.

Um and I guess just if I can ask this question, it's my understanding that um the current vendor that's being selected, they are not a um they do not have a certification or are not a minority-owned business, correct?

That is correct, they are non-certified.

Non-certified firm.

And I believe um PRISM is a minority-owned firm.

Is that correct?

Yes, um uh minority and women-owned business.

Minority and women-owned business.

Um, and I guess if you can help me to understand um, and I want to say this, it looks like the dollars associated with the contract appear to be a significant increase into what we are currently um how we have been trending with our current vendor that we have under contract.

Is that accurate?

Looks like we're taking on almost a hundred percent, a hundred percent increase.

Uh yes, it's um it's about a ninety-two thousand dollar difference.

Okay.

But that does equate to almost a hundred percent increase on an annual basis, correct?

Um just under a hundred, yeah.

Okay, so so we're increasing, we're increasing cost by a hundred percent over the next 10 years.

We're moving to a non-certified firm from a from a certified firm, correct?

Uh yes, that is correct.

And also in regards to our opportunities to recover cost, I know with it's my understanding with PRISM, there was no cost by the contractors.

Moving to this new system, is there now a cost for the contractors?

At this time, we don't have a cost to the contractor.

That is something that we are currently exploring the idea for.

But as for the exponential input, hold on.

Just before you leave that, there's no registration fee or anything with LCP tracker and BG2 now.

Contractors use that system.

If I go to the PLA folks and say, hey, do contractors have to pay a registration fee or pay a fee on their end, they're going to tell me the answer of no.

So um I can't speak to L CPT.

I'm sorry, well I'm I'm doing like an asterisk.

I'm I'm I'm saying yes and so right now the city does not have a cost to contractors.

If contractors want to use PRISM, the the system we have now has something called PRISM Genie, which they do have to pay for for ex the extended services within that system to allow their payroll to speak to the system.

So if they want to utilize that service, they can okay.

I'm not familiar with a if you want your if you want PRISM to speak to their system.

So there I'm gonna go back to LCP tracker.

So my understanding there was a fee on the contractor side, not a city user fee, but just a fee by the vendor.

Is that the case or is that not the case?

Yeah, so just a point of clarification from there.

So the new vendor, B2G now, um has purchased out a company called eComply for their um wage module.

Um so they are no longer associated in this with this contract with B LCP tracker.

So it's going to be B2G now doing their um certification and then um with eComply that's now under the umbrella of B2G now as they bought them out for the wage compliance.

Okay.

All righty.

Um I I think what I will do is um I'm gonna have my office um circle back to request some additional um information so I can better understand this.

Um we have a first uh I I'll conclude there.

I won't be supporting um this item um as um one I don't support um as we are um have as we've been doing business with the certified firm since 2009 um in and you know with the work that went into development and establishing the system um and now I'm um looking at what took place with this RFP as to what I know um currently I'm not going to be supporting this um item um but I would like to get some additional information um as it um moves to council um circle back um so I can request that detail and um work with personal contracting treasurer's office um to do that um so with that um we have a a motion um and a second we will now have um each uh committee member register oh I'm sorry cheers like we'll um Council Maria Rivera is is there anything that you'd like us to work into the motion in terms of information that comes understanding you won't be supporting the motion for the reasons you stated but also happy to include uh any specific requests for information that you think are pertinent and important for the the full council for in for those of us who um you know might support the the the motion um to have in front of us um as a body um i appreciate that um council member but just would to make sure that I get the terms correct and and and so forth I don't think we'll do it real time here okay let me fall back request the information um and then um we can have uh the necessary additional discussions if need be um as this item moves to council thank you um so with that we have a motion on the floor um and and also I do just want to highlight that you know this is very critical um in in regards to um the things that I monitor we need to make sure folks are getting paid correctly um but also I think we need to have some more conversations um with the state as they took they really um took our ability to um as we do enforcement and how that enforcement process works um to where it really put us at a disadvantage um and so I think there's some things we need to have um Paul Walt and his department in um as we go through and do some additional lobbying um with the state in regards to reimbursements as to the requirements that they're putting on um the city we did not get grandfathered in like the city of LA um in certain things um so with that um again we have a first and a second um now you please um call for the vote and the item passes 30 with committee with chair foster voting no thank you so much that concludes item um four and you please introduce item five item five authorization for city of San Diego fiscal year 2027 tax and revenue anticipation notes thank you so much 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 members of the committee Jody Pantlu assistant director with the department of finance and presenting with me today is Richard Eyre Financial Operations Manager.

We also have a department director Ben Bataglia available to answer any questions.

We'll need about seven minutes thank you.

The item for your consideration this morning is the fiscal year 2000 2027 tax and revenue anticipation notes.

Trans differ from long-term financing tools such as general fund, these revenue bonds are water and sewer revenue bonds, which are used which which are issued to fund capital projects over multiple years.

While significant expenditures, including pension payments, occur early in the fiscal year.

Major revenue sources such as property taxes are not received until later in the fiscal year, starting November and December.

This timing gap necessitates the short-term cash flow borrowing.

In determining the size and the need for issuing a general fund trans, all legally available funds are evaluated to ensure prudent borrowing levels.

This borrowing is authorized under the California government code and city charter section 92, and the final borrowing amount is certified by the city's chief financial officer.

The city issue trans historically and last issue trans in fiscal 2013.

Several factors have contributed to the need for a TRAN issuance in fiscal 2027.

These include the exhaustation of the COVID-19 relief funds, the drawdown of the general fund excess equity, and the absence of contributions to the general fund reserves since fiscal 2023 due to ongoing budgetary pressures.

In addition, as noted earlier, general fund relies on other available funds or policy funds to meet cash flow needs within a fiscal year.

A recent reevaluation of these policy funds resulted in certain funds being excluded from the use for general fund cash flow purposes.

Collectively, these factors have led to the projected issuance of trans in fiscal year 2027.

With that, I'll turn it over to Rich.

Thank you.

Thanks, Jothi.

Good morning.

Our current financing plan includes an issuance date of July 1, 2026 to coincide with the outgoing pension payment and a maturity date of June 30th, 2027.

The size of the note issuance will be determined by the maximum projected general fund cash flow deficit in the FY27 adopted budget.

Current projections are in the 300 to 350 million range.

After the notes are issued, and over the course of the fiscal year, the city will be required to set aside general fund revenues in a separately held repayment fund in advance of the final maturity in June.

These deposits, which are portions of the total principal and interest due, will typically occur after large influxes of property tax receipts likely to begin in December or January.

Slide highlights some of the key elements of the TRAN issuance.

The city will be the issuer of a single series of short-term notes.

They will be tax exempt notes payable from available general fund revenues and are projected to have a 12-month maturity.

The interest rate will be fixed for the term, and the notes will be sold via competitive public sale, although we will have the option to pivot to negotiate it if necessary.

The related documents that the city council will be asked to approve include the financing resolution, no ordinance is required for approval of these notes.

The accompanying document, the preliminary official statement, paying agent agreement, and notice of sale.

Recent estimates included in the accompanying staff report to this item assumed a borrowing size of $300 million and an effective interest rate of two and a half percent, which equals approximately $7.6 million in total interest due on the notes.

The interest cost is expected to be partially offset by interest earnings on the set-aside funds as well as the positive monthly fund balances created by the injection of cash from the notes at the beginning of the fiscal year.

A more complete picture of the borrowing sizing net interest costs and the impact on cash flows in the FY27 adopted budget will be included in the POS and shared with the City Council in early June.

Our financing team includes our trusted outside consultants of KNN public finance as a municipal advisor, straddling as note and disclosure council, and our trustee slash paying agents will be uh US Bank.

Our current timeline anticipates coming to council for approval on June 8th or 9th, same week as the planned budget adoption.

We would release the POS a few days later and price and sell the notes on or around June 18th.

The issuance would close and proceeds transferred to the city on July 1, same day as the city's pension payment is expected to be released.

Again, we are requesting the committee forward uh to the city council for review and approval, the related actions authorizing the issuance of the FY27 tax and revenue anticipation notes.

This concludes our presentation.

Happy to answer any questions.

Thank you for that.

We will now go to the IBA for comment.

Great.

Thank you, Chair Foster.

And thank you, Josie and Rich, for the presentation.

So this committee heard the city did last issue trans in 2013, and we have not made use of them since then.

However, they are a relatively common cash flow tools that cities can rely use when they rely on tax revenue that comes in on a different schedule than when major expenses go out.

As you've seen, there is a potential for some potentially positive offsets and impacts on the city's overall financial position, depending on interest rates on the trans themselves and if any interest income can be generated from available fund balances they might make available.

Given the general fund's cash position moving forward with trans makes sense, although it will be important to monitor interest rates and the total amount issued as this moves forward to council, as well as the cash flow requirements and the plan for the general fund and the trans themselves.

The Department of Finance provided my office more detailed cash flow projections yesterday afternoon.

We are currently going through them and we may have additional comments on this during our review of the proposed budget at council.

But at present, we recommend that the committee move forward with approval of this item today.

That concludes my comments.

I'm available for question as is the Ku Patel from my office.

Thank you for those comments.

Natalie, do we have any public comment on item five?

Thank you, Chair.

Yes, we do have one speaker's left from an individual in the committee room, and there are two hands raised in the virtual queue.

Blair Beekman, please approach the elector, and you'll have one minute to speak to item five.

Hi, Blair Beekman.

Thank you for the really engaging public uh for the uh committee discussion on the previous item from everyone.

It was really nice to hear.

Thank you.

Um for this item, boy.

It sounds like uh you're trying to uh develop creative ideas for our future of our budget uh budget issues.

Thank you.

Um it's important.

Uh we're you're finding ways to be creative to be considering the importance of social services with these sort of programs.

Uh uh these funding stream ideas is really uh needed as always.

Uh social services are first and foremost as a city government, I think.

Um and to note, I'm not fully sure the future uh parking allocation uh fees for the Balboa Park area.

Uh I hope we're in a process of how to make that more clear for all of us to say that more clearly.

Thank you.

Thank you.

This concludes in-person public testimony.

We will now move to the virtual queue.

I've started the five-minute timer.

Catherine Rhodes, please unmute and begin.

You'll have one minute to speak to item five.

Wonderful.

Um, hi, Catherine Ribbs.

And I want to say, you know, the ballot measures that are uh that Mandy Havlick and I are bringing forward will bring in 250 million dollars that will set solve your total structural budget deficit.

If you guys get on board, I would like some of you to actually call me so you can be the champion on this issue, and you could understand the wonderful opportunity.

And I would also like um for you to put this um issue of the two ballot measures onto your um your your budget um in government efficiency agenda so you could see how just these little wording changes alone will bring in a hundred and twenty-five million dollars that you don't have.

Um, and then you know, the the other top thing, you're gonna be losing your top if we don't have a convention center expansion, and I don't see you guys doing anything about it.

Thank you.

Thank you.

And our final speaker in the queue with their hand raised.

Phone number ending in 870.

Please press star six and begin.

Uh thank you, Natalie.

Uh Joyce and Yata.

The general fund is something I am being very protective of now.

My points on this item are revenue and expenditures balance, structural budget deficit priority, general fund cash flow.

And thank you, Councilmember Dr.

Campbell.

She talks about the pathetic percentage of our share of the property tax revenue.

That really shocked me when I first heard her say that.

Thank you so much, debt management for your work on this very important item.

Please treat my general fund, our general fund with tenderness and care and nurture it for us.

We need it.

I approve this item.

Love to all.

Thank you.

And Chair, this concludes public comment on item five.

Thank you so much.

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

We will start with Council President Pro Tim Lee.

Thank you.

I don't know if the mic words.

Hello?

Okay.

Uh well, thank you, Chair.

Uh thank you for your presentation and sharing the uh use of these notes um and the fact that the city hasn't put them to use in some time.

And so with that, I'm gonna go ahead and just move um this item.

Thank you.

Thank you so much.

We will now go to we have a first by Pro Tem Lee.

We will now go to Vice Chair Moreno.

Thank you.

Um I appreciate the presentation and also uh the work from the finance department.

Um and I do understand the purpose of the item before us today.

At this point, um I don't have the confidence that this administration is prepared to make um some very difficult decisions uh when it comes to um increased borrowing.

Um I voted no on the budget last year for several reasons.

Um I will say um that the city has known for years that we were headed towards this kind of shortfall.

And instead of taking a hard look internally at reducing costs, eliminating waste, and protecting the services our communities rely on specifically D8.

Um, what we got last year was across the board cuts.

Um communities of concern like mine, like the one that I represent were impacted uh more than others, uh specifically when it came to reductions of library hours and reduction of programs um at parks.

Um I think it's critical that we demonstrate to our communities that fiscal responsibility should be at the front and center before moving forward with this action.

Um maybe on April 15th, I'm gonna see something different.

Um I understand that this is just an issuance.

We're not actually uh it's preparing us for um for um the next step, which would be basically to borrow the money.

This is just the first step, and I do recognize this that and maybe when that comes back.

Um I think you said in June, right?

That's when it's gonna come back.

Um once I have seen the mayor's budget.

Um I I would be a yes on that issuance, but at this particular moment, I am a no um on this action before us today.

So thank you.

All righty, thank you for that.

Um I don't see any other member we'll go to council member Ilo Rivera.

Thank you, Chair.

Um I think the the points made by Councilmember Moreno are important.

I think no recognizing that this is a this the step um step one in the process.

Um and um what would you say the alternatives to this area if I maybe I could take that in the context of the budget that we're about to release next week.

So this is a tool that the IRS is providing municipalities, counties for us to basically be able to borrow for a shortfall in our cash position because property taxes come in December, April, right?

So what this allows us to do is to take that cash invested at a higher yield, and that'll be about five million dollars in net uh uh interest earnings that we will have that will avoid having to cut additional an additional five million dollars from the budget.

So this is uh an important tool.

Uh it's um it's a tool that basically only municipalities and counties have.

Uh so it will be uh very important in terms of reducing the the amount of reductions that are coming.

So if you can just add council member, the other thing to keep in mind is the cities have a very large payment that goes out on July 1st of each year, which is our contribution to the city's pension fund.

Uh the city's the general fund cash resistant position is not in a position where we can make that payment absent these unless we find another source to draw from.

This being really short term, it will be paid off in the fiscal year that it is actually taken out, and it really is just bridging that cash flow between when that pension payment is made and the city's other obligations that it pays for as well, and when those large influxes of tax revenue come in, largely the property tax payments that Rolando just mentioned that come in in December and April.

Got it.

Well, with that and Ruland, if I'm understanding you correctly, you're here's the cash flow situation that needs to be dealt with.

And you see this as actually a for lack of a better way of saying it, a revenue opportunity based on the rate of return that you'll get with the investments made with the with that cash.

Is that correct?

That's exactly exactly right.

So the interest rate that uh our team was uh showing in in the presentation was about two and a half percent.

Typically the investment returns with the city treasurer have been around four percent at least recently.

So there is a bit of a uh arbitrage there that we're able to uh benefit from, and uh that would yield based on the size of of the issuance, about five million dollars and additional interest earnings that help us with our shortfall that that we projected in our five-year outlook.

And uh all of this is making sense.

I do feel like it's important to ask.

Um there's the world as it normally works, and then there's the world today with incredible amounts of volatility ranging from well.

Everyone knows.

They don't even need to say it.

It's a volatile world right now.

Uh, are there any circumstances under which that volatility would have a step back from this or if not step back, pivot in the direction you anticipate going?

And what what might those circumstances look like?

You're absolutely right.

There's a lot of volatility.

Uh typically, and and maybe Joth and Rich can help me in that since their experts on in this area.

Typically, interest rates will parallel whatever is happening.

The the greater the risk, interest rates increase on both ends, both for this fixed issuance as well as the investment returns that we would see on the treasurer side.

But uh I'll let Jothia and Rich uh expand on that uh Yes, uh councilmember, when we uh uh wrote the staff report, we had assumed a two and a half percent borrowing rate that had a little bit cushion.

Yes, there has been a lot of volatility in the market in the past few weeks.

Um as of yesterday when we checked with our municipal advisor, the borrowing rate is still uh slightly below uh two and a half percent, but again, we can't exactly predict what it's going to be in June.

But to the point Rolando was making, typically, again, uh, you know, we can predict interest rates, but yes, typically we are borrowing at a tax exempt rate, but we are able to reinvest at a taxable rate, and typically there is a differential that would benefit our system.

Okay, thank you.

Um I'll second the motion.

Alrighty, thank you for that.

Um we have a motion by Pro Tim Lee, a second by council member Ilo um Rivera.

Um I do have um just with no other members on the lights, just a quick question.

I believe you indicated the last time that this um that the city utilized uh I guess this option was in 2013.

Why has it not been used since then?

If you can help me to understand that.

And two, is this something that we are going to is this going to come up on an annual basis as we're talking short-term debt, because I'm assuming our pension payments not changing, uh, at least not drastically in in when it's due and in how partial taxes come in and so forth.

Yes, uh council member, yes, before 2013, we were issuing it annually.

I I don't know exactly how far back, but I joined the city in 2002, and since then we were issuing trans on an annual basis.

Um in 2013, uh there was an effort to consolidate when I was referring to in my presentation this notion of policy funds, the funds that are available for cash flow purposes.

There was uh consolidation of those funds and based on the budget size at that point of time uh and the available cash uh position for the general fund for cash flow purposes, it was considered not necessary at that point.

But again, like some of the factors I listed in my presentation, fast forward to 2026.

I think starting this current fiscal year, we started re-evaluating given uh our cash position and we are bringing this forward now for 2027.

And counselor, if I could add, as a general rule, um the IRS has pretty strict requirements on municipalities issuing debt on a um tax exempt basis because it is an advantageous position for the city.

Um there are general regulations against cities and public agencies issuing on a tax exempt basis, and then knowing that they can get a higher rate of return by investing in taxable markets.

Um when we are issuing debt for capital projects, you'll have a requirement to spend down debt that's issued within a certain time frame, one to two years.

Otherwise, you are subject to paying arbitrage penalties.

We are allowed to make some interest income on that debt, but in that case, it needs to be paid in a certain amount of years.

In this case, the uh short-term debt that's issued has a requirement that it's actually necessary for the city operations to go in to or to be maintained.

Uh so just in general, um, this is not and should not be looked at as a mechanism for just stable revenue coming into the city in a general.

This really isn't as needed cash flow kind of approach.

And to the extent that there are some potential financial benefits, we're allowed to realize them, but really on a limited and short-term basis.

Okay, so what I'm hearing is should be a justified need to move forward and use this tool.

Um, thank you for that.

Um I guess um uh I must say if we could just talk about process moving forward quickly, uh, because I kind of feel you know what we have talked about is, for example, pension payment that's due.

Um I guess how are we going to be able to monitor and have some type of understanding oversight as to when this is used, what what's driving the use and in and how are we what's the plan with that?

How is that pro what does that process look like?

Is there now a conversation in our budget monitoring process?

Is it come up in our fourth quarter, third quarter?

How does how are we going to monitor how this is used and and what's causing the need to actually expand the dollars?

Uh council member, in terms of uh when we bring this forward uh this item forward to city council, we will have uh the backup cash flows that uh monthly cash flows that will show when the money comes in, when the money goes out.

Um bulk of the proceeds actually we will get the money on July 1 at uh maybe 7 a.m.

and bulk of it is going to go out at 8 a.m.

So we are but there will be positive cash balance because we have this in flux.

Um there are requirements to set aside the repayment.

So in terms of the uses, it's literally on July 1.

Um in terms of the covenants of the issuance, we have to set aside the repayment fund, starting uh we are projecting probably December or January when the property tax starts coming in.

Uh so in terms of um reporting back to city council, like we can discuss internally if that's something that can come in one of the monitoring reports.

Okay, thank you so much.

I think I'd like to um uh I'll support this item um today, but I will reserve my right as this moves forward to um full council.

I just want to make sure that we are um as transparent as we can be um as we move through this, uh, because I do agree with my um with with Vice Chair Moreno, you know, we do have a fiscal obligation to make sure we're being responsible.

And so um I just want to make sure we're doing our due diligence and uh being transparent so not only this council understands exactly what we're signing off on, but also um the public.

Um so with that that will conclude uh my comments.

We have a motion by Pro Tim Lee, a second by Councilmember Elo Rivera.

Natalie, please call for the vote.

And the motion passes 3-1 with Vice Chair Moreno voting no that concludes item five.

We will now move to our information agenda.

Natalie, please introduce item six.

Item six, fiscal year 2025 prevailing wage annual report.

And if you're joining us and would like to call in to make a comment on item six, please call 16692545252.

When prompted, the webinar ID is 16040-838 pound.

If you're if you're calling a call-in participant press at star six to raise your hand.

Chair.

Thank you so much.

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 again, Chair Foster and committee members.

Again, I'm Aaron Leah Enderlunas, deputy director, the Office of City Treasurer.

Um, and I'm joined today by Leslie Cerritos, the Office of Labor Standards and Enforcement Program Manager.

We are here to present the fiscal year 2025 prevailing wage annual report, and this is an informational only item.

This report is required under the San Diego Municipal Code and includes a summary of program activities, operational challenges, and opportunities for improvement.

We'll focus on the scale of the program, the work performed, and how the program has evolved over time.

Our presentation will take approximately 10 minutes.

Prevailing wage applies to city funded public works projects above certain thresholds, including construction projects over $25,000 and other covered work over $15,000.

It also applies to projects that receive state or federal funding.

State law requires charter cities, such as San Diego, to comply with prevailing wage requirements on locally funded public works projects in order to maintain eligibility for state funding.

As a result, maintaining prevailing wage compliance is critical to protecting the city's access to infrastructure funding.

The purpose of prevailing wage is to ensure that workers are paid appropriate wages and benefits, promote fair competition among contractors, and support a skilled and qualified workforce.

In 2025, the city executed 728 contracts, subject to prevailing wage requirements, totaling approximately 1.3 billion dollars.

As shown here, the contracts span multiple procurement types, including construction, professional services, goods and services, and minor repair.

In addition to the contracts executed in fiscal year 2025, OLSE monitors active contracts from prior years, including multi-year agreements and task orders.

When those are included, the program monitored a total of active contracts of 1,246 contracts, purchase orders and task orders, representing more than $3.6 billion total value.

Prevailing wage compliance supports the city's responsibility as an awarding body under state law.

This involves a range of activities throughout the life cycle of a project.

Staff provide contractor education through pre-construction meetings and outreach, conduct ongoing review and audit of certified payrolls submitted on active projects.

Staff also conduct site visits, interview workers, and investigate complaints in order to verify compliance out in the field.

Additionally, our program monitors apprenticeship requirements, maintains project documentation, and responds to public records requests.

When compliance issues are identified, staff work with contractors to resolve them and report violations to the Department of Industrial Relations when necessary.

These activities occur across all projects and require ongoing monitoring throughout the duration of the contract.

In fiscal year 2025, the program conducted a high volume of compliance monitoring activities.

Staff issued 590 delinquency and noncompliance notices, conducted 456 site visits, 590 worker interviews, and facilitate recovery of nearly $96,000 in underpaid wages to workers.

The program also processed 73 awarding body payroll requests, excuse me, and 38 requests for information from the state and submitted 22 violation notices to the Department of Industrial Relations.

Staff also participated in 665 pre-construction meetings, providing contractors with guidance on prevailing wage requirements prior to the start of work.

In addition to these activities, the program conducts outreach and education to promote compliance, including contractor training and training for city staff involved with procurement and project management.

These activities reflect day-to-day administration required to support prevailing wage compliance across city projects.

In addition to ongoing compliance monitoring, the program implemented several operational improvements during fiscal year 2025.

These included updating the pre-construction compliance packet, standardizing audit procedures and templates, and conducting staff training to improve consistency and compliance.

The program also advanced procurement of a new labor compliance system, which is anticipated to improve payroll monitoring, document management, and reporting capabilities.

At the same time, compliance activity has increased significantly over the past three fiscal years.

Site visits have increased by 175%.

Worker interviews increased by 184%, and noncompliance notice increase by 116% between fiscal year 2023 and fiscal year 2025.

These increases reflect both the growth in the number of monitor contracts and expanded compliance verification efforts.

Since the adoption of the prevailing wage ordinance in 2013, the scale of the program has expanded significantly.

At that time, the city anticipated approximately 190 construction contracts totaling totaling 331 million dollars would be subject to sub prevailing wage requirements.

In fiscal year 2025, the program monitored 1,246 active contracts and task orders representing more than $3.6 billion in total value.

This reflects more than a six-fold increase in the number of contracts and more than an 11-fold increase in the total contract value.

During the same period, program staffing increased from approximately CIF six to 14 positions or just over two times.

As a result, the growth in contracts subject to prevailing wage monitoring has significantly outpacked pace staffing levels, and compliance officers are now responsible for monitoring substantially more projects than originally anticipated.

This has required the program to prioritize core compliance monitoring activities under current resource levels.

Based on benchmarking with other California charter cities and the program's operational experience, we identified several opportunities for program improvement.

These include establishing municipal enforcement tools to allow the city to address certain compliance issues more efficiently at the local level while maintaining coordination with state enforcement processes.

The report also identifies the opportunity to adopt a citywide administrative regulation to clarify roles and responsibilities across departments involved in public works contracting compliance.

Finally, the report identifies a potential cost recovery mechanism, such as a compliance monitoring system user fee to help support the administrative costs associated with prevailing wage compliance activities.

These concepts are intended to improve the city's ability to monitor compliance, strengthen coordination across departments, and support the long-term administration of prevailing wage requirements as the city's scale of contracting continues to grow.

That concludes our presentation.

And with that, we can take any and any questions you may have.

All righty.

Thank you so much for that.

As a reminder, this is an information item, so no um motion is required.

Natalie, do we have any public comment on item six?

Thank you, Chair.

Yes, we have received one speaker slip from an individual in the committee room.

Blair Beekman, please approach the elector, and you'll have one minute to speak to item six.

After in-person testimony concludes, we have one hand in the virtual queue.

Hi, thank you, Blair Beekman.

Um thank you for your patience with myself today.

Um I'm trying to offer my usual positivism and ideas of idealism.

They can be a little short, and you're talking about deep subject matter today, and I hope um I'm I feel a little short and had a better talk about these things.

So thank you for your patience with myself and the ideas of ideal idealism and positivism that can help uh in any way it can for these items.

This uh is an item that I I would I'm hoping that um we can be addressing the future of some sort of immigration board overall for the future of San Diego that's come up uh to some roadblocks in the past three years that this sort of item can very much help out.

I'll talk about more on the next item.

Um, this is in and of itself is uh as a real hopeful item, and good luck in your future work with the state uh figuring out these sort of things and creating good precedents for local cities.

Thank you.

Thank you.

This concludes in-person public testimony.

We will now move to the virtual queue.

We have one hand raised in the virtual queue.

Phone number ending in 870.

Please press star six and begin.

I thank you, Natalie.

Joyce and Yata.

Wow.

1,246 active contracts and task orders.

3.64 billion dollars in total value.

That's amazing.

So a question for you.

Uh regarding compliance monitoring system.

That's those are great words.

Thank you.

Can we uh you know, are we giving out the prevailing wages with equity of who does the work?

I believe we are missing the mark.

As you know, I'm I'm following this.

I wish I had more time.

It's a huge subject that needs improvement on the equity end of the workforce.

But uh, let's keep doing what we're doing.

Office of the city treasurer appreciate your work so very much.

Keep it up to all.

Thank you.

And Chair, this concludes public comment on item six.

All righty, thank you so much.

I want to turn it over to committee members for any questions and comments.

Um, don't see anyone.

Oh, we'll go to Councilmember Ilo Rivera.

Thank you, Chair.

Um Thank you for um the update here and for all the work that you all are doing on a day-to-day basis.

Um if there was a single thing that you could ask the council to do to better support your mission, what would it be?

Doesn't have to be one either, but that's a great question.

Um some of the things that we added in this report this year were some recommendations for our program.

And and one of them would be the increase of of municipal tools for us to address violations here at the local level.

Um right now, we send out underpayment letters or non-compliance letters, notifying contractors to get in with compliance, pay those those underpayments.

If we find certain violations, then we send them over to the state.

When we did our charter city benchmarking last fiscal year, we identified what other cities such as San Francisco, Oakland, San Jose, Sacramento, and Long Beach have.

They have a more robust municipal code that gives their OLSE type programs more power.

And when I I keep on using the term tools in our tool belt, right?

Things of actually in their municipal code to withhold contractor payments, they actually take the state labor code and mirror it within their municipal code to assess penalties for noncompliance.

So there's a kind of a laundry list of additional tools that these other charter cities give their OLSC programs.

So that's one recommendation that we included in the report, looking at what other cities are doing.

And and those tools they're not just so I'll kind of removing um the specific issue at hand and just kind of more speaking more generally.

Sometimes we see uh policies or practices in other cities, and they sound like they would be great.

And um there isn't hasn't necessarily been analysis of whether or not upon implementation, they're actually having the desired effect.

Your understanding is that those tools in your hands would have the desired effect and would um tangibly improve your ability to to do the work that you're charged with doing.

Yes, and and our major focus, our main focus of our teams is twofold.

Ensuring that our prime contractors that have a contractual relationship with the city are in compliance with prevailing wage and that the city is not in any kind of prevailing wage violations.

And two is ensuring that the workers that are building the things for our city, our sidewalks, our roads, our fire stations, are getting paid what's legally required to them for the work that they're doing.

That's our focus.

And so if we could have more robust tools, we could be able to utilize that to get the get the back wages back in these these workers' you know, hands sooner.

That's that's what our goal would be.

And one of the um I think in in the ideal world, there's no violations.

We don't live in an ideal world as much as I would like us to.

Um and uh a kind of step forward from that is there is significant enough enforcement that um there are there's a presumption that if you break the rules, you will be caught.

And I don't think many people believe that that is the current presumption.

How much closer to to getting there would we be if your recommendations were implemented?

That is a great question.

Um I I don't know if I can I don't know if I can speculate on something like that.

But some of the things that you know having a more robust compliance system that allows us to flag these violations that we can notify these these contractors, sometimes it's not malicious, it is you know unintentional, but allows us to address these violations sooner.

Um we're gonna be going over the living wage report in a little bit, but the ability to penalize contractors when they're in violation, even just saying, hey, this is the consequence of your action, definitely allows us to achieve compliance sooner, right?

When when things are reported to the state, like another government agency, they they have a long list of other violations to investigate.

So to be able to handle these kind of violations sooner than later would allow us to be more efficient.

Yeah.

And then the last question um, are you getting any sense that the um federal administration's approach, not just immigration, but kind of worker rights in general.

But I think the immigration part of this is important is having an effect in terms of what is either being reported and or um violations that are occurring.

Um I'll just share from my own experience, and this is your much much more experience in all this and way deeper in it, but just even being at legal clinics in the past, knowing that folks who don't have have status or have um status that could be um status that isn't 100% secure that there are employers that know that and prey upon that and um use that as a to as their own tool um to either underpay or violate other rules.

So I'm just kind of curious, like because this would seem like an environment that's ripe for those sort of bad actions.

Um are you seeing any of that and would the recommendations here help either mitigate or prevent um any of that exploitation from happening?

The recommendations we have in this report don't really address you know the concerns that you have.

I will say that we do have boots on the ground staff that are out there on our construction sites interviewing workers that are construction workers.

We live in a border city, um, and there are many minority and immigrant workers that are on our construction sites.

I don't have data for you on if there's any kind of reduction in willingness to interview with our workers when we ask them about that.

I will say that there is a state of California law that um prevents employers from utilizing immigration status against someone, they are still due and owed their their wages.

Um but I'm not sure that we've seen anything like that, but we don't we don't maintain data like that.

We don't we don't keep something like that.

Okay.

Thank you.

Thank you, Chair.

All right, thank you for that.

I don't see any other members on the lights.

Um I think just for this and in um kind of um just for some context um in regards to the questions um by my colleague Aaron, can you touch base on um, I think it's SB 854 if memory serves me correctly, from I want to say around 2014, where the state significantly changed the labor compliance program, which at one point in time the city was an authorized labor compliance program.

Can you just touch on the impacts that that have had?

Because I think it speaks to what you were getting towards our ability to um I I guess work within the the realm of the almost say deficiencies, fines, penalties, and how we once were able to deal with that versus how we deal with it now, if you don't mind.

Yeah, can I can I go on a little history tour with y'all and and kind of go on this a little bit?

So previously, before SB 854, um certain cities and government agencies were able to have what's called a labor compliance program.

This empowered that agency to kind of step into the role of the Department of Industrial Relations and on any of their public works projects, they could carry out things like assessing penalties, recoup those penalties, um, and and and have a stronger enforcement.

I keep on using enforcement tools, tools in our tool belt.

That's that's the um analogy that I always use, but it was a more robust framework that was allowed for these labor compliance programs.

Now, SB 854 moved a lot of that away from these labor compliance programs.

The city has one currently, and it's just for our Prop 84 funded projects, but there are four legacy LCPs throughout the state.

Everyone else, it is now more the state itself carries out that enforcement.

So when I say when we identify violations and we give contractors the ability to correct those violations, and then we report to the state, that is the framework that was updated with that state law.

Um so some of the recommendations that we included in this report was looking at benchmarking of other charter cities and since that change in the state law, what are they doing to empower their OLSE equivalent programs and have uh an enforcement framework within their own municipal codes?

Do you do you um know offhand what the grandfathered LCP agencies are?

Um I I believe it's City of LA.

It is Sacramento County, it is School District of LA and Cal Trans.

Okay.

I've got I've got some of my staff behind me.

I I think those are the four.

Um, and and I I think just another important piece is that when they uh made changes in the state um labor code, they actually wrote in provisions that actually put Aaron and her staff to where they say you can become personally liable as let's say if you are knowingly not administering oversight to where the state can come in and actually um press charges or or bring charges personally against each of the uh individuals.

So um why we maintain uh and I'm saying that to to say why we maintained our current labor compliance process or system, right?

So that's why we still have the department, why we're still going through doing all the monitoring and working with the state um enforcement um folks.

So I just wanted to make sure everyone understands this, and this is where I go back to.

We should be working with our our government affairs folks to see what we can do to get um the the second largest city in the state back into a a LCA a labor compliance program to where we can run more efficiently and as we are doing the work, bringing dollars back into the state to uh make it more self uh reliance.

Um, the other thing I just want to make sure everyone understands um just the way that the program works, is my understanding if we're doing public works that we um are are are pretty much reimbursed, I guess, for the specific projects versus what we do, say on our goods and services side where we're doing more maintenance and service contracts where that is a hit to the general fund and there's no um true reimbursement, correct?

That's a great point, and that's included in the report under the fiscal impact section.

Yes, our prevailing wage team, when they work on a capital improvement projects, they use a WBS or an IO so that we are re reimbursed, and that's built into our budget as well.

It's about 75 to 80 percent of our prevailing wage staff are able to recoup those times.

Now, things like goods and services and individual purchase orders, we don't recoup the cost for those.

Okay.

Um thank you.

And and I'm sure we can go on and on as there's always work to do because I think with any labor compliance program, our main goal is to make sure that our um workers are being uh paid um appropriately for the class classifications in which they are performing the work.

Um, one last question in regards to your site visits and actually being able to um recognize um a a trades um person working um in the appropriate classification.

How do you guys handle that type of training?

Where does that come from?

That's a really great question, and I would like to highlight our supervising compliance officer, Angel Bustos, he's behind us.

He had the great idea of really getting our staff hands-on training.

So a lot of our staff have actually gone to some of these apprenticeship councils and training, and we have some amazing facilities here in San Diego and actually go to see what is the difference between a pipe fitter and a plumber three and an operating engineer.

As you know, there's multiple ones.

Um I can go down a rabbit hole of what prevailing wage is and how many different classes and trades and classifications are.

But as you know, Chair Foster, they're very nuanced, and it really goes into what the role of what they're doing is out there.

So we have had our staff go out to these apprenticeship councils and get some hands-on training of identifying that.

Um, I'm really proud of my staff for going out there and learning this because it is nuanced, and um, I am not a plumber or electrician or operating an engineer, but I really appreciate that my staff can be able to differentiate it because it is a there is a price differential in those wages that those workers are owed.

So thank you.

Absolutely.

Um thank you for that.

And and as always, I'm sure there's um just more and more work to do in regards to um compliance and making sure our workers are being paid appropriately.

So thank you for that.

I don't see any other members on the lights.

So that will bring us um that will conclude um item six.

Uh, with that, Natalie, please introduce item seven.

Item seven, fiscal year 2025 living wage annual report.

Chair?

Please introduce yourself for the record and let us know how much time you'll need for your presentation and feel free to begin.

Okay, thank you, Chair Foster and committee members.

Again, I'm Aaron Leah Endre Lunis, and I'm joined by um Office of Labor Standards and Enforcement Program Manager Leslie Cerritos.

We will need approximately 10 minutes for this presentation.

And at this time, I'm going to turn it over to Leslie who oversees the living wage program for the rest of this presentation.

Thank you, Erin, and good morning, Chair Foster and committee members.

The living wage ordinance or LWO was adopted by City Council in 2005 to ensure that workers performing services on behalf of the city are paid a livable wage.

The ordinance requires contractors performing covered services to pay specified wage rates and provide benefits on applicable service contracts, financial assistance agreements, and facility agreements.

It applies broadly across city agreements, regardless of dollar value, including cost neutral and revenue generating contracts.

As detailed in the report, the program monitored 1,022 active agreements subject to the LBO and fiscal year 2025, including 312 covered employers and approximately $794 million in total contract value.

931 formal contracts and purchase orders were referred to the program for compliance monitoring.

Attachment one of the annual report provides a comprehensive list of all contracts and purchase orders subject to the LWO during the reporting period.

The program also reviewed 33 financial assistance agreements for the LWO applicability.

While the ordinance has historically covered city facility agreements, these will be removed beginning in fiscal year 2027 with the implementation of the city's hospitality minimum wage ordinance.

The ordinance requires program the program to conduct compliance monitoring, investigate complaints, and assess remedies and pursue enforcement actions.

Compliance monitoring includes routine reviews of certified payroll records to verify payment of applicable wage rates and conducting side visits and worker interviews.

Proactive compliance reviews are strategically conducted based on risk factors such as prior violations, industry trends, and referrals.

The program also investigates all worker complaints and recovers unpaid wages where violations are identified.

In fiscal year 2025, the program initiated a compliance reviews, investigated two worker complaints, and recover over 157,000 in back wages for 65 covered employees.

The program also advanced formal department proceedings against the janitorial service provider, D2 Distributors, LLC.

This action required significant staff time and coordination to investigate, prepare, and advance the department proceedings.

It represents a significant enforcement milestone under the living wage ordinance.

Details regarding the department proceedings are included as attachment to to this report.

Effective administration of the living wage ordinance relies on consistent outreach and education as a core risk mitigation strategy.

Outreach is directed both internally to city staff involved in contracting and externally to covered contractors with a focus on establishing clear expectations early in the contract lifecycle.

In fiscal year 2025, the program conducted 127 outreach events and training engagement, including webinars, project kickoffs meetings, and department trainings.

To maximize efficiency, living wage requirements were integrated into existing prevailing wage workflows, including project kickoff meetings and standardized labor compliance materials.

This approach reduces duplicative efforts, improved consistencies in contractor communication, and minimizes compliance risk before violations occur.

The program reviews exemption applications on a contract-by-contract basis for employers that may qualify under the ordinance.

In fiscal year 2025, staff reviewed 296 exemption applications with 293 being approved and three denied.

These exemptions most commonly apply to small businesses, nonprofit organizations, sale proprietors, and entities operating under a collective bargaining agreement.

As part of the fiscal year 2025 update to the rules, exemption criteria, documentation requirement, and enforcement procedures were clarified to ensure consistent and transparent application of the ordinance related to exemption applications.

In fiscal year 2025, included several key administrative and program improvements.

These included advancement of the department proceedings, update to program administration and oversight processes, and implementation of operational efficiencies.

The program developed an annual compliance reporting process for city facility agreements to improve oversight.

Additionally, a pilot program was developed to streamline exemption processing for certain low-dollar high volume service agreements.

The most significant of these efforts was the comprehensive update to the rules implementing the living wage ordinance, which will be discussed on the next slide.

The updates to the rules implementing the L LWO represents the first full advancement of the program's administrative and enforcement framework framework, sorry, since adoption.

The updated rules clarify applicability, exemptions, and employer obligations and establishes consistent standards for compliance monitoring investigation and enforcement.

Additionally, the rules formalize key enforcement tools, including a standardized civil penalty framework, department procedures, and referral to other agencies.

Overall, these updates strengthen the city's ability to administer and enforce the ordinance in a consistent and legally defensible manner.

A copy of the updated rules is included as attachment three to the report and is also available on the program's website.

During fiscal year 2025, the living wage program consisted of two budgeted positions, one supervising compliance officer and one senior management analyst, with oversight provided by the OLSC program manager.

These resources supported monitoring of more than 1,000 active agreements, as well as compliance reviews, investigations, outreach, and overall program administration.

Given the scope, program activities require careful prioritization and coordination across OLC to maintain effective oversight.

Building on integration efforts in fiscal year 2025, the program implemented implemented and coordinated oversight model in fiscal year 2026 for agreements subject to both living wage and prevailing wage requirements.

This approach approves efficiency and consistency while maintaining program-specific enforcement authority.

This concludes our presentation.

Thank you, Chair Foster and committee members for your time today.

I'd also like to recognize the OLSC living wage program staff for their hard work and dedication to this program and its mission.

At this time, we're happy to answer any questions.

Thank you so much for the presentation.

As a reminder, this is an information item, so no motion is required.

Natalie, do we have any public comment on item seven?

I guess we have received one speaker slip from an individual in the committee room.

Blair Bakeman, please approach the lecture.

You'll have one minute to speak to item seven.

Hi, Blair Beekman.

Thank you.

I wish we had a minute 30 at least for these sort of items today.

Thank you for these two items.

As I previously stated, um, I'm really interested in the idea of a future of uh office of immigration here in San Diego.

I know it was an important item a few years ago and it kind of got put aside for a while, shelved.

Um this sort of item in the previous item, wage theft and uh human trafficking issues, I think all can be really important subjects that can be nonpartisan for the future of uh uh Office of Immigration here in San Diego.

And very nice words that were spoken about the previous item about uh how different cities implement uh up in the Bay Area.

I'm very aware of how they work and don't work uh on on their wage step issues.

And you can learn really good examples that council personnel right nicely described it, and also positiveness from council uh committee working on it together.

Thank you.

Thank you.

And chair with no hands in the virtual queue.

This concludes public comment on item seven.

Thank you so much.

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

Seeing none, uh you have one.

Go for it.

All right.

Actually, like if you're okay, I'd like to kind of follow your lead on this.

You've got expertise that I do.

Um, I just have to I guess one my questions.

It's my understanding that at some point we made a change to the living wage program.

Meaning it was very in the I'll say in the older days, it was complaint-based.

Now is my understanding.

Do we have the contractors actually submitting certified payroll on a regular basis, similar to what we how we are running our construction contracts?

Is that the case?

Sorry, so in our ordinance, certified payroll is not addressed as a requirement, but in the contractual language, it is required that they provide certified payroll.

So any contracts that you know are subject to the living wage, if it's in that language, they are required to submit certified payroll to the city, correct.

Not still does not reflective in our ordinance, but it is in a the contractual language use.

Right.

Do they do it on the is it required on a weekly basis?

And do you do it in the same fashion?

So, yeah, so we because because the program is synced to both programs to monitor for both, so uh prevailing wage is the one that takes the lead on those requirements on the parameters that we've built into.

Well, not I haven't built in, but it's built in into system.

So if they're reporting weekly payroll for any projects, it would be in that weekly basis, correct?

Okay.

So I'm going to say we went from a a complaint base to more of a proactive type process.

My other question is this when is the last time that we've actually done a study on what a what the living wage is or should be in the city of San Diego?

It seems we always end up in a scenario where minimum wage at some point when you look at the base, you're constantly playing a who's first type scenario.

So how are we monitoring or how often are we looking at what the living wage is or should be?

Do you want to do that?

You can do that, and then I can add something.

So right now, how the living wage is calculated is by the municipal code.

It's it's specific in there of how it's calculated each year.

One of the reasons why we highlighted updating the living wage rules this past fiscal year is that we worked with city attorney's office to include an actual part of our rules that say when that living wage base rate, that hourly rate that's paid to the worker if they don't pay that health benefit rate, that if it falls below the city, state, or federal minimum wage, our program can make sure that these contractors are paying no less than the highest minimum wage in effect.

So that was part of updating the rules.

But as for an analysis or a study on what a living wage is, I'm not sure.

I we my office doesn't conduct that.

We don't have the authority to conduct that.

We do what's required out of the municipal code.

Laura, take anything else?

No, that I was in the and then um I guess in in regards to living wage when we do see um violations, are we um I'm assuming we have more control or or ability to deal with those as is our program, correct?

Correct.

Yeah, when we get a complaint refer, even if it's from a third party or a con contract administrator from the city or a cover employee, we intake the complaint and then we investigate first.

We make sure that we have a contract that is enforceable that is subject to the living wage, and then we pursue, you know, with investigating that complaint.

And then in regards to identifying violations, how are we doing with repeat offenders and are we taking um action?

I know years past we put some things into the debarment um process when it comes to wages specifically.

Are we in enforcing the way we need to to correct to get bad contractors or providers out of doing city business?

How are we dealing with that?

Um there's there's a couple of different different things to address in that.

Yes, the municipal code has either violations of prevailing wage, living wage, or minimum wage built into the actual debarment ordinance itself.

The living wage ordinance also says that if a violator violates twice in a two-year period, then we have required steps and required enforcement actions that we're allowed to take.

Now, between those two ordinances, we also updated our living wage rules of well, what does that mean?

What are the criteria and what are the factors of when we take someone to debarment when we move on to that?

So I do want to highlight that that is updated in our rules.

One of my um my biggest focus is to ensure that these programs live beyond me doing this work, Leslie doing this work, and that these programs, these processes continue in a consistent manner.

So, like we had identified in the report, we did move forward with debarring a contractor.

That is a very labor-intensive process.

As noted in the report itself, we have two staff in the living wage program.

A debarment takes a lot of time and resources because it's meeting with not only the department that is carrying out this contract with purchasing and contracting with the city attorney's office.

There's actually an citywide administrative regulation that there are certain steps and processes that we need to follow.

So that debarment, that one department was hundreds of hours worth of our work.

So while we would like to focus and be able to get bad actors out, it is um dependent on the resources that we have to do.

Not sure I understand exactly what that means or how it impacts um what we're trying to accomplish.

Um in here it it talks about um I see where it talks about restitution recovered.

Are those just the dollars that are associated specifically for the employees?

Are we um recouping any dollars associated?

So those were just restitution, those are just strictly back wages, as we mentioned with the update to the living the living wage rules, we've actually added a civil penalty that's standardized.

So now moving forward, if those violations are not in cured, then we can move over adding civil penalties where we would move that contractor into a notice and order, put him on notice, you know, and try to recover those civil penalties.

Um and that is what we're building in, and we hope to move the program towards to.

But at that point, that amount is just reflective of the back wages we were able to recover for the 65 covered employees.

Okay.

All righty, thank you.

Um that uh I'll stop there and I'll turn it over to Councilmember Elo Rivera.

Thank you.

Thank you, Chair.

Um you asked everything I probably would have touched on and and then some the one uh follow-up question I did have the administrative code that you were referencing in the debarment process.

How much of that is uh how much of the length and workload that is imposed upon you all during that process is self-imposed by the city rather than a result of of the wanting to stay in compliance with state and federal law.

So the city's debarment ordinance, that's our own ordinance, right?

That the state can debar vendors if they want to.

Our debarment ordinance, there's actually a section that says if a contractor or vendor bidder is in violation of prevailing wage, living wage or minimum wage, they can be debarred up to three years.

So when you say self-in impose, it's it's our municipal code and our administrative regulation that actually says these are the steps that you go through.

So those steps.

I know it's a very serious decision.

And in it and going back to the some one of the points I was making earlier, if unfortunately we know there are bad actors.

And if you are acting in a with a mentality of I'm unlikely to get caught, and even if I get caught, though I'm gonna pay back what I owe with a nominal fine, the interest that I'll gain on that money is gonna way, way outweigh um what I end up paying.

That's not a huge deterrent.

No longer being able to do business with the city is a much more significant deterrent.

But if you know that there's only two staff members and that that department process is an enormous workload and it's super onerous on the city side, I don't know that that's seen as a tool that is likely to be wielded by the city.

And so I'm curious when I say self-imposed, how much more difficult are we making it on ourselves?

Not that that we should use it, you know, just on a whim, but uh how much more difficult are we making it on you and as a result on the city to let bad actors know you you don't get to continue to just do business with the city if you're not uh aligned with our policies and our values.

Um is there a way to streamline that process on the administrative side?

It's kind of a policy question.

Um I just know that okay.

Yeah.

It it is, but it sounds like it's policy that's being guided at the administrative level rather than at the council level.

If I'm I understand that there's a policy that that is there's a uh an overarching policy, but uh what I understand your response is that there's administrative guidelines.

Are those Yeah, we have an administrative regulation.

So for an example, if our office, Office of Labor Standards Enforcement has a bad actor, has continually violated the living wage ordinance when we do these investigations, we find other violations, labor code, things like that, sick leave.

Um the first step is to put together the case, all of the evidence, all of our arguments, then that goes to the city attorney's office.

They review that to make sure that it is legally sound.

Then we go and um pitch it to the executive team to make sure that this is what we want to go through.

Then we do a hearing.

So when I say it takes time, it does take a lot of time.

I keep on saying tools in our tool.

There are other tools that are available because these are our own contracts, right?

Having um a relationship with the purchasing and contracting department and making sure that repeat violators um are on their radar, making sure that the contract administrating departments also have power that if we let them know that there's either violations, they're not submitting submitting documentation to us, potential violations, that they are involved in this in our notice of violations and things like that, being able to withhold those contractor payments.

So before it gets a department, which is really like the most extreme, there we can withhold their contract payments.

Not getting paid on your contract is a wonderful tool, right?

Getting the idea of not working with the city really does lead to compliance.

So there are other options.

I mean, it it's it's here, and then there's like criminal charges.

Yeah.

So I I guess just one piece of feedback here is what would be useful, I think, for the council to know is from a policy perspective, what actions are required on our end to enhance the tools that you have.

And then a suggestion would be that on the administrative side to really look at again this when I this the self, what are we imposing upon ourselves that is making the work more difficult?

My guess is that there are legacy.

There are legacy processes in place that make your job more difficult, and that that is unnecessary.

And that's not specific, that is not just specific to to the work you do.

I think that's across the city.

And some of those rules might have been put in place for good reasons a long time ago and maybe don't make as much sense now.

And I think in other circumstances, the people who have historically run this city um were able to embed um the rules that they wanted to play by uh into the the rules of the city.

And so um from a policy call perspective, um, I I just think you know, again, recommendations on our end for what we can do to enhance your toolbox, but also um, you know, that looking at that set of administrative guidelines and saying, you know, we already have too much work.

What can we do to streamline things?

Not because we're going to uh wield these tools in a malicious way or in an irresponsible way, but because we don't want to be tangling ourselves up in our own web as we try to fulfill the mission of uh of the city.

So anyway, thank you for for the response there.

Um thank you, uh Chair Foster, for the questions you asked and for the time.

Thank you.

Thank you for that.

And um, I think that uh brings us uh to a conclusion with um item um seven.

And I think um as always it's just important to make sure folks are getting paid appropriately and making sure that you guys um have the steps in front of you to make it as efficient and as effective as you can be to make sure that happens.

Thank you.

Um we will now move to um item uh number eight.

Thank you, Chair.

Item eight, informational update on the city of San Diego's reserve policy.

And if you've joined the Zoom webinar would like to call in, you can dial 16692545252 when prompted input webinar ID 1604 30838 pound.

And if you're a call and participant press star nine to raise your hand, Chair.

Thank you so much, 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, Chair Foster, committee members, Summerland Travel, uh Chief Financial Officer with me is Ben Bitalia, our director of finance and city controller.

We'll need about 20 minutes.

Uh to provide some context of why we're here, uh we as we go into our budget uh budget, next budget cycle, we wanted to look at reserves uh for several reasons, mostly having to do with budgetary pressures.

Uh the city has not been able to make uh reserve contributions in a number of years now.

We wanted to better understand uh, even though we understand what the best practices are as established by the government finance officers association, what the expectations are from our rating agencies, we want to better understand how other cities are doing and do a benchmark analysis of the general fund reserves and how we compare to other cities.

So uh we thought it was timely to bring some of this information forward uh in anticipation of the budget cycle that we are about to embark on, and uh at the same time hopefully receive some some feedback uh from the city council as we continue to work on potential changes to the reserve policy that is expected to come back in uh in June uh of this uh fiscal year.

So, in terms of uh some of the basic concepts, any time we look at uh general fund reserves, uh some of the basic concepts would include making sure that we're setting the target at the right amount, uh, to the extent uh we are setting a percentage, or we using revenue store expenditures as as the base for that.

Um, how do we build reserves versus maintain reserves?

Uh those are two important um concepts as we continue to make contributions.

Uh when do we tap into reserves?

When do we use them?

And if we use them, uh what is the the process to replenish them?

In terms of where we stand, uh we uh looking at FY25 monitoring process, we were close to uh using reserves.

Uh fortunately we're able to close the the uh fiscal year without drawing on reserves, which means we haven't drawn reserves really ever.

Um we have been able to maintain our reserves at our current level, which is about 207 million dollars.

Uh there was a small contribution that happened in 2023, but for the most part, uh the reserves have been maintained at the same level from a dollar perspective uh for some time now.

Uh what happens though is that as our revenues grow, uh that dollar amount as a percentage uh of our overall revenues continues to diminish.

So that's something we would we as an organization need to consider uh as we move forward in terms of either maintaining and and building reserves.

Obviously, uh the city has been facing some significant structural challenges, um, and that uh puts uh reserve contributions uh in uh in contrast with some potential service reductions and other priorities uh that the city has.

In terms of the benchmarking uh that we did, we looked at 10 uh cities.

We tried to find cities that were comparable in size, but also include a mix of cities that were under the California jurisdiction just because they have the same uh regulatory environment, for example, not being able to issue taxes without uh vote of the people.

So we wanted to have a good mix uh, and that's that's what we uh will be presenting today.

Um we we use the financial statements, the audited financial statements for 2024, which was the information that was readily available, and compare them to the FY25 uh 24 revenue budget.

That was to make sure that there was consistency uh in the way we are uh evaluating each of the cities' reserves.

We also looked at unassigned fund balance above reserve levels, what we call excess equity, because that's another potential buffer that this uh that can serve almost as a reserve uh if uh if there is a need for that.

Uh and we obviously looked at key areas like what structure do they have, target basis, target levels, uh, what are the conditions for use and replenishment, and what are the funding mechanisms that other cities use.

What we found is for the most part, uh most cities have the two components that the city has, one related to uh what it would be the equivalent for our stability reserve, which is basically to protect against uh revenue downturns associated with economic downturn.

Um, the other component being uh tied to emergencies, whether it be natural disasters or some other one-time event.

Um the target levels typically range in between 10 and 20 percent, mostly in the mid-teens.

Uh some cities use revenues, other use expenditures, not a real difference there since for the most part general funds are balanced where revenues and expenditures equal each other.

Uh there are some that have triggers in terms of when they can use reserves, for example.

There are some cities that might have a like a 1% reduction in revenue justifies the use of reserves.

Uh replenishment time frames vary.

Some uh have minimum for ex minimum uh balances, for example, that require uh faster replenishments if they uh cross a threshold, others don't.

Um then the one thing that uh was important to us to see was a lot of the cities relying on year-end surpluses, one-time revenues, uh as a source for uh uh for building reserves.

Here you can see uh where the city stands when you're looking at uh reserve, the formal reserve components of fund balance.

So again, this is excluding any uh fund balance in in addition to reserves, again, what would we for us excess equity?

So you can see that we're in in uh in the upper uh uh half of the of the table here uh on fourth place, only Jacksonville, Austin, and Sacramento being higher than the city.

For the most part, you see a lot of the cities in the you know around that 10% range, uh at least uh the ones that are in in the middle of the table.

Uh when you convert the city's reserve policy to match the the the way we looked at it, which was basically FY24 revenue budget compared to FY24 financial statements, we're at about 10.3 percent.

When we looked at any fund balance above reserves, the the story changes a little bit.

Um you can see that a lot of cities have basically fund balance on on top of their reserves, so that can be shown on that second column.

And when that gets included, then the city does drop uh towards the more the middle of of the pack.

Um at that point, we the city had about 31 million dollars, we were about 11.8 percent.

The reality is that if you look at the headlines across the nation, many cities, especially large cities are facing structural issues.

So I wouldn't be surprised if uh some of these fund balances were abused uh as part of their budget mitigation measures in the over the last couple of years, so that would be something to follow up on.

But at least as of this point in time, um that just shows that the city is again, even though we haven't been contributing to reserves in the last several years, we're still within uh the middle of the pack in terms of uh where we stand for general fund reserves.

In terms of best practices, GFOA, the government finance officers association sets the standard of two months of operating resources.

They do state that we have to consider risks.

For example, if it's a city that has a lot of natural disasters, that should be taking into account.

Cities that have a lot of volatility on the revenue uh for whatever reason, maybe concentration of revenue, uh, that should be taken into account as well.

But overall, a two-month operating reserve is uh what is called for, which matches the city's policy.

The other important component of in terms of kind of setting the standards are our rating agencies.

Obviously, the more liquidity that a city has, the better it is for our ratings.

Uh the the slide here shows what would be required for a very strong rating, which should typically be triple A, the cities at a double-A rating, which would be probably more in the 10% to 15% range, at least for SP Global and uh and Moody's.

Um again, uh rating agencies are not only going to be looking at the amount, but also the overall reserve framework.

Uh are there clear rules for usage?

Uh, when can how quickly are they replenished once they're used and things of that nature?

Now, an important point uh just to distinguish when we are making reserve contributions is what's called what we would uh qualify as maintaining reserves versus building reserves, right?

So normally when you look at uh the the general fund, revenues grow up by about three percent a year.

That would be between sixty and seventy million dollars a year.

So as our revenues grow, if we hold our dollar reserve constant, as a proportion of our overall revenues, that rate continues to decrease.

So we believe that at a minimum the city should strive to not let that percentage continue to decrease.

Uh so for example, that would mean that if revenues are growing by 66 million dollars, that would be about 3% for a $2.2 billion budget.

We would require, we require to use about $6.6 million for that grow of that growth to contribute towards our reserves, and that would allow us to be able to maintain it at the same uh 10% level in this example.

Now, building reserves, that's a little bit of a different story.

Um that comes with good sacrifice.

If you think about it, if revenues are growing by about 3%, uh we also have you know salaries that will probably require a cost of living adjustment.

Um inflation has been high, but assuming also a 3%, that's 70 percent of the general fund costs, there's going to be inflationary pressures on non-personnel expenditures.

Uh, we might be opening new facilities, we need to maintain our infrastructure.

So building reserves above where we currently are means that we need to make a policy decision.

Do we take, in this case, 22 million dollars, assuming a 2.2 billion dollar general fund, and contribute to increase one additional percentage point, or uh or or do we invest that money in in other needs, other priorities, right?

So uh I think as we continue to have a structural challenge, uh it will be very difficult for us to build reserves above where they are right now.

In terms of solar some of the policy considerations uh that we wanted to bring forward uh and continue the discussion with the IBA and take your feedback, was looking at uh really nine uh items.

The first two is basically just maintaining uh continuity in terms of our reserves.

There are four items that we wanted to uh uh bring for bring forward for consideration, and then three additional items that we wanted to uh open up for discussion.

The the two that want that we think are just uh items to continue is basically maintaining uh reserves at that two month level, 16.7 percent in accordance with best practices, maintaining our two components, stability and emergency, uh so no changes there.

In terms of potential changes, um, one could be uh as we talk about again building reserves, which would basically be bringing them, you know, adding half a one percent more on an annual basis, relying more on one-time dollars for that purpose, uh that could be to the extent there's a surplus at the end of the fiscal year, or there's one-time revenues, the sale of a building, uh real estate, uh insurance proceeds, things like that.

That could be a source to continue to build reserves.

Uh to the extent that those if there's a significant one-time uh inflow, we could set a limit, maybe half a percent, one percent, uh, so that anything above that would go towards any other priority that the mayor of the council has.

Um what is important though is we believe is just to at least maintain reserves at a certain percentage level, which means that as revenues grow, make a uh proportional contribution to reserves so that we don't continue to uh dilute the dollar from a dollar perspective in relation to the overall uh revenue base.

And uh as we make these decisions to ensure that those get uh included in all of our planning documents, including the five-year outlook.

Um additional considerations uh would be if if we wanted to be more aggressive in terms of funding reserves, the farther we are from that 16.7, we could try to make contributions faster and prioritize those.

So that would be uh another point of discussion and consideration.

Um the other point that it's really not clear in our policy is it really is vague in terms of when do we access the stability reserve, for example?

Should we have more objective criteria in terms of if there's a recession and it's you know it's impacting revenues by a certain amount, does that uh is there uh an objective trigger that would allow us to use reserves?

And then just bringing clarity in terms of as we make contributions, where where do that money, where does that money go first?

Stability reserves, uh, emergency reserve a c or a combination of the two.

The last piece of the analysis that we did was looking at risk management reserves.

Um there was with in our preliminary analysis, there wasn't a lot of information in terms of best practices.

The more we looked at it, what we found was the cities uh basically uh set up uh what are called self-insurance funds to manage uh public liability, workers' compensation, long-term disability, and they fund those so uh self-insurance funds basically uh at 100% of what the actuary uh actually determines to be the outstanding liability, meaning that if the cities closed shop, you know, for uh at a at that at the end of that fiscal year, just for example purposes, there would be enough cash in that fund to be able to satisfy all of the existing liabilities of the actually estimate, the actuary estimated.

The city has a different way of funding it, uh it's less conservative.

We we basically follow a pay as you go uh uh process with some reserves uh as well.

Um based on our current uh financial situation, we were not recommending uh moving to these best practices.

It's not fiscally feasible.

Uh but we did find if you can go to the next slide.

Um here you can see what that would mean uh basically in terms of the city.

Uh we have about 350 million, almost 351 million dollars in outstanding liabilities.

Our reserves are about 62 million dollars, so we would need about another 289 million dollars to be able to fund reserves at a 50% confidence level.

Uh what we are will be bringing forward in June is just more of a technical uh uh issue on that first uh item that you see in this slide is to uh uh convert our the way we measure uh reserves for risk management on a fund balance basis versus a cash basis that would be consistent with the general fund.

Um the one area that we did look at was long-term disability.

And it was almost like when these reserves were set up, they were probably looking at the three components of the risk management reserves.

Uh, but the long-term disability really represents such a small portion of the general fund expenditures.

It's about 0.03%.

So having a $3 million reserve there, uh I don't I don't think it's necessarily justified, um, especially because there's not a lot of volatility, volatility, volatility in in that component of our expenditures.

Um so that could be an area that we either use those funds and transfer it to another reserve or use it for another purpose.

But again, uh, given our our structural deficit right now, uh we believe that we just continue on on our on the way we've been funding re-smanagement reserves without without uh uh more substantial changes.

Uh next steps, we will be uh incorporating any counsel that we uh receive from from the council today, um, or happy to meet uh offline and and continue the discussion with with uh any of you or uh some of the council members that are not part of this budget committee, um, and then come back in June with um some uh refinements to our general funderies management uh policy uh with participation obviously from the IBA um and uh again come back in June with a more formal proposal.

That concludes our presentation.

Happy to answer any questions.

Thank you for that.

We will now go to the IBA for comment.

Right.

Thank you, Chair, and thank you to Rolando and Ben for the presentation.

Uh, for the committee's awareness earlier this year, my office reviewed potential reserve policy changes in detail as Department of Finance, and we provided feedback, and we really appreciate the collaboration on that effort.

Uh, broadly speaking, we do believe it is worthwhile to ensure that our reserve policy reflects our actual practices and our physical or fiscal realities, and to that extent, revisions to the reserve policy we believe are appropriate.

We do want to note though that in the short term, the approach being presented leans more towards preserving service stability, potentially at the expense of advancement reserves to best practice levels over time.

However, given the city's structural deficit and the need for expenditure cuts next year, even with no contributions to the general fund reserve, this is likely unavoidable.

Accordingly, we want to stress that changes to the reserve policy should be paired with a clear and time-bound commitment to resolving the city's structural budget deficit.

Without that commitment, there is a real risk that the city will remain in a cycle where reserve contributions are consistently deferred because they compete with the expenditures that are needed just to maintain current service levels.

The approach that is being discussed involves maintaining lower reserve funding levels in the near term due to the structural deficits we're facing in FY27 and FY28 with more meaningful contributions beginning in FY29.

Uh, it is worth noting that at the proposed contribution levels, it could take 10 to 20 years to fully fund reserves to the 16.7% target, which really underscores how this will ultimately be a really long-term effort.

Um, given that we believe it's important that we establish clear expectations for ongoing contributions you heard discussed, and also that we consider prioritizing the use of sustainable and ongoing funding sources and avoiding over reliance on one-time revenues that may not consistently materialize.

Uh we also finally recommend that transparency and accountability measures be built into the reserve policy, particularly around when and how reserves can be used, along with clear plans and timelines for replenishment.

Uh that concludes our comments this morning.

We look forward to the discussion today and in continuing to work with Rolando and his team on an updated reserve policy for consideration in June.

Thank you.

Thank you so much.

As a reminder, this is an information item, so no motion is required.

Nellie, do we have any public comment on item eight?

Thank you, Chair.

The public comment period for item eight is now open, and we did receive one speaker slip here in the committee room.

Blair Beekman, please approach the lecture, and you'll have one minute to speak to item eight.

Hi, uh Boy Beekman.

Thanks a lot for this item.

Thanks for the meeting today.

Really interesting meeting.

Um these are um we're trying to figure out our best practices right now with all of these items.

Our reminder that the more open we can talk about our best practices, um, it it is concepts of our better human reasoning and ideas apiece that I think can always be applicable and helpful to our international level at this time.

So good luck what we're doing here right now.

We're really trying to work out something important.

Speaking of best practices, we were working on you know really good things pre-COVID.

Um, you know, different funding ideas, new funding ideas that I hope you're trying to develop uh in this difficult time, and that we're trying to move past the COVID era of just tons of government funding, and then we have to pay it back.

Um we we really can develop dynamic things that I think we're trying to consider here.

Thank you for your efforts.

Thank you.

This concludes in-person public testimony.

We will move to the virtual queue.

There is one hand raised in the virtual queue.

Phone number ending in 870, please press star six and begin.

I quote As the city continues to address the structural budget deficit, the importance of maintaining cash reserves to strengthen the city's physical position and effectively manage potential future economic downturn has never been more critical from me.

The FY26 approved statement of budgetary principles.

Questions if there is any structural budget deficit from me.

We need robust efforts to counteract our structural budget deficit being the driving force behind our physical deficits now.

It was a beautiful meeting, Chair Blair.

Thank you.

Thank you, everybody love to all.

Thank you.

And Chair, this concludes public comment on item eight.

Thank you so much.

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

We will start with Vice Chair Moreno.

Thank you.

And uh once again, thank you for the presentation.

Um and Mr.

Chavel, thank you for everything your D uh your team does.

Um as we I think this is a really important conversation as we approach the budget season because I had to go back to a year, which seems like 500 years ago.

But and I had to look at um what um the adopted budget of fiscal year 26 proposed, which was uh to access about 10 million dollars of our reserves.

Um this was yet another reason why I voted no on last year's um or this current year's uh budget.

My understanding is that we didn't utilize the funding, which I was very happy about that.

Um but um I just wanted to touch on that.

Um I will say you're looking for feedback, right?

So I I will provide a feedback here.

Uh uh thank you for the benchmarking that you brought up.

Um I think a lot of the cities, and I don't know for a fact, I haven't I haven't uh looked at all the cities, but I don't think those cities had the financial scandals that the city of San Diego had in the past.

Um, and I think it is important um that we um preserve our um reserve at the tune of two months um 16.2 percent.

Um I know the financial scandals were a few years back, and they you know focused a little bit more on the pension, but still it did impact the city of San Diego.

Um so I I think it is diligent for us to keep the reserves um at that amount to ensure financial stability and also to protect our credit rating at the end of the day.

Um I will say that uh for the city, uh it should be the absolute last resort that we use.

And um, we should exhaust all other options uh when we are talking about using um our um reserves.

Uh it that includes taking a hard look at our services, uh conducting a thorough cost benefit analysis, also with an equity lens.

I think it's important that we do that.

Um but um I will say I will say this is a good discussion, and I understand why we are having the discussion.

Um I don't I didn't think we were at the point last year.

Uh we hadn't tightened our belt uh to the point where it warranted us utilizing our reserves last year at the tune of 10 million dollars.

I still think that's the case today.

Um, but I do think it's important for us to take a look at this and for you guys to get feedback from us.

I did like the idea of potentially um adding to the policy that should the city sell a pro should the city sell a property, maybe a portion of that go to the reserves.

Um as painful as it is, um, I do understand why we're not adding to the reserve right now.

Um, although I think we should always strive for that.

Uh, I think the year before that, we I think it's been like three years since we didn't add to the reserve.

Is that correct?

It was fiscal year 2023.

It was a 1.5 million dollar contribution to the reserve.

I've I always had issues with us not adding to the reserves.

Um, like I said, I can understand why we're not, but we should always be striving for that.

Um so though that would be my um my recommendation is looking at other ways in which we can potentially um add to our reserves or getting a little bit more um, I don't know what the term is.

No, not not necessarily conservative.

Um the point about the sales of properties and us potentially adding to the reserves in that method, I think is is a good one, especially with the surplus land act that most of those funds are just going back to the general fund.

Um but I do once again, I will just stress the importance of us continuing to add to the reserves and maintaining our reserves, not forgetting the past that isn't that far behind.

There, I think are still elected officials in the city of San Diego who voted.

Um I think 20 years ago, right?

That got us to the point where we had to have a have this policy right now to just take care of the city of San Diego and its reserves and its credit ratings.

Um so it's not that long ago, is the point that I'm trying to make.

Um so um what and I think I made the point.

Let's look at other ways to add to the reserves.

Um, I think is is what I want to say, still maintaining the fiscal responsibility of our policy, not just changing the policy for the benefit of a few years, because this hopefully this financial crisis is just a few years here for us, and we don't go and change the policy and here we go back to Enron by the sea in a couple years.

Um so I will stop speaking at that point, and that's my feedback.

And I look forward to having more of a robust conversation.

Where is this leading?

We're gonna be coming back to this committee in June and then council.

Okay, and what are you gonna come back to the committee in June for?

Uh the precisely some of the the items that you were talking about.

That that is something that we think we should be doing is uh looking at some one-time dollars, certainly, potential of if we have a year where we close with excess equity, that could be a good source for us to build reserves.

Okay, wonderful.

Well, I look forward to that conversation.

Thank you.

Thank you for that.

We will now move on to pro Tem Lee.

Thank you, Chair.

Uh, and thank you for the presentation uh on this topic.

Uh, I think this has certainly been of interest, especially when you look at the last couple of years, and the city has not been able to make much of a contribution to a reserve.

Um, and each year our reserve policy puts our uh anticipated contributions at a level which we already know that we're not going to hit.

And so I think this is actually an important time for this discussion.

Um as Council Mr.

Reno noted, uh, not just for the next couple of years, but looking forward.

That's where I think the benchmarking with other cities was important for us to see.

I think we need to be a little bit realistic about um what our objectives are.

Um and I do think we uh certainly based on your recommendation, maintaining a healthy reserve is certainly within our objectives.

Um, but doing so in a way that um allows us to meet the crisis that we're facing now, I think is important as well.

Um I think the IBA had noted that when we're facing a a direct trade-off of putting more dollars into basically a rainy day fund versus uh actually meeting the services that residents are looking for.

That is that is a trade-off that we have to make a choice on.

Um I I don't want to just have reserve funds sitting in account for the sake of a positive percentage if residents in the city are losing out on it uh the actual services that they depend on.

So um for me being responsible about how and when we make choices uh that involve the reserve is important, that we do so with a plan for the future as well.

I was a big concern last year when we hit the year end and there was a proposal that the city simply didn't make its budget, and so hey, we're just gonna pull from that reserve.

We don't get the budget with that in mind at the start of a year as a council.

We have to deliver a fiscally balanced budget and plan.

Um and I think our intent should be to meet that.

So I think some of the ideas that have been proposed about taking excess equity one-time dollars uh in the future and and use utilizing those as sources to help um bolster the reserve make sense.

I think that's what a lot of uh even nonprofit organizations do is that when they have that kind of excess, they they don't just roll it over into a future year spending, but they try to ensure that some of that goes towards um uh meeting any future you know issues that they might face.

And so for the next couple of years, especially because we know the crunches, particularly in the next two years, um, understanding what capacity we do have to work with the reserve um while also planning for the future.

That's the balance I'm hoping to achieve and happy to chat more about it offline.

Thank you.

Thank you for that.

Um not seeing any other members on the lights.

I think that um will bring this item um to a conclusion.

Um I think I do share in the concern of um you know, having dollars, you know, balancing that concern of making sure we're able to provide the services we're obligated to provide.

And so I think at the forefront of this is addressing the structural deficit in the appropriate manner.

But there are some decisions that need to be made, need to be made in the right manner from an equitable perspective.

And I think until we actually sit down and resolve the structural deficit, we're just applying band-aids and in and potentially you know, without understanding all of the consequences in front of us, you know, creating um larger issues down the road.

So I think it points us right back to the structural deficit and what we need to take care of.

So with that, I think that um brings this item um to a close and thus brings us to the end of today's agenda.

Thank you to the 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, June 17, 2026, at 9 a.m.

We are adjourned.

Thank you.