I'd like to ask the interpreter currently on the Spanish channel to commence interpretation of the meeting.

For those just joining the meeting, live interpretation in Spanish is available, and members of the public or staff wishing to listen in Spanish, can join the Spanish channel by clicking on the interpretation icon in the Zoom toolbar.

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Click done to activate and begin the interpretation.

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Item three point one, conference with labor negotiator.

Uh, and then item three point two, conference with legal counsel regarding significant exposure to litigation.

Do we have any members of the public here who wish to make public comment on either of these items?

Seeing none, we will close public comment and we'll recess into closed session.

Okay, we had some technical difficulties, Francisco.

We're gonna restate the announcement.

So I've moved you back into the English room.

Okay.

All right.

So Claudia, I'd like you to ask.

I'd like to ask you to commence interpretation of the meeting for those just joining the meeting.

Live interpretation in Spanish is available, and members of the public or staff wishing to listen in Spanish can join the Spanish channel by clicking on the interpretation icon in the Zoom Zoom toolbar.

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Francisco, will you please restate this in Spanish?

Sure, thank you.

See muy buenas tardes a todos, but uh interpretación in espanhol.

In su computadora, I got click in the button del Global.

And celular o tableta.

Toque in more interpretación.

Active silenciar audio original y presione finalizado.

Gracias.

Thank you.

Welcome back, everyone, to the Twilight Zone episode that this meeting is shaping up to be.

I'd like to confirm with our IT team that we do have Zoom Zoom coverage.

We are good to go.

Well, in that case, we're gonna officially kick this off again with the time of twelve twenty-one.

Uh Madam City Clerk, would you please call the roll?

Thank you, Mayor.

Councilmember Rogers.

Present.

Councilmember McDonald is absent.

Councilmember Fleming is absent.

Councilmember Ben Wellos is absent.

Councilmember Alvarez.

Present.

Councilmember Vice Mayor O'Krupke.

Here.

Mayor Stapp?

Here.

Thank you very much.

We will again move to item three, our closed session items.

Item three point one, conference with labor negotiator, and item three point two, conference with legal counsel regarding significant exposure to litigation.

Are there any members of the public who wish to comment on either of these items?

Seeing none, we will close public comment and we will recess in a closed session.

All right, thank you for your patience, everyone.

The time is looks like it's two sixteen.

So we're about forty forty-six minutes late, but we will reconvene in an open session.

Madam City Clerk, would you please call the roll?

Thank you, Mayor.

Councilmember Rogers.

Present.

Councilmember O'Krepke.

Here.

Here.

Let the record reflect all council members are present with the exception of Ben Whalos, Fleming and McDonald.

Thank you very much.

All right.

And we're gonna get started with our highlight for the afternoon.

Our general fund our item four point one, our general fund budget update, and of course, eventually item four point two, which is our our CalPers discussion.

All right, finance team, welcome.

Thank you, Mr.

Staff, members of the council, Scott Wagner, Chief Financial Officer with me here today is Veronica Connor, the city's budget manager.

We're very pleased to present this item, giving a budget development update for our coming fiscal year twenty-six twenty-seven.

So just give a brief overview of where we are in the process.

Next slide.

So big picture as part of our base budget, we're seeing a 17.5 million dollar general fund deficit.

This is right about where we thought we would be.

It just means that our expenditures are still growing faster than our revenues here at the city.

That's been the case now for a while, and that's ultimately the net we're trying to crack with our fiscal fiscal sustainability.

If we were to take no corrective actions and adopt a 17 and a half million dollar deficit, we would again expect the structural aspect of our deficit to cause growing deficits in the future years.

Veronica's gonna go through our forecast, but again, it's the same trend that we've been seeing.

We've been making progress.

The actions that have been getting taken, that which I'll go through in detail have made a big difference.

That is a fact.

But the reality is we just still have not fully gotten over this snowball effect within our budget.

Veronica will go through in a little bit more detail our revenues and expenditures.

But key to today's discussion is that we will not be discussing any proposed reductions at this time.

The facts are that our city manager is still in the process of those of reviewing those reductions, and those will move forward on the fifth and the sixth to uh bring to council to have our departments here to discuss it further detail.

Next slide.

So I want to define the term base budget because we haven't used it in the past, but it's a really great term for us to use is that the numbers we're talking about today really don't include any proposed uh reductions, but it does include include things that are already baked into our budget from prior years.

What it does include is essentially our in-response programs and our safer grant.

Now, we'll be talking about it more in a moment, but both of those programs have been funded by outside funding for the history of the city.

Uh what we are seeing now is that those outside funding sources are no longer.

With the case of SAFER, it's the federal grant expiring.

And with the case of in response, it is that was a program that was launched with federal ARPA dollars, one-time dollars that was able to be maintained with county measure o grant funds.

And we do not we do not anticipate receiving the full amount from the county to for that program in the coming year.

So those positions and those expenditures have not been removed from the budget at this time.

Um next slide.

Oh, I'm sorry, go back one more.

I told Veronica I would do this.

Uh, one more thing that the base budget does address is that when we've analyzed our budget so far, and and we discussed this at the LTFPA, is that we're seeing our trend on actuals within overtime far exceeding our budget.

So we have a pre-existing funding gap in our overtime for our public safety departments that this base budget does address.

This is frankly just good budgeting.

Um, we're gonna talk about that much more at length here, even here today.

But going forward on the 5th and 6th, both Chief Cregan and Chief Weststrope will be coming down to council to give a full um analysis and talk about the trends that they're seeing within the overtime, their overtime budgets and actions that are getting taken to ensure that we're maintaining.

Next slide.

So I'll with this, I'll pass it off to Veronica to run us through our forecasts and revenues and expenditures.

So our long-range forecast is something we show at just about every budget update that we have.

Um, looking back at fiscal year 25-26, our current fiscal year, we adopted a deficit of 8.4.

And as um Scott mentioned, we are right at a 17 and a half million dollar projected deficit for fiscal year 26-27.

We see this continue to grow in the out years as our revenues are just not keeping pace with our expenditures.

And our projected general fund reserve slide does show that we are um expected to be under our council mandated reserves by fiscal year 27.

Is that what that one reads?

Yeah, so this is uh the same trend that we've been seeing within our our our general fund reserve spend down.

So again, because we're still experiencing the structural deficit, we're we're showing here as we've done in the past on how that sustained deficit would impact the city's reserves.

The important takeaways really from this slide is that the box on the right hand side is our upcoming budget adoption that we're working on fiscal year 27, and then the next year being fiscal year 2028.

What we would anticipate with no budgetary reduction actions is that we would fall below our mandated reserve in the coming adopted year by the end of the year.

That's important because our mandated reserve is really what I consider our disaster or macroeconomic big impact while we can stay sustainable and continue operations as a city.

We anticipate that being around 45 million dollars in fiscal year 2027.

So you'd see without action, we would actually fall below to about 37 million.

I note every time I talk about this slide, but this slide is put together with governmental accounting standards.

Those are very complex, more complex than they should be.

But to this slide, what it means is that we live one year in advance.

Government accounting standards say when you pass a deficit, you need to hold that against your reserves.

So sometimes I get asked, how come the years don't exactly line up?

They line up a year in advance.

Um next slide.

So taking a look at our revenues projected for next year.

Um, in the general fund for the city, we're projecting about 223 million dollars worth of revenues to run our general fund.

Property tax continues to be a very strong, very reliable source for the city's general fund.

We do anticipate hitting our budget for 25-26 to 41.4 million, and we anticipate this will grow at 5.1% for next year.

Sales tax has been more volatile over the last few years.

However, this year we think we're finally getting on track.

We do expect to hit our 70 and a half million dollar budget for fiscal year 25-26 or come in very, very close.

And we're looking at a growth rate of about 1.4% for next year.

It's not a large growth rate, but it's growth in the right direction.

We are still seeing increases in places such as our fuel and service stations as well as our county pool, which is where we see our online sales tax revenue come through.

Um, also worth mentioning our permits, fines, and charges are seeing a decrease.

This is our PED permit revenue.

We're starting to see some changes in trends in our planning and economic development department where we're seeing um maintaining high volume of permits, but they're lower in dollars.

We don't have as high ticket permits coming through in large developments.

So we're keeping a close eye on this.

PED does have a rate structure in place that plans for adequate cost recovery.

We are just seeing a difference in the types of permits that are walking through the door.

Our recreation revenues, we're budgeting a 24% increase for next year, which is sizable.

This is a reflection of high demand in our rec programs.

They're popular.

We have a lot of people that sign up for these.

And back in January, our recreation division did come back and increase some of their rates.

They felt that the market could bear the burden of some higher costs.

We're doing everything we can in the general fund to bring in what revenue we can to sustain our operations.

A quick note additional note on sales tax is we have been glad to see some stabilizing of that figure, but when we look at it on a three to four year basis, we are so woefully behind where we really would have imagined we were over the past four or five years.

We've recently reviewed quarter four of 2025 with our sales tax consultant.

It follows that trend.

You know, we we saw a little bit less than one and a half.

Um, one and a half is not a number that that is ultimately gonna help us a lot within our structural deficit.

Again, very modest growth of 70 and a half to set 71.5, you know, an additional million dollars year over year.

Again, when we're looking at our expenditure growth, it's just not pacing given sales taxes our most critical revenue source.

Thank you.

And Yasma, as I forgot to mention on this slide, our overall change year over year is 3.6% in revenues, which is again an increase in the right direction.

But as we get to our expenditure slides, a couple slides ahead, you'll see it's just not keeping pace.

This pie chart is just a visual of the previous table.

We're still looking at general fund revenues, and we show this to always illustrate the fact that property taxes and sales taxes make up over half the pie.

These are our two largest revenue sources for the city.

So these are by far the ones that we pay the most attention to and do what we can to keep these healthy.

So moving on to the expenditure side of our general fund expenditures in fiscal year 26-27, we're budgeting about 233 and a half million worth of expenditures.

And our year over year growth rate here is 7.7% compared to about 3.5%.

A couple slides back, this is where our structural deficit is really illustrated.

Um, looking at the top line here for salaries, we have a 10.5% increase.

This is due largely to several grants expiring that were previously paying for some of our salaries in the general fund, and we will talk about those more in future slides.

Most bargaining units are scheduled to get a 4% cost of living increase in 2026.

Our professional services are showing an increase too of 15.4%, but that's only 2.1 million.

About 600,000 of that is our election costs for next year.

Those are costs we have to budget for every couple of years as they come up.

So it's not one that we see year to year, but it shows a variance as compared to last year.

Our vehicle expenses too are growing at 6.4%.

Vehicle expenses include everything from gasoline to maintenance to repair to replacement.

And I highlight this one just to show that this is a pretty major cost for the city that we can't control due to outside factors.

The cost of gasoline is going to be what it's gonna be.

There's a lot of state regulations requiring the types of clean energy vehicles that the city is required to buy.

And it is a big category that we struggle to maintain and to keep at a low growth rate.

This is still our general fund um expenditures by category.

And again, salaries and benefits are our two largest pieces.

They make up over 77% of all expenditures in the general fund.

So while we can talk about vehicle expenses or professional services, it's really just small dollars compared to the personnel costs that we incur.

So our base budget general fund expenditures by department.

This is the same total as what we've been looking at 233.5 million.

This is our still our general fund expenditures, just divide it up differently.

Before we had them by category, now this is by department.

Our top line includes the cost for all of our administrative departments.

Um the second line down for fire, we're seeing a large variance there of an increase of 13 and a half percent.

This isn't typical, and again, we'll have the opportunity to talk about this more in future slides.

You're also going to see some large swings in recreation and transportation and public works.

This is a result of a reorganization that happened last year when we moved our parks division over to transportation and public works.

It's going to take a couple of years to be able to stabilize our trends here.

So we're going to see some big swings in a lot of areas due to this reorg.

And again, a visual of our departments in a pie chart.

Police and fire, our public safety departments make up over 65% of the general fund.

I'll hand it back over to our CFO Wagner.

Thank you, Veronica.

Uh so next slide.

So what we'll start to go through is really some composition concepts on what's making up our 17.5 million dollar deficit.

The first thing I would bring up is that uh what this first slide shows is really that that grant funded programs of in response and safer, how much of that is getting made up of our budget versus our ongoing structural deficit.

What you see there is $13.9 million versus the $3.6 million within those grant funded programs.

Next slide.

This is really the prior chart put into put into a graph to understand how the departments are shaking out from that growth aspect.

And what you see here is that the fire department has the largest growth, but it's made up of some specific issues.

Uh the very top, that purple section is the in-response aspect of funding going away from the county and the additional funding coming from the general fund of 1.2 million dollars, $2.4 million worth of the safer grant expiring, which we no longer can have employees charged to.

So really the the takeaway here is not a whole lot of increases within admin or or PET or some of these other areas within the city.

Again, a lot of our increase, specifically when we look at the departments are coming from those reasons.

Next slide.

Um for us numbers people who love numbers.

This is uh for us, this is really that that chart broken down on what's driving the fire department and police departments increases.

Next slide.

So as part of May 5th, we're we're gonna have both Chief Kriegan and Chief Westrope come down and talk about overtime within their departments.

But what we wanted to just go through very briefly here today is really the understanding of what's happening within those numbers from a big perspective.

This first slide shows the budgeted versus actuals overtime for the fire department over the past four years.

And what you would what the first thing that sticks out to me is that darker orange uh bar is budget, and that budget has remained flat over the past four years.

Now that's important because our salaries don't remain flat at the city.

And so there is an inherent uh disconnect here between the math of how pay works at the city versus how we're budgeting revenue, trying to keep it flat.

And what we've noticed is that really starting in 24-25, that equilibrium became very, very far off.

And so again, we're proposing adding two and a half million dollars to the budget for overtime this year to not uh incentivize more overtime, but to really align ourselves to actuals of what's we're seeing happen within our budget.

Next slide.

The police department is is broadly the same but slightly different.

What you're gonna see here is the green bars being actuals within the police department, which has been going down over time for the police department.

And what was happening starting in 2223 is that the city made a concerted effort to start doing this correction of bringing the budget to the actual number.

So we started increasing our overtime budget starting in 2324 and then 2425 to start aligning it.

Then last year we decreased the budget.

And what we're seeing is that that decrease in budget doesn't correspond with a decrease of overtime within the department.

The reality is that our public safety departments have mandated staffing requirements that they need to meet, especially within the police and fire departments.

Incidents and large events can very much cause material differences, especially within police for this number.

So we're seeing that our current year, we're anticipating them being well, well above budget.

Again, what we're trying to do within the coming budget adoption is to really correct that.

Next slide.

So in summary, uh we have a baseline budgeted deficit of 17.5 million dollars.

It includes the grant funded programs and positions that no longer have grant funding to support them, which is 19 FDEs.

This includes a correction of the pre-existing funding gaps and public safety overtime of $3.1 million.

And of course, we also can trude our include our contractually uh approved compensation adjustments as part of our budget.

So I think it's important each time we have these budget conversations to recap what's happened at the city in the past.

Um so I'd like to do that very briefly.

Next slide.

The first thing that's really happened over the past year is that I'd like to make a statement that the finance department is committed to transparency and communication.

Um over the past year, we've we've done so in a numerous in numerous different areas.

We've conducted monthly fiscal update meetings with our labor representatives where the labor representatives drove the agenda of those meetings.

Those meetings included a full discussion around the city's investment portfolio, how it works, what's made up of the balance.

Both the city's independent auditor came to the came to that meeting along with the city's investment advisor to really break down how we go from a really large number within our investment portfolio to get to our reserve and pointed it back at the city's audited financials to give that breakdown.

We included a CalPers pension discussion, we included CIP.

How does the city have such a large CIP program?

But yet, how does that interact with the general fund?

As we know our funding sources within CIP are almost all restricted.

They come from special revenue for sources that we can't backfill into the general fund legally.

They are there for specific reasons.

We included the city's long-range financial forecast, and how do we come up with the assumptions that we make to show those negative numbers and what do we consider for wage growth, expenditure growth, and revenue growth.

And we went through it line by line.

We additionally have a formation of the city manager budget working group with community members.

That group actually meets next week.

That's been going on for a while, but that's been another great opportunity for the finance department and city manager's office to really interact with just members of the public to talk about our current issues.

Very importantly, here to me is that the final line item is of the LTFPA subcommittee line by line review of all departments' budgets.

Um, what does that mean?

That means that our subcommittee over the past year did a thorough thorough review of budgets that literally went line by line through their budgets.

That was over 10 hours of review.

That was not at the top level, but it was the tell me what makes up professional services within a department.

And I will say that my takeaway was from the committee was these large, large ER departments budgets where they have large ER operating supplies budgets or professional services, they really get eaten away by mandated costs.

As Veronica mentioned in a slide a few moments ago, our primary costs at the city are fundamentally salaries and benefits.

Next slide.

So as we move forward, really we are conceptualizing our budget process as really we've been in two phases.

Phase one was everything prior to this year, and phase two is what's gonna be ahead.

And phase one was very dramatic.

We we we needed to make dramatic actions to correct the city's deficits.

That included $15.2 million worth of ongoing reductions, decreasing the general funds work workforce by 54 employees, 10.2 million dollars of one-time money to go back into shoring our reserves, and voter approved revenue tax measures of EE and FF, affecting business licenses and transient occupancy taxes, which brought in $3.7 million worth of additional revenue.

Additionally, we had, I'd like to mention we had no mid year cuts as part of 2526.

You'll hear myself or the city manager talk about we like to be very intentional with our strategy moving forward on how we address cuts.

We do not want to be reactionary.

We do not want to make half measures that then we have to come back to council mid year to change course.

We want to be able to have the proper times to develop the strategies.

Some of those strategies you're gonna see here today.

This is a just general summary that we've been showing on how the city, those $15.2 million have ultimately been spread amongst our departments so far.

Next slide.

So really phase two of where we're going today.

Uh next slide.

Is we started really with what are the strategies that we can start looking at.

We've already made very big cuts to the organization, what can be next?

And we we really workshopped and did some thought exercises and game plan for well, what could that look like?

One of those options is let's fix it right away.

Let's make a 17 and a half million dollar reduction to the city.

Um that could be a very fell swoop instead of what some might call dragging this out over a period of time.

That's very difficult for communications, it's very difficult for morale.

It's a very difficult thing to do to spread this over time.

What if you did it tomorrow?

I would say that we have a very large responsibility to really weigh that kind of concept against impacts to the community.

The reality is that we want to be able to maintain the services we offer for the community for as long as we can, given our reserves that we have at the city.

We're looking towards cutting positions that are vacant.

Um, we want to make sure that we can impact employees that are currently employed by the city last.

We always want to take a look at what vacancies we have as a city first, and that's one of our strategies considered.

Next slide.

We took a look at some of the larger pension or items that we do have at the city, one of those being vehicles, and really a look at what are our larger purchases within our fleet structure and how are we funding that and is there a better way to fund it?

The short answer is yes.

Uh, we are going to be considering and proposing a financing structure where we can utilize lease financing going forward on some of our larger apparatus that'll take advantage of matching us paying for the item over the useful life of the item instead of having to bring cash up front, which causes a little bit of more burden on the organization up front.

It's a little better way to finance the larger purchases of the city.

Use of reserves.

We have a sound reserve and a healthy reserve at the city as of right now.

That is a fact.

Our issue again is how quickly it gets spent on a structural deficit basis, but we can use utilize a portion of reserves for the next year to help us not make the level of cuts immediately that we need to make and give us some additional time for strategy and concept developments.

The largest financial issue of the city is pensions.

Uh, you've heard me say that frequently.

We are gonna talk about that a lot here very shortly.

So I'll I'll briefly skip over it, but really getting down to what can we do to start bringing this pension problem into control and having it powerfully impact our current budget and future budgets and save the city money.

And then finally is department reductions.

At the end of the day, we're left with what is the amount that we ultimately we need to cut from the organization now, and how do we spread that out amongst our departments?

Next slide.

So ultimately, this is a two-year deficit strategy to address the entire 17 and a half million dollar deficit.

We're gonna be implementing a multi-pronged approach over two years.

Year one, we're gonna focus on having fewer reductions to the apartment to the departments and being able to maintain core services.

But year two, we really need to start moving forward with a transparent conversation and thorough analysis of additional impacts here in the future.

Again, we we've been going through this process now for for what will be four years by the 27-28 when we need to start making those actions.

Um, we're gonna talk about that a little bit more in a minute.

Ultimately, in year two, we need to present what are the impacts of the organization if the general fund can't find a way to drive additional revenue.

So year one, again, as we mentioned, we're gonna be focusing a strategic use of reserves to partially prevent major cuts to service.

We have looked at vacancies, vacancies will be our first any kind of position impact will be focused there first.

Pension cost smoothing, we're gonna have a very large discussion on it in a moment.

After this, and the major apparatus apparatus lease, we're targeting essentially uh apparatus over 250,000.

But we've also, it's not just on the expenditure side, we've looked at what are the costs of the cities and what are our options towards better recovery, whether that be in PED or within recreation.

Again, we've made a lot of improvements in the areas, but again, it's how do we drill down even farther to make sure we're we're getting the best cost recovery we can for our departments.

Next slide.

As I mentioned, um the formal budget that the city manager will be proposing for fiscal year beginning uh July 1, 2026.

We will be bringing back those cuts to the council on May 5th and 6th to review.

Um, and as I mentioned, the year two discussion, I will say it is staggering for us to start looking at some of these year two impacts.

We are at a point just with the budget where we've squeezed as as hard as we can, and we're we're gonna kind of talk about that a little bit more in a moment.

Next slide.

This is that concept, and really what we're proposing as our strategy just put to numbers.

So, as you notice on the top, if we have a 17.5 million dollar draft deficit at the moment.

We're proposing at the moment to use $8.4 million worth of our reserves to address that on a one-year basis.

That is the same $8.4 million that we adopted as a deficit in the current year.

So one way to think about it is we're not falling farther behind.

We are gonna maintain the adopted deficit of where we were as of the current year.

We feel that we can get or we can get a million dollars worth of apparatus savings from this lease versus cash program basis.

Uh I'm gonna talk about that more in a moment, and then we're talking about it a lot in a moment that we can receive $3.8 million worth of savings and reducing our payment to CalPers next year in a in a in a function of using our 115 balance with amending our contract to CalPers, and we're gonna have a long discussion on that later.

The good news is it's even better than $3.8 million.

We're gonna reap a lot of savings from this program.

That ultimately leaves us with what's left over, and that leftover is that last bullet on the last slide is it's the department reductions.

The $4.3 million dollars is ultimately was our north star towards what we need to affect the organization with on a department reduction basis.

Importantly, I'll note that's a lot of numbers, but from my perspective, what that shows is that uh more than half between the fire apparatus and the pension savings makes up more than half, or that's the same amount as our department reductions, right?

We're addressing half of what we needed to address through not even impacting our departments or services to the community.

Next slide.

So a little bit more about the major apparatus lease strategy.

An important thing to understand is that this is a good opportunity for us because we have an opportunity to reduce how much money this or how much funding the city's dedicating towards future apparatus purchase, but it is not going to extend the useful life of our equipment on the streets.

It is not gonna impact, for example, we have many fire engines on order right now.

We have eight engines on order.

It does not impact the delivery of those engines.

This is kind of a best of both worlds, meaning we're gonna be able to reap some savings, but it's not going to impact ultimately the fleet of the city and the negative negative aspect.

Again, our goal here in focus is to just better align the payments with the useful life of this equipment.

Next slide.

So $4.3 million again of our department target address is ultimately 25% of the deficit.

Uh big picture, it will be difficult to get to 4.3 million dollars.

That's not easy, but it's much better than having to come up with 17 and a half million dollars through the innovative financing strategies that we're proposing and the use of reserves.

Uh they will be presented in in May.

I screwed up my month there, not March, it's May.

I forget what month I'm in at the moment.

Um it's included a tiered approach, right?

We've been talking about how do we tier reductions going forward at this chamber, and really again, it's that tier of how do we impact server critical services of the community as late as possible and last.

Um, we need to develop a plan that sustains the general fund on a long-term basis uh is gonna be critical moving forward.

Next slide.

So $4.3 million department target.

What was what happened was, or excuse me, the city manager directed departments to come up with 1% and 3% targeted reductions based on their budgets.

So what you'll know is that the 3% is over the 4.3 million dollars and the 1% is under.

That gives our city manager the ability to review the proposed reductions and move forward the ones that uh need to be deemed to happen.

It gives the ability to weigh the the proposed reductions on a tier basis of what should move forward.

So coming back to scenarios, we we've been busy doing scenario analysis over the past year of what it really takes to balance the city's budget and what that would look like.

We ultimately do not want to have abrupt changes to the to the city's operating.

We do not want to have abrupt changes to the city's budget.

So the next future slides, what we've done are illustrative.

They are not being proposed.

Uh, these are not plans that are moving forward, but what we hope to do going forward is provide what I would describe of a scaling of our problem.

Government ultimately has really big numbers, including us.

Sometimes it can just be easy to get lost in the size of those numbers and really how they layer onto the organization.

The next couple of slides, we try to do that.

So next slide.

So this first slide really shows what a 17.5 million dollar total reduction against our departments uh on an across the board basis would look like by department to come up with 17 and a half million dollars.

The column to the right shows what we would need to cut on an FTE basis to achieve that number.

Now, this is as much art as science here, meaning that we wouldn't be proposing to close every dollar of a deficit with cutting employees.

That that's not what we are suggesting.

But again, it's important to note that that's the size of what we're talking about.

And ultimately, if our total general fund is 77% salaries and benefits, and a lot of the other costs are mandated.

Um, while this isn't the number, I would say it's not that far off.

It's still a staggering and sobering number what that would end up being.

Um the number at the bottom shows well, what if you just didn't include the police or fire department public safety departments against that number?

In that same spread, we only get to $7 million.

As Veronica showed earlier, 65% of our budget is ultimately made up of police and fire.

So when we we don't have a broad approach to trying to fix the city's deficit, we just run into a math problem.

Next slide.

This is that same concept, excluding police and fire from the 17.5 million dollars worth of impacts.

What you would note is that the prior slide had around 89 in FTEs, and when we exclude police and fire, we end up with 108 FTEs.

This is just a function of the average compensation of those groups and needing to cut more from different areas that to make up that difference.

Um I will add as a as a note, and again, I this is a note about scale and about the size of our of our budgets.

But Director Hennessy, when he gave his presentation on PublicWorks' uh budget to the LTFPA, he did a really good job of breaking down that public works has 250 employees in the general fund.

But the reality is he has 85 general fund funded positions.

A big difference because public works is utilizing all these different funding sources ultimately to make up their budget.

And so when we think about it, and I look at this chart and I go 48 employees versus 85.

You can't do that.

You can't you can't execute that level of cut.

Um that's just not something that we can execute as a city administratively or operationally.

So there's a reality with these numbers that that's really staggering.

We wanted to provide some context on the history of FTE count or how many employees the general fund has had over time.

And I think we all can point out the historic events that have happened over this chart.

What this really shows is starting in 2000, 2007-2008, what we would call our pre-recession general fund number.

We had 885 employees in the general fund prior to the Great Recession.

That precipitously fell to a bottom of 705 employees by 2010-2011.

Well, you'll notice that really over the next seven, eight years, the general fund grew back to the point of 808 employees.

We then took an additional dip.

At that time, there was a focus to address a deficit within the city.

And that's what happened in 2018, 2020, 19.

And now you're seeing at the end of this chart really the fall off from our current structural deficit within the city.

Big picture to me is this.

So conclusion, um the general fund's been experiencing significant deficits and except extensive efforts have been taken to address those deficits.

We are in a far better position today than we would have been without those actions.

Ultimately, what we'll be moving forward is finance along with the city manager's office, we'll be discussing a two-year strategy moving forward.

Only with only one year of an adopted budget.

We are not proposing a two-year budget, but we are proposing a two-year multi-prong strategy.

We are very pleased to report that we've come forward with innovative strategies financing strategies to try to mitigate some of those impacts of the organization to do some of the bigger financing issues at the city, whether it be pensions or apparatus, a little bit better.

Additional revenues are going to need to be considered to ensure the sustainability of the organization.

And ultimately, a year two scenario will be presented to the May 5th and 6th study sessions with the department heads here to help facilitate those conversations of understandings within their departments of impacts of any proposed cuts, or ultimately the structural deficit of the city.

Next steps is April 21st.

That's today.

Thank you, Scott and Veronica for uh now four plus years of work.

Um, this really has been an extended conversation.

Uh, before we get into questions, do I recall at our previous meeting and relatively recent previous meeting when you noted that this current council was the most courageous and fiscally responsible that you would work with?

Does memory serve?

Uh my standard always answer here with this question, Mayor is yes, Mayor.

Uh yes, that that is true.

Uh, but but I I will always add it is true.

Uh this council has made reductions in the city that have been historic and needed.

And frankly, if they weren't made, we would have been in a very critical moment of failure at the city.

So it is true.

Well, we thank you for that.

Perhaps a consideration for the future slide deck, just to have that as a standard disclaimer at the beginning.

And with that, I will turn to I will turn to my colleagues.

Questions.

Vice Mayor.

Thank you very much.

Thank you for that presentation.

Um a lot of numbers in there that um that can sort of uh cloud the ability for uh for the layman to understand the the size of the issue that we're facing.

Um if I recall correctly, that's 17 and a half million dollars.

Um that's more than multiple departments' entire budgets combined, is that not yes?

Thank you for your question.

So we we can I think it's worth coming back on May 5th and 6th and giving that illustration.

But when we talk about a 17 and a half million dollar deficit, that's more than our entire administrative program at the city.

So, you know, no more finance department, no more city manager department, no more um HR, no more any of those things still don't make up the deficit.

So we we fundamentally have an operating issue.

Thank you.

Thank you.

Um and then one of the things that uh Veronica that you mentioned was um getting a hold of the sales, trying to get a hold of the trends of sales tax.

Um can you excuse me, can you give a little bit more detail as to why over the most recent years that's been a little bit more difficult than before?

Either of you.

Well, certainly.

Um through the COVID years and the years leading out of COVID, many agencies were certainly not alone, statewide, nationwide.

We saw some unprecedented growth in sales tax as people's spending trends shifted and people were staying home and spending money that might have gone to vacations or somewhere else on taxable goods.

And then through COVID, there also was a large shift to online spending.

So what we saw was some very steep growth followed by some very sharp drop-off, and now that trend line is correcting itself.

So we are finally getting into a point where instead of seeing negative growth, in fact, decreases in sales tax year over year, we're finally starting to see it stabilize.

But the question has been for the last few years is what will our normal growth rate look like year over year?

And what's emerging is that it will not look like the pre-COVID growth rates.

Um the consumers' trends have changed, people are shopping more online.

We do not realize as much sales tax here in Santa Rosa as we would if people went to regular brick and mortar stores.

Um the inflation has caused a lot of strain on consumers as well.

There's less disposable income as people are spending more on interest rates and other areas of spending on food and mortgages, et cetera.

So we are waiting to see what our new normal will be, but our consultants have advised us it will be less than it was.

Um future projections of year over year growth for sales tax are looking to be more around two percent, two and a half.

That's what they're considering to be in a little bit more healthy as things rebound.

So we are just keeping our eye on that as we are coming out of this time of recovery.

Thank you.

I really appreciate that.

As much as I would love to expand more on sales tax and trends and Bradley Burns and all of that stuff.

I I think we can spare everybody the detail at this point and get more, and we could probably get more into that on the fifth and sixth as to why um some of that more uh detailed discussion.

Um let's see.

The one thing I I want to be um a little more clear on is is the apparatus leasing.

I want to be very clear.

Um, I guess I should ask you to clarify or restate this does not affect delivery of apparatus in any way, shape, or form.

Is that correct?

100%, yes.

This does not affect our apparatus on delivery.

Uh, frankly, I'm looking forward to Chief Weststrope really talking about this more on the fifth and sixth, but ultimately, uh especially our fire fleet is gonna be in a better position than it's been in a very, very, very long time.

And not only is that the case, but future, they're in a much better place as well.

We're not we're not kicking the can or borrowing from the future.

This sets up future councils, future fire chiefs, future CFOs for success.

There's still funding in the future that wasn't there seven, eight years ago.

All right, thank you.

Others, all right.

Let me throw out a few questions then.

Um I recall correctly that um over the past few years, our budget estimates have been within about a percent and a half um of actuals at the end of the year.

We've been we've been pretty accurate in terms of what our budgets would look like.

Is that right?

We've come in pretty close within some categories.

There have been some swings, obviously, in some areas and others, but at the bottom line, our revenues have come in pretty close within I'd say two percent, one percent, two percent, um, and expenditures uh close, maybe two, three percent, a little bit closer.

But yeah, we are trending very close to what our budgets are.

We're paying very close attention and trying really hard to budget an accurate budget.

We do not want to be overpromising, but we also don't want to be restricting the general fund on the positions and the programs that it can budget every year.

So trying to walk that line pretty closely.

Yeah.

Mr.

Wagner.

I I'll add, because Veronica's being a bit modest.

We've been spot on for really the past three to four years prior prior to um up until COVID or since COVID.

I will add I sh I sh we need to be modest though, because we don't know what we don't know.

But that's why we take such a critical approach of trying to be accurate within our models, not being not thinking that every day is gonna be a rainy day, not thinking that every day is gonna be a sunny day.

Important to point out is always that within these numbers that you're seeing today, there is no recession considered.

Um, and there is no boom considered either.

We're we're we're trying to hit the target.

That's really hard to do.

We can't see the tell the future, but at least over the past three or four years, we've seen that our models are sound.

The city paid a cons or the city had a consultant come in to review our models and they were found to be best practice.

Thank you for that.

I was hoping that you would both take more credit because it really has been an impressive accomplishment by the by the department.

Um, and it wasn't it from my understanding is it wasn't always the case here.

And so, but in recent years, we have been very accurate with our with our budget projections.

Um, and that can give us confidence going forward that we know we know what those numbers are gonna be.

Um, another another percentage question.

We took if you the those 15.2 million cuts that we took over the over the past few years.

That's roughly 8% of the budget.

What's the something along those lines?

So we're talking about an additional one to three percent.

So when all is said and done, we're likely to take we're likely the city is likely to have taken in excess of 10% budget cuts over the over the past few years, which is substantial.

It it is, and I'll add though, is that what it's it's not just the fact that our we've had to reduce budget, is that our uncontrollable costs, whether that be pensions or vehicle costs or all the costs that we're even seeing within our own personal budgets, the city's experiencing those hits as well.

So on a service delivery model, it it's it's expand, it's it's exponential off of that, right?

It's it's more challenging than just hey, we've cut it by 10%.

We've had to cut by 10% because we've also taken these large increases in other areas.

It's it's very challenging.

Thank you for that.

Uh and final question, uh, because I really like the fact that you put the slide there with the number of positions that are funded by the by the general fund uh from 2007 up to today, the city population is about 15% bigger than it was in in 2008, correct?

So even though we then uh I didn't do that, I didn't do the calculation in terms of going dropping from whatever it was eight, was it 835 down to 731?

A substantial 17% cut, something like that with those 15% population increase.

Yes.

And I I think again, it's important to note that the city on a service delivery model is a different city as well.

So that's not the same.

The ultimately our our departments can really show this within their data very clearly, whether that's calls for service or the amount of regulatory pressures put on them.

It's it's not the same amount of work.

It's it's expensive exponentially more than just our ex our our population growth.

So, yes, it's challenging.

Thank you for that as well.

Uh, those are all my questions for the moment.

Anything else from council?

We'll open it up to the public.

Are there any members of the public that wish to make comment on this item?

Seeing none, we'll bring it back to council for final comments.

Mr.

Alvarez.

Just to add on to the conversation that happened just a little bit ago in regards to projections and actuals.

I do remember going back to 2015-16, and we see up to a 10% difference between the actual to the budgeted.

So just want to comment on the statement that was made of how much that's improved to really get and be spot on.

Thank you for that.

Ms.

Rogers.

I don't know if these comments are for our next session or for this one.

But uh just I guess a few comments for the city manager and the the finance team.

Um I am a little reluctant to keep using reserves because I I feel like um I don't know if we're going to be able to put them back and when we get under that threshold, we're under that threshold.

And I know we're trying to be creative.

Um, but we've been doing this for a few years now.

And so I am a little skeptical if one more year is gonna really give us what we need in order to stop using um reserves.

I'm happy to learn more about the apparatus replacement because we did not have that a few years ago, and that was something that I pushed for.

And so I'm happy to see that it is evolving and developing.

Um that that makes me happy to know that we're not just trying to get get rid of it because we need it.

Um then I have some concerns about uh department reductions.

So I I don't know how much more our staff can do with less.

And I I feel like it is gonna get to the point to it is gonna affect our delivery of services.

Um that leads me to another question for council is I know this came up before, but what are our core services?

And I feel like we always say um this is something we need to discuss.

And I don't know that we've really just hashed out the conversation of what are our core services, what do we feel like our our core services are?

What can we cut and what can we not um cut?

Although it it keeps coming up, and I think um Councilmember Okrepke uh with my sideline of yes said it last time was what are our core services?

What is it that we must do as a city?

Um and I I say that because I know that I reading articles and seeing other budgets that are there's gonna be some hospital closures of the services that they are providing and speaking to some of our our state representatives, knowing that there is money out there for the county and saying, well, we're providing services, why aren't the cities getting money?

But the county can continue to get money for services that we are now providing that we didn't used to provide historically, but us feeling like we need to provide it because we have programs and they are working.

Um there's some challenges there.

So I think if we can go back and really figure out what are, as a city, our core services that we have to provide.

Not that we want to provide, but that we have to provide.

Um, because although we've made choices and cuts, um, and thank you for the kudos, we're probably gonna have to make some pretty hard decisions coming up.

So we need to know what our core services are that we have to um have to provide.

And I'll wrap it up by saying that I'm appreciative to to your team.

I'm also appreciative to the exec team and its members for being able to look at some of the cuts that we can make, even though it is really hard and they probably don't want to make any cuts because they know that they're doing uh a lot with less.

Um, and then to our staff who continue to come to work despite all the cuts that we're making, despite everything that's going on, continuing to serve um our community, our city, um, and our visitors that come, like kudos to to all of you for the work that that you're doing.

So I did want to to put that in there because you guys are taking the brunt of it.

So thank you.

Thank you.

Uh and and we certainly all all second that.

Um back to you, uh Veronica and Scott.

What one of the uh the parts of your presentation that I most appreciated was at the end when you when you talked about all the work that had gone into this and you laid out some of the concrete things that we're doing better now than we used to.

Um, whether whether it's looking through alternative ways of handling pensions, whether it's leasing arrangements, um, whether it is the the pre the the time that you and the departments took to do the presentations at long-term finance, uh Mr.

O'Krupkey and I had that we had the benefit of being part of those meetings.

Um that was a genuine culture change for council and I think for the departments as well.

That was a very uh useful exercise.

I think I can speak for for both of us and for our colleague, Miss Ben Wellos.

Um really getting our head into the operations of the various departments, talking about talking about options, talking about challenges, talking about about uh the effects of potential cuts.

It is a different lens for us this year as we as we as we look through the future.

Uh and that happened because your team and all the departments took a significant amount of time to put those presentations together.

My hope is that that was a good exercise for the departments as well.

Having been through that in other organizations, I that that does tend to spur thinking and spur some creativity.

When we come back in um in May, to the extent that you're able to highlight some of the different thinking that's emerged.

You've already touched on it in part in the presentation.

Again, CalPers and leasing are two examples.

Getting council um and the departments more involved with thinking through budget options, and that's another uh example.

We've made some significant organizational changes in the in the last few years in terms of combining departments in terms of looking for efficiencies.

As we're telling the story to the public about the um the difficult decisions that are inevitable, we're gonna be making them over the over the next few years.

To the extent that we can also be showing them how we are doing things better.

Yes, we're making difficult cuts, but we're making genuine process improvements in various ways that are gonna be great for the city in the long term.

I think those are helpful to have um to have out in in the public and have the public realize those are happening.

Uh final note, and this is at a bit of a tangent, but I did want to I did want to note that um having uh interim city manager Farrell here as part of these conversations has been invaluable.

Watching uh Ms.

Farrell and your team work together has uh inspired all of us here in council.

We're all we're all grateful for that.

And we've seen the creativity that that's emerged.

So thank you for all the work that you've done in combination with your team.

Uh we're looking, we're we're looking forward to the conversations in May.

Uh and with that, anything else from council?

All right.

Well, thank you.

Thank you for this item.

And now we move into uh another exciting one.

Correct.

CalPERS pension funds.

Item 4.2 are CalPers pension unfunded liability expenses overview and potential cost avoidance strategies.

Mr.

Wagner, I'm I'm assuming you're still in the hot seat.

Veronica, thank you, we're not gonna get a little bit of a thank you again, mayor and members of the council.

Finance back to back on even a more exciting item next.

But uh we're we are thrilled to be bringing this pension item forward here today.

Um with me here today is Mike Meyer from NHA Associates, and uh yeah, we're really looking forward to a good discussion around pensions here at the city.

I'll give a very brief overview.

Pensions are complicated, and and I very much understand that.

But really, what we've hoped to do to here today is kind of boil down a little bit of history with CalPERS and understanding how we've ended up here where we are today, but also much more importantly is what we can do and really coming forward to council for a first time with options to start addressing this issue.

You've heard me say multiple times uh to council that our primary financial issue at the city is pensions, it is pensions expenses, and really this is a way for us to start getting ahead of that on a strategy basis.

We're very excited for the conversation.

I'll give a brief introduction to Mike.

Um, really, this this starts with a story, and the story is that the city's uh pension actuarial reports from CalPers come out in July.

This is like Christmas morning to finance directors all over the state to be able to read through these reports.

And really, the first time I read through it this year, some numbers really popped off the page that hadn't popped off the page before.

Um there was some opportunities that I saw that we hadn't had in the past.

And my first call was to Mike.

Uh Mike is very modest, so I I will not be modest for him.

Mike is a leader around the pension issue in the state of California.

He's worked with over a hundred agencies on their CalPers issues, uh, billions of dollars worth of impact from from what he's done.

And I'm very fortunate to have the relationship with him where I called Mike and said, hey, I think I've got an idea, but uh it's a really big idea, and I I need you to make sure that it works, and I need you to make sure that the math is right, and I need some help.

Ultimately, we'd like to get some help on bringing this conversation forward in a way that he does so well to help folks understand uh these issues going forward.

So, with that said, I'll let Mike uh get started.

Great, thank you.

Thank you, Scott, and good afternoon, mayor, vice mayor, council members.

Nice to be here today.

Um, a little more background on NHA Advisors.

We are a municipal advisor based here in the North Bay, have nine registered advisors.

We also have eight practice groups.

Um, one of those is our pension and fiscal sustainability group.

That's one of those that I manage.

As Scott mentioned, a lot of our work is uh surrounds education, trying to really translate the complexity of CalPers so that you all can make good decisions.

Um that's evolved into really implementation of cost management strategies, whether those are bonds, one fifteen trusts.

We're gonna get into a variety of options today.

Um we have been kicking around dozens of options over the last six to nine months.

So the ones you'll see today are what we've deemed the most viable.

Um we could flip to the next slide.

The way we've laid out the presentation is a little bit of background on CalPERS, how CalPers works.

We'll try to keep that brief, get into some of the historical cost trends that have been really uh impacting some of the budget challenges that you heard in more detail today, and then look at some of the projections based on those uh latest reports that Scott mentioned, and then we'll really get into some of the options that we've been analyzing that we think work best for the city.

So next slide.

So high-level summary of what we're gonna be talking about today.

The city's debt with CalPers right now is 482 million.

This is your unfunded accrued liability, and this is something we'll define in a couple of slides.

Pretty evenly split between the miscellaneous and the safety plan.

For most of the presentation, we really wanted to focus in on what's attributable to the general fund.

And so that number is about 331 million.

There is some good news coming out of CalPers.

They have had two good years of investment returns where they they beat their goal of 6.8%.

They earned 9.5% in 24, and last year they earned 12.1%.

So we do think when those reports get released this fall, the city will see a decrease.

We don't know by how much yet, so we wanted to be conservative and use last year's report for all the analysis you're gonna see.

The city right now maintains a 115 trust, that's a separate trust dedicated towards pension cost, current balance of just under 15 million, and combined with the internally held pension reserve, that's about 26 million in pension assets.

And that's really the foundation for a lot of the analysis we looked at is how can the city best leverage that 26 million over the next decade or so to avoid uh future rising costs with pensions.

Next slide.

So there's two types of payments that all agencies make each year to CalPers.

There's the normal cost and there's the UAL.

And the normal cost is the cost needed to keep up with pension benefits for current employees, and both employees and employers pay part of that.

Now, in a perfect world, that's all you would ever pay.

The challenge is that over time, CalPERS has not met their uh investment targets, and they've also changed assumptions at various points in time.

And if we flip to the next slide, what happens when that occurs is that a shortfall develops.

And this is the gap between what the city would need to have to be fully funded.

And you can see that in the Navy blue bar there.

That's about 1.7 billion dollars.

Right now, the current value of your assets with CalPers is 1.2 billion.

So that difference there is that 482 million shortfall that you see in that light gray box.

That's you don't pay that back all at once.

That's a big number.

So similar to a mortgage, CalPers amortizes that for you at a 6.8% interest rate over a period of time.

The one thing that we'll point out here, and it'll become clearer on a later slide, is that beyond just the sheer magnitude of that that debt, it's the way that it amortizes that's challenging.

So it's not just one mortgage with a uh a 30-year payment that's level that um is easy to budget for.

It's actually a combination of about a hundred different mortgages.

They all have different terms.

Looking at Santa Rosa's, uh, what they're called as amortization bases, they range from about five to twenty-four years, and when you stack them all on top of each other, you get a very irregular shape that's been increasing rapidly.

Next slide, please.

So UALs were non-existent prior to, I believe around 2003, and that's when the stock market was had a pretty long history of generating double-digit investment returns.

And a lot of the benefit packages that were entered into at that time assumed continued strong returns in the stock market.

Back, I think in 2003, CalPers assumed they would earn eight and a quarter percent.

That's known as their discount rate.

However, if you look in the top right on this slide, you'll see their 20-year average is under 7%, and their 10 years at about 7.1, and the 30 year is a 7.6.

So not horrible, but significantly below what they thought they would earn uh 20, 25 years ago.

And so they've ratcheted ratcheted down their assumed rate of return about four or five times over the last 20 years.

It currently stands at 6.8%.

They've also been changing other actuarial assumptions, so inflation rates, mortality rates.

They've also been forcing agencies to pay that debt back over a shorter period of time.

So 10 years ago, they would amortize the UAL over 30 years.

So more interest paid over time, just like a mortgage, but you do have a lower payment.

So the ability to absorb that was a bit easier.

But after the Great Recession, CalPers was such at a low funding ratio that they needed to get more money in the system quicker.

So they they shortened the way that UAL is amortized to 20 years.

Next slide, please.

This is a graphic from the CalPers website.

We like it because it's it's very simple and it shows where the money comes from to pay retiree benefits.

And right now, this is by the way, this is statewide, so it's not just for Santa Rosa, but it's fairly applicable for for the city.

About 55% comes from investment earnings, about a third comes from the employer, and then CalPERS members, so the employees pay about 11%.

And the interesting thing about this graphic is to really visualize how big this challenge has become is if you would have looked at this graphic prior to the great recession, you would have seen the left side of that dollar at about 70 cents on the dollar.

So 70% coming from investment earnings, meaning that the middle part, which is what Santa Rosa is paying, it was about 20 cents on the dollar.

So any time that investment earnings don't meet their goals, it means that the employers have to pick up the share.

The as I mentioned earlier, the city has two primary plans, the miscellaneous and the safety.

There's a little over 4,000 members that are covered by the CalPers retirement plans.

About 30%, and you could correct me if I'm wrong, Scott, but about 30% are active members, and out of that amount, a little over 60% are covered under the new PEPRA plans.

And so these PEPRA plans provide benefits for employees hired after 2013.

They are slightly lower benefit levels and more cost effective for the city, but we want to just clarify the fact that, and we this is at the bottom of the slide here, that nearly 100% of this UAL comes from the classic plan.

So this is a hard dollar amount.

It's a challenge that has been uh occurred because of poor investment returns over the last 20 years.

I'd like to add, Mike.

The Pepper of conversation is really critical in how the state lowered the benefits for employees hired after a certain point.

And that really went into effect on January 1, 2013.

And at that time, if you looked at presentations from CalPers or even presentations that came to this city council back then, it was well, PEPRA employees, because they have a lower benefit will help offset the cost that the city would be incurring now.

That did not end up happening for a lot of complex reasons, but fundamentally the bottom bull is really critical, and that really our large cost here that we can't bear is the UAL cost.

99% of that UAL cost comes from classic members of the plan.

Next slide.

So yeah, this section, we're gonna get into some real numbers for the city of Santa Rosa.

This is a eight-year, seven or eight year history of the UAL balance shown in the gray bars.

And then we've also shown in orange there the funded ratio, and above that in teal is the funded ratio of of your plan, inclusive of your 115 trust assets.

And really, I think a couple things to point out on this is just how volatile the UAL is.

So if you look at 2020, going to 2021, that third column there, you see a big drop in the UAL.

That's because CalPers earned over 22% returns, and that's shown at the bottom there.

If you go to the very next year, that gray bar shoots up to 335 million.

That's a 120 million dollar increase in one year because CalPers earned negative 7.5%.

And so that's really what the city and really all agencies across the state are having to adapt to is that volatility.

As we'll get into, you you do have some time to prepare for these impacts.

They don't hit you with that bill for there's a two-year lag, and then they they ramp up the the payments over five years, so you don't you don't feel the impact in the very next year, but it is fairly quickly after they have a bad year.

Next slide, please.

So slide 14 is I think really important, and especially going back to the last presentation you saw related to some of the budget challenges.

But this this chart goes back to 2018 and then also projects out to 2048.

And this is based off the most recent CalPers actuarial reports.

At the bottom, there is the normal cost in orange, pr grows at a pretty linear rate, so pretty easy to budget for.

And then you have that UAL amortization in light blue there.

And if you look back at 2018, you can see the city was paying about 20 million dollars combined.

If you fast forward to this fiscal year in 2026, it's over double that.

It's over 40 million.

And then it's gonna continue to grow to close to 50 million by the end of the decade before it starts to come down.

And this really is the it's one color here in light blue, but if we wanted to do a bunch of colors, you would see a 100 different mortgages here that are all have different terms.

You know, let's get creative.

What can what can the city do to limit the impacts of what's shown in that red dotted line?

Because that's about 52 million of additional increases beyond the current budget.

And preview to some of the options that you'll see later, they will address about 80% of that triangle.

So, you know, close to 30 to 40 million of that triangle, but not the whole thing.

Next slide, please.

Next slide.

So slide 16 is really a summary, really a menu of some of the most common tools in the toolkit that agencies are using to manage pension cost.

And most of these the city is doing or at least looking at evaluating.

The first two being, well, the first one being prepaying the UAL early in the fiscal year, you do get a 3.3% discount.

The city has a history of doing this.

Cost sharing with employees, the city has done that as well.

I'm gonna fast forward to the last one because we're not gonna spend a lot of time talking about that.

But there is a tool in the toolkit that involves issuing bonds to refinance the CalPers debt, which CalPers charges you a 6.8% debt.

It's known as a pension obligation bond.

We do have slides in the appendix if there are questions about it.

But this was a very popular tool five years ago when interest rates were 3%.

And you compare that to CalPER's 6.8%.

There's risk involved, but there was enough, I think, buffer there that a lot of agencies went down that route.

This has not been an option executed by any agency in several years now, given that rates are above 6%.

So there's not really that much of a delta there, and there's a lot of risks.

So the risk reward calculation really isn't favorable right now.

So what we really focused in on were the most viable options within the current market environment, and that's the what's shown in teal there, which is a fresh start with CalPERS, meaning that instead of those 100 mortgages that you have, you basically request a new payment schedule.

So you just have one new layer that's amortized over a fixed period of time.

In this example, it's about 16 or 17 years, and it's at a level payment.

Now I want to be clear that that doesn't mean that it avoids future UAL coming online, but it does convert all of the current UAL into a flat payment or over a fixed period of time.

The what's shown in orange there is is really using reserves to pay extra.

And there's two ways that agencies do this.

The first being putting that money into a 115 trust, which the city has a practice of doing.

The current balance is about 14.5 million.

And then the second one is actually just sending money to CalPers to accelerate the pay down of that UAL, and that's known as an ADP.

Should have spelled it out there, but that that's an additional discretionary payment.

That's also an option.

And those three are what we looked at, and we've boiled it down to three options for that.

We'll discuss on the the next slides.

Thank you, Mike.

I want to start by saying on a strategic goals basis, as we've been developing these strategies.

Really, for the policy that we want to move forward is these five points.

Is we want to provide more predictable budgeting that matches expense growth with revenue growth.

We don't want big spike in big down.

We want something that will match the city's revenues to even out that CalPers mountain that I've talked about before.

Ultimately, that graph Mike showed to me, it's it's a mountain.

We want to create a mesa.

We want to create a tunnel, something that's flatter or more manageable to climb.

We want to decrease the total amount paid.

So if we owe 482 million now, we want to pay less than that.

We want to pay off the unfunded liability quicker.

We want to be able to say to the community that we're not just kicking the can and bringing our payment down lower to push off payments.

We want to actually be able to say that we're gonna pay off this very big problem faster.

We want to maintain local controls over local funds.

Right now we have $26 million worth of local funding.

We would like to maintain those funds.

We've been very successful managing them and investing them.

We would like to continue that success and continue the opportunity for the city to be flexible with those funds.

And ultimately, we want to also provide the maximum amount of cost avoidance and budgetary relief in the short term.

This is a policy ultimately that we want to bring forward that not only serves today but serves the future.

But we also need to recognize that now is a critical moment in the city's financial structure.

It's exactly some of the charts that we were looking at earlier.

On a budgetary structural deficit basis, this is a historical moment for the city that we can address in this way to provide some immediate relief to the organization.

Part of that structure is what Mike was talking about of our usage of our 115 trust.

I'll very briefly cover the history of that because it's important in that $10 million of PGE settlement funds were deposited into the Section 115 trust as a result of the 2017 wildfires.

The advantage of having a 115 trust is that we can more broadly invest those funds versus the city's regular treasury.

We've been very successful at that at that strategy, and ultimately we've grown the fund from 10 million to 14 and a half as of recently.

Now investments are volatile.

And uh I will briefly say that the market has been volatile along with the world over the past few weeks, which has been unfortunate.

But again, we we anticipate over time that these funds do very, very well.

At adoption, um city council directed uh once we paid the city had a former POB bond, it had a pension obligation bond that paid off in the recent past.

Once that happened at that time, council directed that that budgetary savings be uh used towards pensions.

We did that for a period of time until the city faced budgetary uh headwinds that we've been facing and cuts over the past year.

I would just want to add for a note that we have not been contributing to any additional way pensions over the past four to five years as part of our budgetary struggles.

These are prior balances into the fund.

And with that, I will pass it back over to Mike to talk about the three options we developed.

Yeah, thank you.

And as I mentioned before, there was, I'd say, dozens of options we looked at.

These three are really uh the most efficient and cost effective and really achieve uh a lot of the goals that Scott mentioned earlier, primarily smoothing that that mountain peak in payments and achieving budget predictability and cost avoidance.

But we wanted to look at three different ways of doing it because there are some pros and cons of of these options.

And option one is it's really a hybrid model.

So it's that fresh start option where you request from CalPers a new payment that's level, and then you would leverage that 115 trust over the next nine to 10 years to essentially have a more uh budgetary friendly payment schedule that starts off a little bit lower and then grows at 2% a year.

Option two is really to attempt to do the same thing, but without the fresh start.

So primarily relying on the 115 trust to offset those general fund CalPERS costs and create a ramp up payment schedule for better budget alignment.

Option three, in a similar way, it's also to smooth out that peak.

This required quite a bit of extra analysis because we wanted to figure out which pieces of that the UAL layers to pay off to that would best smooth that peak.

Now, the downside of this option is of course you would be liquidating all of your 115 assets right now in order to effectuate this option.

Next slide, please.

So this is option one.

One thing to note here is that you'll you'll be looking at a similar chart for all three options, and I think take a moment to just say this looks a little different than the previous slide because we aren't including the normal cost.

We wanted to really boil it down to just the UAL, which you see in light blue here.

This assumes that the city executes a fresh start.

That would level out payments at around 32 to 33 million a year.

And then instead of having those payments right off the bat, you would actually start withdrawing funds from the 115 trust in a methodical way over the next nine or 10 years, so that ultimately the general fund is paying what's shown in the orange dotted line.

So anything above that orange dotted line is paid for by the 115 trust.

And the amount of uh budgetary cost avoidance there under this scenario is $37 million, and that's from 2027 to 34.

And take another opportunity just to say this is a snapshot in time.

So when the new reports come out in the fall or you know, next year when the new reports come out, that you know, this shape is going to continue to move a little bit up and down.

Next slide, please.

So I'll I'll add on this slide.

This slide is really a summary of those of the prior chart, and and you know you you all know that I love a screen with a whole bunch of numbers on it.

So I I'll just point out a couple of my favorite though is that one at the bottom right in red that shows that over the life of this program, the city saves $36.6 million.

Um, very substantial.

You'll note at the very top of that column though, is the $3.8 million number that was mentioned earlier tonight.

Of this is a way that we can provide some budgetary relief in the next budget.

The great thing is that it's 3.7 this year, 4.4, 6.9, 6.7, 6.4.

This is a program that's not just going to benefit the next year, but really the the whole five-year forecast forecast for us, it is gonna benefit.

Now, when we look at the chart, it's important to note that there is a difference.

There is a delta once we start getting eight, nine years out, right?

In theory, if nothing had changed with CalPers, that our payment would have started going down earlier.

I I want to really mention a few things.

One, this strategy hits all five points of what we were trying to do on a policy basis.

This is five for five.

If we can get to three out of five on a policy, that's awesome.

Five out of five is even better.

So it pays off the debt earlier.

Additionally, from a future programming of the city's perspective, it is much easier to maintain budgets than create them.

And ultimately, 33 million, 32 million dollars eight years from now is much less than it is today.

And it gives future councils and future city leadership the ability to have a more predictable structure for paying this debt down in the future.

And we will have created the budget for them to maintain it over the next period.

So we are setting them up for success.

The greater success, though, is when you look at this chart and you see 2042, 2043, where this falls off to zero.

This is gonna give folks at that time an ability to make substantive changes in those areas that can happen when you have large amounts fall off of your budget.

Very small fall-offs are very challenging to program.

But large fall-offs are a way that we can in the future make really large structural change in the city financially.

Can you go back to one slide?

Not to dwell on the the all the numbers, but just to point out one assumption that I wanted to point out that we're using.

If you look in the middle there at the 115 trust withdrawals, and then if you go to the bottom, it's close to 30 million of withdrawals.

That's a little higher than the 26 million we talked about earlier in the reserve.

We are assuming it continues to earn interest.

And we're being pretty conservative at 5%.

So this option as well as the other 115 trust option would look a bit better if we were using current market rates.

A lot of the 115 trusts are earning six, seven, eight percent, but we wanted to be conservative here.

Next slide.

Option two is similar, but again, without the fresh start.

So essentially, you would be utilizing the 115 trust assets, again, growing at 5% a year over the next six years.

And the general fund would be on the hook for what's shown in the orange uh the purple dotted line there.

And that the cumulative amount of cost avoidance under this scenario is 30 million dollars, so about $7 million less than option one.

It is a little bit of a quicker depletion of the trust as well.

So seven years versus nine.

Um always nice to, you know, if uh keeping the 115 trust only helps with future flexibility in case there are some downturns with CalPers.

Next slide.

Again, uh, if you look at the blue column on the left, this is your current payments, and then the blue column on the right, those would be the new general fund payments, and this is just the source data from the chart on the prior page, and then in the bottom right there is the total savings again, close to 30 million dollars.

Option three, very similar uh looks to option two, but it mechanically is a lot different.

So, under this scenario, you would be essentially liquidating your trust, taking that money, sending it to CalPers, and choosing which pieces of the UAL to pay down such that you're left with a payment schedule that looks like the dotted green line there, and that that's about 32 and a half million dollars of cost avoidance over the next 10 years.

So a little bit more than option two, and that's really a function of the the interest rate assumption.

So if we would assume 6.8% on the 115 trust, those savings numbers would look exactly the same.

Next slide.

27, just uh comparing visually all three options again, very similar concept in terms of smoothing the peak.

Option one is a bit different in the sense that it does provide the lowest payment over the next seven to eight years, and then it does have that higher payment out in the out years versus the current schedule.

Also in 2041 is when that orange line would stop.

So, as Scott mentioned, this would um offer paying off the debt six years earlier than currently scheduled with CalPers.

Lots of numbers on 28, but this is just a summary of all three options.

Again, glancing at the red at the bottom, I think is the easiest way to compare.

We'll just stay on this slide here on 29.

The we wanted to show the cost avoidance both in the very near term as well as overall.

And you can see there for option one, it's about four million dollars higher than options two and three over the first five years.

It also provides the most cost avoidance over the the long haul: 37 million.

Options one and two do allow the city to maintain that trust.

So you do have more local control over those investments, a little bit more budget flexibility and liquidity to deal with unknowns, both with CalPERS and then just with the general economy.

Option one does check the box on the city's objectives of having a more predictable payment for the longest period of time.

So going out 16 years, and again, it does retire the UAL debt six years earlier, whereas options two and three maintain the same final term of that debt.

Next slide.

Next slide.

So I think we hit it on the last slide, but option one checked all the boxes.

I would I would say that all the options are strong options.

Some do come with some downside.

I would say the ADP option, even though it was this you know ranked second in terms of cost avoidance.

I would caution against that option, just knowing that you'd be liquidating your entire trust at one time.

So in terms of future flexibility, that does limit uh the city quite a bit, but again, hits all the objectives that uh Scott laid out earlier.

I think this is, and Scott could probably talk about this in more detail.

This is uh one key step in the process.

Uh we've talked a little bit about long-term uh continued funding of this challenge, it's not going away, even with any of these three options.

Um, looking at a policy, um, hopefully one that continues to try to funnel more money towards the trust or or towards an ADP, knowing that this CalPERS challenge isn't going away.

Um, you know, we've had a few good years, they're currently actually having a good year again right now, which is good news.

Uh, but we all know that if there is a recession or they have a down year, it's gonna be a significant impact to the to the UAL.

I know when Scott mentioned uh when he reached out about a year ago, we were talking about POBs, we were talking about the risks.

We can talk a lot about that.

I would encourage the city that if if you were wanting to learn more about those, the risks involved, how to quantify the risk, how to mitigate the risk.

We could do that at future workshops and such.

So yeah, thank you, Mike.

I I'd like to add and just echo that this is really the continuation of a small seed planted on a pension issue that's really come to fruit today in a way, but there's continued work to be done here.

Um as we move on to the discussion.

Uh I would mention that option one is is the option that city manager and the finance department are recommending to council take action on.

Um that action with council's direction today to come back, we would come back with an amended contract with CalPers to move us into the fresh start program.

I want to be transparent that that does lock the city into that program.

It's just like refinancing your home mortgage.

Once you do it with the bank, you can't come back later and say, I didn't want to do that.

So you do move forward with that structure.

That is restricting, but at the same time, it does not restrict the city in the future and future councils to take additional actions.

We monitor the POB situation frequently to ensure that this is or isn't a moment to be issuing POBs.

I don't see that happening anytime soon, given the rate environment and overall debt market within within the uh the markets.

But in the future, I absolutely could see that being an option for the city and one that would make a lot of sense from a risk basis.

It doesn't prevent future councils additionally towards um we are in rainy days now, rainy days we do eventually become sunny days.

And once we have some surpluses within the general fund of the city looking at that and going, hey, we got so much benefit from this 115 trust, we're pulling some funds away from it.

Let's replenish this and double down on this on this thing that's worked really well.

So while this is a restrictive action moving forward at the same time, there's still a lot of options and tools in the toolbox moving forward to make an even bigger dent in this huge problem.

But certainly any of these actions or options put before you, especially option one, provide an action that the city has not taken to date at this level.

That would be very, very impactful.

So with that, our presentation is over, and we'd welcome any questions or comments.

Thank you both.

Um it's so reassuring to know that you're both waking up on Sunday mornings and just breaking out the Excel to do some pension modeling.

That's that's what we want to hear.

Uh looking to my colleagues, questions.

Mr.

Alvarez.

I'm gonna pretend that I know everything that you just said, right?

First, I'll just begin with that.

Our CIPs.

And looking at how much funds or or we've set aside for all our future projects.

Actually, I'll begin by asking this question.

Where does our money reside for our community improvement projects?

For example, the library, the money we use the money for the purchase of the property.

We we funded uh studies.

The rest of the cash, where's that cash now?

That's a great question.

Thank you very much.

Uh, Councilmember Alvarez.

So the city's funding for CIP infrastructure, to my mind comes from two places.

Well, we'll technically call it three places, but I'll talk about the third one last.

First and foremost is from restricted funding sources like special revenue funds, gas tax thing, you know, uh county measure M funds for parks, uh, park development fees from developers, right?

Those are very, very restricted and they can only be used for certain purposes, right?

That's one.

The second area that the city historically over the past 20 since the great recession is what we call one-time money.

Meaning that we want to fund the library in Roseland.

We're gonna, we need to find one-time money to do it.

It's not it does not live within our budget.

It's it's not permanent.

ARPA, for example.

You got it.

ARPA or or PG ⁇ E funds.

PGE funds.

They they they arrive and then we decide what to do with programming them.

The third place they come from is the general fund, meaning ongoing capital uh dedicated capital funds coming from our general fund.

And so I'll put that in perspective.

Of our 200 and we'll call it 50 million dollar general fund, 1.2 million dollars of that is dedicated to that area.

And even that 1.2 million dollars, I would describe as restricted because it's really used for ADA funds, et cetera.

So the house which it lives in is our general fund for the time being until the money is spent.

It it lives in the CIP fund, but yes, we for let's keep the finance at the high high level, of course, yes.

And what I was trying to speak to earlier was that the hope of doing this program is to not just address pensions, it's to set the city up on a path in the future that it can address these larger structural inadequacies within our budget that frankly other agencies do.

Other agencies do have capital funds within their general fund.

They do have facility replacement funds within their fund.

They do have IT software replacement funding within their fund.

Um I will I will speak for interim city manager Farrell.

That was one of her our very first conversations was you know, Scott, explain to me where those funds live within the within the budget, and the answer is they don't.

Um we have already stripped down to operating.

Does that help?

It does.

And the point being is it in our general fund, it simply resides there.

But I'm sure there's restrictions that would impede us from holding in an interest bearing account per se, which we could offset little interest which we'd be uh paying in in the amortization in in the CalPers.

Yes, and that's and that's ultimately the the path that I wanted you to take, which you just did.

Yes, thank you.

And that's exactly right in that we are statutorily very, very restricted for the general funds investment portfolio.

We're very proud that we've seen better results of late, but we're juxtaposed against a pension system with a 6.8% interest rate, right?

That's that difference.

And that if we were a private organization that could assume that level of risk, like an insurance fund, et cetera, we could do much more creative financing to try to tackle this issue that we in the public sector just can't do.

And I'm I'm and I'm glad for you.

I'm glad you clarified that, as that was one of the the comments that that I've been hearing is why don't we hold these accounts in an interest bearing account to counter?

But the reality is we are restricted from doing so.

Thank you.

And and I'll thank you, council member.

I will clarify all of our accounts are interest bearing.

It's a matter of how much risk we can get.

It the risk.

I can't, yeah.

I can't match my 401k or my you know, private investments with the city's investment performance.

It's far more restricted.

Thank you.

Other questions.

One clarification for me.

So did I understand correctly that with the uh the PEPRA liabilities are in essence fully funded or within a percent of being fully funded, it it is the um uh the the pre-2013 liabilities, that's where our our issue is.

We're paying back that chunk of liabilities.

Yeah, when we when we do analysis of well, where'd the UAL come from?

It's fundamentally the generations past.

It was the enhanced benefits of the prior workforce against investment returns that frankly fell apart during the great recession and the dot com bubble.

Um, more great recession.

But that's really the driver of where that UAL came from, 99%.

Yes.

Okay, thank you.

Uh if there are no further questions, we'll open it up to the public.

Any members of the public wish to comment on this item?

Saying none, we'll close public comment, bring it back to the dais.

Any final comment?

Vice Mayor?

Seeing it sounds like you're looking for direction at this, uh, yeah.

Um I'm nowhere near as uh smart on finances as you or as uh the city manager, and you're both recommending option one, and it makes a lot of sense to me and my limited understanding of our unfunded liability.

I'm uh I'm good with option one going forward.

Ms.

Rogers did have a a quick question.

Um so in these slides, it said that they're I don't know, I'll explain it the way I know how to explain it.

When I worked at the county, there was a line item in our paycheck that we were actually helping towards the unfunded liability.

Are you stating that our employees have that now?

They do.

All of our bargaining units have all agreed to pay above the employee required cost to CalPers.

That is almost all the units are about one and a half percent.

There's a little bit of variance in there, don't bear with me, but really that happened in 2013-14 area as part of negotiations where uh the city the city and and the labor groups negotiated to have a a kick in, we'll call it.

So yes, just like the county.

Does it have a sunset?

No.

It does not have a sunset.

That actually really goes to their uh pension contribution, though, right?

It does.

So if someone were to separate from the city prior to vesting with calipers, they would be retaining the amount they put in.

And and let me just be very wonky technical.

Uh any benefit or agreed upon MOU sunsets with the ending of the MOU, right?

So it what I say is right now there is no sunset for it.

Correct.

Okay.

Um and just because you are looking for direction, just because you guys want to go with one, I'm gonna go with three.

And I would like us to look at a policy.

Um to address how we're gonna move forward so that we don't have uh difficulties like this um in the future because we don't know what things are gonna look like um in the future.

So I would be interested in seeing a policy to help with this in the future.

I'm I'm sorry, but through the mirror.

I I would be remiss to not also say thank you uh to City Manager Farrell.

You know, it's refreshing and inspiring to have her come in, look at this policy and give very clear direction and motivation to move forward and this is and to have her do the same analysis and come to the same conclusion as the finance department and go, this is awesome move forward.

And I just would like to express my thanks.

So thank you.

Thank you, Mr.

Alvarez.

I want to just say one and just let the mic go, but being that we have Mike here with us.

Uh it gives me great confidence that not only you applied your experience to coming up with something outside of the norm, but that you also recognize to go outside of yourself to even further that strategy.

And that does give me a great sense of uh confidence in you, sir.

And you said the word seed.

So with that, I'll just say this.

We plant a seed for which tree's shade we will never enjoy.

And that's where I think you were going with it.

Thank you.

Um and yes, obviously, option one for me too.

By all means, um, please continue the process.

And thank you for the creative work on on both your parts and from our our city manager's part.

Um to be able to to engineer this kind of sir savings at this time and not just savings right now, but uh a much better plan in in going forward that future council members and and future uh city managers will thank us for or thank thank you for.

Um very much appreciated.

So uh thank you for all the work on this, and by all means, let's let's uh let's see if we can deliver this um this improvement to the city.

All right, with that, we will move on to our next item, which is uh bear with me for a second.

All right, I'm hearing I'm hearing shouting from the dais that we need a break.

We have to maintain our quorum today, so none of us can leave.

So with that, let's take uh let's take five minutes, be back here at four or five,

The time is what four 409 and we can reconvene into open session.

Madam City Clerk.

Thank you, Mayor.

Councilmember Rogers, present.

Council members McDonald, Fleming, and Buen Willos are absent.

Councilmember Alvarez.

Present.

Vice Mayor O'Krepke.

Here.

Mayor Stapp.

Here.

Let the record reflect all council members are present with the exception of Councilmembers Ben Willows, Fleming, and McDonald.

Thank you.

And I should note that even though we started 45 minutes late in our last last session, we have almost got ourselves back on time.

This is how we work in the city of Santa Rosa.

We'll move right on to item uh six, our report, if any on study and closed session.

Madam City Attorney.

Thank you, Mr.

Mayor.

There's no reportable action taken in closed session today.

We just conducted uh our study session on the general fund budget update as well as CalPur's pension unfunded liability.

And that is the end of that report.

Thank you so much.

So we'll move on to item 7.1, our proclamation in honor of Sexual Assault Awareness Month.

Ms.

Rogers.

Thank you, Mayor.

Whereas Sexual Assault Awareness Month is intended to draw attention to the fact that sexual violence is widespread and has a profound and lasting impact on every community member of Sonoma County.

And whereas Verity Sexual Assault Prevention Intervention and Healing Center works with over 1,200 survivors in Sonoma County every year with a 24-7 365 days a year crisis and support line and tailored advocacy services at any point in their healing and justice journeys, hosts over 200 presentation and events, reaching over 14,000 community members with age appropriate outreach and education to prevent sexual violence, encourage people to show up for one another, and recognize signs of unhealthy relationships, and provides hundreds of sessions of individual and group therapy to support people in processing and healing from trauma.

And whereas nearly half of all women will experience some form of sexual violence.

And whereas over 18,000 members of the military and over 80,000 people who are incarcerated experience sexual violence every year.

Please go ahead.

Every year we support over a thousand survivors, notably approximately 20% of whom are children through crisis intervention, advocacy, and healing services.

They come to us to support their healing and justice journeys, all while trying to hold the rest of their lives together, their families, their work, their school, their community.

In addition, we work hard every day to prevent sexual assault from happening in the first place.

Sustaining this work requires ongoing investment, both for responding to harm and also preventing it in the first place.

This year, in the lead up to sexual assault awareness month, a new revelation related to a cause near and dear to our community came to light.

Cesar Chavez, revered civil rights leader, had groomed, abused, and raped women and girls who he worked closely with.

And not being believed when speaking out against this powerful man.

That fear, that tension between speaking truth and protecting something larger than oneself is something that many survivors of sexual assault understand deeply.

Unfortunately, not really.

How are these stories still met with doubt so often despite all of the data in the history?

It underscores sexual violence, intersects with power, white supremacy, oppression, and history.

And it reinforces why our response must be thoughtful, inclusive, rooted in justice and clear in one message.

We believe survivors.

Survivors are not alone and do not have to carry this burden on their own.

We will not tolerate power-based harm and violence.

So today we accept this proclamation with gratitude and with a call to action, to continue building a community where survivors are supported without hesitation and with the resources that they deserve to heal.

Thank you for standing with Verity and with survivors this month and always.

Rebecca, thank you so much for coming.

So many of whom are going through massage, uh supposed massage uh parlors in the city.

Uh Verity's been a wonderful partner for SRPD and done wonderful things for um again the victims and uh so many other residents of our city.

So thank you for being here today.

We want to do a photo op, but before we do that, we're gonna open, we're gonna open it up to members of the public.

Uh, would anybody else like to speak about sexual awareness month or uh Verity's work?

Seeing none, we'll close public comment.

Rebecca, why don't you come down front?

We'll do it, we'll do a quote.

Thank you again, Rebecca and Verity Verti, rather.

Um to item nine, our city manager and city attorney's reports.

Madam City Manager.

Thank you, Mayor and Council members.

Good evening.

Let me just pull up my report to provide a few updates on some community events that are coming up.

So the first update is we're coming up on Earth Day.

As you know, Earth Day happens every April.

And for us, it will be this Saturday, April 25th, from noon to four PM at Old Courthouse Square in downtown Santa Rosa.

This free, I will stress free family-friendly zero waste festival brings the community together through fun activities, live performing arts, great food, and inspiring exhibits that raise environmental awareness.

So if you need something to do with the kids this weekend, please come and join us for this Earth Day Festival.

The very next day, everyone is invited to the wildfire and earthquake safety expo on Sunday, April 26th from 10 AM to 3 p.m.

And that will be at the Sonoma County Fairgrounds.

This free event helps community members learn how county and city emergency response teams work together to keep everyone safe during wildfires and earthquakes.

You'll also discover how to better prepare yourself and your family, your business, your property, and let's not forget pets and even your livestock.

And that's this Sunday at the fairgrounds.

Next update is that construction has started on new electric vehicle charging stations in downtown, adding six level two chargers and two DC fast chargers at the parking lot at 735th Street, funded through parking revenue and a PGE grant.

These improvements support a more accessible and a more sustainable and welcoming downtown.

And next we have applications that are now open for the community promotions event support program, which supports nonprofit community-based events that are free and open to the public.

So if you're planning an event between July 2026 and June 2027, we encourage you to please apply at Srcity.org backslash event support.

Again, if you are planning, if you are a nonprofit and you are planning a community-based event that's open and free to the public and you need support, please apply at srcity.org slash event support.

And last but not least, we'd like to highlight the City of Santa Rosa Merit Awards, which recognize local individuals and organizations whose volunteer service makes Art City a better place to live.

If you know of someone making a positive difference in our community, we encourage you to submit a nomination at SRCity.org slash merit awards.

Again, that's srcity.org slash merit awards.

If you know of individuals and organizations whose volunteer service is making Santa Rosa a better place to live.

Thank you, Madam City Attorney.

Thank you, Mr.

Mayor.

Um I do have my monthly report of settlements and active litigation.

Um we had one settlement that was previously approved by council in closed session that was finalized in the month of March.

That settlement relates to a claim submitted by Samuel Ngadero in June 2025, alleging that Santa Rosa Police Department made an unlawful entry into our home.

The city paid Miss Gadaro 200,000 full uh for a full release of all potential claims.

And uh with respect to ongoing litigation, our caseload remains consistent with 31 current litigation matters.

We have trial dates assigned to approximately a quarter of the trial level matters.

And there are four cases currently on appeal following rulings in favor of the city at the trial court level.

As always, we try to resolve smaller cases at little or no cost to the city.

And that concludes my report.

Thank you.

Would any members of the public like to comment on either report?

Seeing none, we'll close public comment and we will move on to item 10 statements of abstention and recusal by council members.

I hope we don't have any of these given our numbers.

All right.

Seeing seeing none, uh, we'll go on to mayor and council member reports.

Any reports this this week?

Mr.

Alvarez.

All right.

A couple of days ago, I really want to come in our our police chief.

A couple of days ago, we had a safety or public safety meeting at RUP in Roseland.

And what I wanted to comment about this meeting is that he brought the beat cops with them.

And this was a great opportunity for the community to meet the officers that patrol their home.

And I thought that was exceptional as it put faces to names and names to faces.

So definitely a props to our chief.

It's okay.

Uh mine is very short, Mayor.

Um, I just wanted to give a shout out to Orange Theory Fitness for uh their 10 year anniversary here in our community.

They are a local family that decided they were gonna open a gym to help people have better health.

And they've been thriving for for 10 years here at Cotting Town Mall.

So they are within the city limits.

And I love it.

They made it through COVID.

Their membership is very strong, and um I go there all the time.

So if anyone wants to meet me there, I will see you there.

Um, but I did want to give a shout out to them for the hard work that they're doing to encourage uh fellow Santa Rosians and other locals to be healthy.

Mind, body, and spirit.

Thank you.

Thank you very much.

Vice Mayor.

Thank you, Mr.

Mayor.

A few things.

Um first um not yesterday, but the Monday before that at the SCTCA Sonoma County Transportation and Climate Action uh Climate Authority meeting.

Um we had a vote to finalize the coordinated claim for the mascots pro program, which was which is um the realigning of multiple transportation agencies so that we can better move our um uh our residents around uh in a timely manner, not have a bunch of wait times, not have you know, people trying to get from Cloverdale to Petaluma and have to take two hours to do it, those kinds of things.

Um unfortunately that vote kind of fell apart at the last second um for a couple of reasons.

Um and so uh it will be continued until uh May, where we will see it again.

Um, but that did delays the funding for um the mascots program.

Uh we had a couple of abstentions, um, a no vote, and then uh unfortunately, because um uh um a few alternates, I think uh a total of three alternates uh were not um arranged.

We had three uh empty seats, and so nothing could be passed.

Um we couldn't get to the required amount of votes to pass it.

So at this point, um, some of the major uh transportation agencies, such as our own, are um uh kind of floating the are gonna have to float the bill until that gets passed, unfortunately, um, which I don't think will be a problem.

It's not a ton of money.

We will get reimbursed through uh the funding mechanism, the coordinated claim funding mechanism, but that that's the way it is.

So uh just as uh uh a plea to my fellow colleagues that when we have alternates, make sure alternate and you can't make it, make sure alternates show up because there could be real repercussions to it, as we saw at SETCA.

Um, on happier note, the next day we went to um we had the uh Hopper uh Avenue groundbreaking for the reimagined Hopper Av uh project.

Um this is something that is uh a big deal because it is one of our last major infrastructure projects in the city of Santa Rosa for fire recovery from the 2017 Tubbs fire, and it is a it is the physical manifestation of some of the uh mental and emotional scars that uh a lot of our residents throughout Santa Rosa carry uh from that night.

So to get it repaired, get it fixed and improved upon with better um opportunities for multimodal transportation and traffic calming measures and beautification is a huge deal.

Uh uh one of the other things uh on a happier note uh to touch on is myself and uh the police chief were asked to be um celebrity judges of a barbecue competition, uh, if we can qualify ourselves as bar as as celebrities at uh the barbecue competition at Battle of the Bruise that has been going on for 29 years.

It's the largest and oldest beer competition in uh Northern California, and this year is estimated to raise over 60,000 for local youth charities.

Uh so that was really exciting to be a part of that.

Um also proud to report no incidents at the event.

Uh but uh uh it was a great time, great food, uh, great people, great music.

Uh this past Saturday, we had the um uh Pat Tillman run honor run.

Uh the Pat Tillman Foundation holds every year uh a run down in Tempe, Arizona.

Uh for those of you who don't know who Pat Tillman is, Pat Tillman was a college football player who was drafted into the NFL and after September 11th, resigned from the NFL to uh to um enroll in the United States Army to and uh was deployed as a ranger to Afghanistan where he was ultimately killed in action.

And the Pat Tillman Foundation carries on in his honor uh leadership training for veterans and their families.

So um it is a uh becoming a tradition for my family to participate.

My son came in second uh overall, running 4.2 miles in 31 minutes, which I think is at a ridiculous time.

Um, but I'm very proud of him.

And um, I'm also very grateful to keeping veterans local for uh organizing the event.

Um we hope to grow it in the coming years.

And last, we had the public safety subcommittee meeting this morning.

Um, and the mayor stole a little bit of thunder during the last item of how great uh of a job the um team has done on illicit massage businesses.

But I will say one thing.

Um, usually at night I use some sort of white noise to fall asleep, but I may just use a uh replay the public comment um uh from that item uh so I can uh calm down and have a good night's sleep.

It was uh about 15 minutes of just praising our staff and our efforts as a city to bettering the community.

Um and it really is uh uh the combination of efforts from the people who are living the life on the streets and seeing uh uh at the street level and seeing um what's affected their communities, city staff, police, nonprofits, and council all working together for a great outcome.

And it uh the praise uh I joke about, but is rightly deserved for all of the people involved who have done it.

So uh it was great uh great experience this morning.

Yes, it was a template indeed for what public comment should be.

Nothing but showering praise on council and staff.

Um I'm glad that uh a few of you mentioned the the uh celebrations we've had, ground bankings, ribbon cuttings for for uh public works projects.

Uh we've got about a hundred million dollars more of those to come just this year.

So we whether we're talking the bike pet overcrossing, hopper av, more more streets, streets, streets and bridges to come.

Uh let's see, in terms of other updates, I had, or we had mayors and council members association last year or last week.

We had an update from Sonoma County Parks and their measure and bond measure where they're going out to renew to keep all of our county parks well funded.

Uh, there was an aviation commission meeting this week, and I am the a representative of the aviation commission.

Um a bit dry for those of you who are not listening, living in West County.

We were talking about the uh the exact altitude at which planes should be leveling off and where they should be making their turns.

But it was in service of a of a a um uh a well-intended plan to lower the noise levels for West County in particular.

Uh the airport is currently getting about 26,000 complaints a year, given the uh the larger jets flying more frequently right over houses in otherwise quiet West County.

And so the airport is trying to do more to prevent noise out there, as well as for cities like Santa Rosa and Windsor.

Uh and then I also had a chance to tour the geysers this week, uh the world's largest geothermal field.

Uh it's kind of a it's an um uh uh a secret in Sonoma County.

Not as many people know about it as they should that we have the world's largest geothermal field here.

And the city of Santa Rosa pumps 4 billion gallons a year 40 miles north up 4,000 vertical feet to make those fields possible, where we generate 700 megawatts of of electricity powering frankly most of the county um and some in Mendocino.

Uh and with Sonoma Clean Power, we are looking to essentially double that production capacity, which would be incredible for the entire North Bay.

So uh a great chance to be up in the geysers again and just marvel at the engineering there uh and and hope for uh significant expansion in the years in the years to come.

Uh I think that's it for our reports.

Would any members of the public like to comment on any of our mayor and council members' reports?

Seeing none, we'll close public comment and we will go on to actually 11 item 11.2.

Uh speaking of the airport, uh, we've got to select a um or give some direction to me for voting on the Sonoma County Mayor and Council Members Association City Selection Committee with reference to an interest in uh I believe it's the uh the airport the airport land use commission.

Um Ms.

Rogers, I'm gonna turn this over to you to make a motion and we can have discussion.

Thank you, Mayor.

Um I would like to make a motion regarding letters of interest to the airport land use commission and authorizing the mayor designate an authority to vote on the late nomination or recommendation.

Do any of my colleagues have a suggestion?

I think there was only one though.

I think it was one.

Yeah.

I'll second as that.

All right, yeah, RL Kelly.

Um to vote for Ariel Kelly.

I'll second that.

All right, we have a motion to second.

Uh one moment, and a word from our city attorney.

All right, thank you for your patience.

Uh a little bit of legal drama there, but does not apply to this this item.

Um any i any public comment on the uh item 11.2.1 regarding the uh mayor and council members' appointment to the airport commission.

Seeing none, we'll close public comment.

We have a motion, we have a second by uh Mr.

Alvarez.

Any final any final discussion?

Seeing none, Madam City Clerk, you can call the vote whenever you're uh whenever you're ready.

Thank you, Mayor.

Councilmember Rogers.

Aye.

Council members McDonald, Fleming, and Ben Wellos are absent.

Councilmember Alvarez.

Aye.

Vice Mayor O'Krepke.

Aye.

Mayor Stapp.

Yes.

That motion passes with set us four affirmative votes with council members Ben Willow Fleming and McDonald absent.

Thank thank you very much.

We will move on to item 12, approval of minutes.

We have two sets of minutes uh to um to review today, the April 7th, 2026, and the April 10th, 2028, or 2026, rather, uh, with the March 24th, 2026 minutes continued to a date uncertain.

Uh any edits to the minutes.

No edits.

Any public comment on the minutes.

Seeing no public seeing no public comment and no edits, we can adopt those minutes as uh as submitted.

Thank you very much, Madam City Clerk.

Uh which brings us through to consent.

Vice Mayor may have a motion.

Or actually, before we do that, apologies.

We'll do it again.

We have items 13.1 through 13.8.

Any questions?

Any any consideration.

Seeing none, we'll open up the public comment.

Any members of the public wish to comment on uh cons on any of the consent items.

Seeing none, we'll close public comment, and now I'll bring it back to the vice mayor for a motion.

I'll move to adopt consent items 13.1 through 13.8.

So a near tie.

We'll give that one to Ms.

Rogers.

Um a motion by Mr.

Okrepki and a second by Ms.

Rogers.

Uh and Madam City Clerk, you can call the vote whenever you're ready.

Thank you.

Councilmember Rogers.

Aye.

Council members McDonald, Fleming, and Ben Wellos are absent.

Councilmember Alvarez.

Vice Mayor O'Krepke.

Aye.

Mayor Statt.

Yes.

The motion passes with four affirmative votes.

Thank you so much.

All right.

I'm just double checking to make sure I'm not missing anything.

Um, but it looks like we are going to move on to item 15.1.

Uh Nick, you were in luck because we are going to start our report on uh the the approval of the preliminary fiscal year 2026-2027 regional water reuse system operating and maintenance capital improvement and debt service budget and allocation of costs.

Thank you.

Thank you.

Thank you very much for being here, and I'm glad we can we can slot you in early.

Yes, good evening, Mayor Staff, Council members.

I'm Nick Harvey, Deputy Director of Administration with Santa Rosa Water.

We're here this evening to uh as we always do uh ask your approval of the preliminary budget for the regional reuse system, OM and CIP budgets.

Reason we do that prior to budget adoption is we treat water for ourselves and for partner agencies, and we like to get the final allocations out to those agencies by May 1 each year so they could go through their respective uh budget processes.

So we'll do a quick uh overview of the proposed budget.

We'll look at the allocations of that budget to ourselves and our partner agencies.

We'll touch on some CIP uh project highlights for the year, and then talk about the remaining budget schedule.

So each year we like to show the percentage of flows coming into the plant.

Uh, this is important because it's these flow percentages that determine the allocation of operations and maintenance costs to each of the partner agencies.

Um, Santa Rosa typically uh anywhere between 70 and 75 percent for uh several years now.

Moving on to our operations, uh we're anticipating or budgeting for a 3% increase.

Um a large part of that has to do with the as you see there, the operations and maintenance projects, uh they're down 32.9% that went a long way to hedge other increases, including the 4% salary increases for next year.

Um that's because those projects carry over budget and uh they had sufficient budget.

We think they can they can go next year without uh contributing more to those.

In general summary of some increases and reductions, salaries and benefits, as I said, uh 4% citywide, um, or at least enterprise wide.

Uh $536,000 increase.

Professional services are going up about $700,000, um, having to do with uh replacement of consumable components of the treatment processes, as well as increased costs for biosolid land application and commercial disposal with LisTech.

Uh utilities, the plant is, I believe, still the largest consumer of electricity in Sonoma County.

It's anticipated to increase another $800,000.

Um, both due to uh problems with our CHP engines, which uh when they're running at full capacity help offset electricity consumption.

Um, those are down.

We've been having some maintenance issues, so we're anticipating a little bump with that.

Plus, we're also anticipating electricity consumption going up because we're in addition to operating our existing UV system, we're also testing the new UV system before it's brought online.

Uh vehicle replacement and maintenance is going up 258,000 for the year uh based on uh increased uh contributions for vehicles that are gonna be needed.

And again, uh we were able to reduce our requests and operations maintenance projects by 1.6 million due to carryover budget.

It's a visual representation of our costs at the treatment plant.

Um salaries and benefits, debt service, and CIP continue to be our three largest categories.

Cash funded CIP.

Uh we have an agreement with the partner agencies to increase $1 million per year.

So this year it's $13 million.

And we always like to show the miscellaneous revenue up top because the revenue that we collect in the enterprise directly offsets the amount that needed that need to be contributed by the regional partners.

Um around the city you hear a lot about undesignated fund balance or reserves.

Uh the regional fund has uh what we call a refund reserve because if we didn't hold these amounts in reserve, they'd otherwise be refundable to ourselves and our partner agencies.

We added seven and a half million dollars about last year to that balance, bringing the total up to 16.2 million.

And um, we are expecting that to go down six or seven million dollars this year due to an item we brought before council for increased appropriations a few weeks back.

Here's a look at our budgeted revenues.

The the two major highlights here are the increase in interest on pooled investments and the uh tipping fees.

Uh our truck waste program has been wildly successful, so we're able to increase budgetarily to 4.7 up from 3.8 million last year.

And we're increasing our anticipated interest uh by 400,000.

Naturally, with higher reserve balances, you're gonna see higher interest yields in the funds with more cash sitting on the balance sheet.

Uh this is just a quick calculation.

How do we get to our total agency contributions?

We start with our operating expenditure requests 54.6 million, add the cash-funded CIP appropriations of 13 million, another million to keep our operating reserve at 15% of budgeted operations.

Um that comes out to 68.6 million.

We net out the 8.4 million dollars in revenues, and we get to net agency contributions of 60.2 million dollars for our CIP and cash uh operations and cash funded CIP rather.

So here are allocations.

Oh, there's a typo, so it should be 2627, but these are 26, 27 allocations.

You can see in the aggregate, we're in we're increasing partner contributions by just under one percent.

Um our increases were largely hedged by the fact that we didn't have a large uh operations and maintenance budget request, as well as the increase in revenues that are helping offset that ask.

Our CIP for the enterprise, uh we're investing ten and a half million dollars in plant infrastructure, 975,000 in reuse infrastructure, and one and a half million for all other uh planning and miscellaneous efforts.

So here's a couple project highlights.

Uh this one is to rehab the secondary clarifiers numbers one through three.

Uh the project is uh estimated at $8.9 million currently in design, and we expect that to construct next year.

Laguna treatment plant flood protection.

This is this project's been a long way coming uh ever since 2017.

Uh we've been working with FEMA and their hazard mitigation grant program to get funding for this project, and we're finally getting down to where we're uh gonna be ready to construct, hopefully next year to estimated cost of 21.2 million dollars.

And the geysers pump station electrical upgrades.

So this uh this is the infrastructure that gets the water up to the geysers project that was previously mentioned by Mayor Stapp.

Um we're going up and looking at the pump stations electrical supply and making sure that we have solid infrastructure so we can continue meeting contract water demands for the geysers project and avoiding um incurring large regulatory costs for discharging.

And as you know, we'll uh study sessions May 5th and 6th and adopting on June 16th.

And with that, Santa Rosa Water, the Board of Public Utilities, and the sub-regional technical advisory committee recommend that the council by resolution approve the preliminary fiscal year 20 2026-27 regional water reuse system operating and maintenance, capital improvement and debt service budget and allocation of costs for the purpose of notifying the regional water reuse user agencies of their allocation of such costs by May 1, 2026.

Quite a mouthful.

And happy to answer any questions if you have them.

Deputy Director, thank you so much.

Uh looking to my colleagues for questions.

I have a great question.

Um I saw in one of your slides that the Laguna treatment plant was in the best district that we have here in the city of Santa Rosa.

Can you tell me what district that is?

Would that be seven?

That would be seven.

And who's the council member for that district?

Would that be council member Rogers?

That would be council member Rogers.

I just wanted to point that out, and thank you very much.

Does this pertain to the topic?

It does.

It's on the slide.

I'm just pointing it out.

I think that they're doing a great job.

All right, we've reached that portion of our meeting this week.

Mr.

Alvarez.

Thank you, Mayor.

I just want to point out that humility is an all-time high day.

Do we have any substantive questions from council?

Um that's true.

We can grandstand a little bit, can't we?

All right.

Let's warm up.

So, Nick, when I was at the geysers last week, I I they walked me through something I never considered.

But your your mention of the Laguna treatment plant and Lionel Road.

Um, when we have at our at our treatment plants, if something malfunctions even for a minute, if our uh um uh ultraviolet uh ultraviolet, what's the technical term, not filter, uh scanner disinfection system, disinfection system.

That was the phrase I was looking for.

If that goes down, if for whatever reason our particular screens don't work, even for a brief window of time, say it's five seconds.

I didn't realize it had never occurred to me that up at the geysers, they have to spring into action in communication with our teams to prepare for that water arriving on site there a day or two later, and then they have to have special plans to route that block of water into different into different systems.

This is what you would have learned if you had you had you gone on Friday.

So we'll we'll change that.

All of us should go.

Um, but I find that I found that fascinating.

So here's my question that pertains to the to the subject we're actually discussing.

As we're doing these upgrades, um, is that gonna mean but uh few or fewer uh interruptions to service or fewer fewer times that the geysers are gonna is gonna have to that we and the geysers are gonna have to jump into action to pre to prevent that kind of uh situation or to to mitigate that kind of situation.

Are you saying is that project gonna cause more system downtime?

No, is it gonna prevent system downtime or or prevent um water that hasn't been properly treat treated from making its way to the geysers and and and um uh keeping them from having to take the to mitigate that situation?

Um I'm I'm not an engineer, I'm an accountant, unfortunately, but just take a guess.

I think it will help.

I think it will help, but also we've we've uh undergone some projects at the treatment plant where we have a significant diversion capability.

So if water's coming through and it doesn't meet spec, we can pump it back up to a retention pond and get it back to the headworks for retreatment so that we're making sure we're staying in compliance with our MPDS permit.

It's I believe Delta Pond.

Okay.

Um it's it's out northwest of the treatment plant.

I don't exactly remember where.

Um my colleagues are probably gonna be disappointed in my answers here, but I'm gonna do it.

No, this is good.

No, I'm putting I'm putting you very much on the spot.

All right, all right.

I will uh I will um not not not bother you any further, but thank you for that.

Thank you for a good presentation.

Any other questions from council?

Seeing none, we'll open up to the public.

Would any members of the public like to like to comment on uh on this item?

Seeing none, bringing it back to uh to counsel for any for a motion and any final discussion.

And Miss Rogers, does this go to you again?

Yes.

Please kick us off.

Thank you, Mayor.

Uh, just want to thank you again for coming here and thank the water department for doing jobs that a lot of us don't know that you guys do and make sure that we have clean um water that we can use.

And with that, I would like to adopt the resolution as presented by staff.

Second motion, I'll give that second to Mr.

Alvarez.

And Madam City Clerk, you can call the vote whenever you're ready.

Thank you, Mayor.

Councilmember Rogers.

Aye.

Council members McDonald, Fleming, and Ben Willis are absent.

Councilmember Alvarez.

Vice Mayor Krepke.

I.

Mayor Stapp.

Yes.

The motion passes with four m four affirmative votes.

Thank you very much.

Uh and we have moved from being behind schedule to being about 10 minutes ahead of schedule.

So before we move on to our next item, we are going to take a 10 minute break, reconvene at five.

And for those of you who are here for the wooy discussion, uh, we are gonna continue that item to a future meeting.

So if you're here for the for the WUI for the WuyMap discussion, that will not take place today.

That'll take place in the future.

See everyone in uh about nine minutes.

Welcome back, everyone.

The time is precisely five o'clock, and we will reconvene in open session.

Madam City Clerk.

Thank you, Mayor.

Councilmember Rogers, present.

Council members McDonald, Fleming, and Ben Wheelos are absent.

Councilmember Alvarez.

Present.

Vice Mayor Krepke.

Mayor Stapp.

Here.

All come council members are present with the exception of Council members Ben Wellos, Fleming, and McDonald.

Thank you.

All right.

We'll go to our first public comment on non-agenda matters.

Item 14, public comment on agenda on matters not listed on the agenda.

Fred, go ahead.

Good afternoon.

I I hadn't intended to uh speak in uh public comment today, but I saw in the water presentation that there was a four percent cost of living adjustment for the uh salaries for the water department.

And so that caused me to think of that that for uh the definition of disadvantaged community is eighty percent of state median household income.

So it occurred to me that it would be fair that that if city staff can get a cost of living adjustment, then the public who is bearing a higher cost burden would get a cost of living adjustment on how the city defines disadvantaged communities.

Any other members of the public wish to comment on items not listed on the agenda.

And again, item sixteen point one, that public hearing is being continued to a future date.

Uh but item sixteen point two, our public hearing on the submittal of the fiscal year twenty twenty-six twenty twenty-seven action plan to the US Department of Housing and Urban Development.

Uh Kelly, welcome.

Our annual application to HUD.

Um so that the city can receive community development block grant.

The action plan is due to HUD by May 15th.

The fiscal year 26-27 action plan is year three of our three-year consolidated plan, which identifies housing and community development needs, priorities, goals, and strategies.

The consolidated plan serves as a guide for the annual action plan.

The priority goals identified in the action plan include increasing the supply of affordable rental housing for the city's lowest income households, preserving existing affordable housing stock, and providing housing and services to special needs populations.

Our funding strategy for the year is 85% of CDBG funds for affordable housing and administration, and 15% for public services.

I'll touch on public services in the next couple slides.

For home, 75% for tenant-based rental assistance, and 15% for COTOs, which are community housing development organizations, and 10% for administration.

These are our annual funding allocations for fiscal year 26-27.

For CDBG, approximately 1.3 million dollars, home 680,000 for a total of approximately $2 million.

The program income column noted in the slide is a result of loan repayments that we then will reuse or recycle for these programs.

The public services program annually we put out a notice of funding availability, a NOFA for funding available through the public services program.

As I noticed, noted a couple slides back, approximately 15% of our CDBG funds go for public services.

That's roughly 200,000 per year.

We held a virtual public meeting on February 11th and received four applications.

Two from Catholic charities for the Carrie Toss Family Center and Drop in Center, one from Fair Housing Advocates of Northern California for our federally mandated fair housing program, and lastly, one from the living room, and that program serves women and their children.

We will be returning to council on June 2nd with funding recommendations following submittal of the action plan to HUD.

HUD requires the city to have a citizen participation plan, which outlines our outreach and engagement efforts related to the action plan.

So this slide outlines all the out all the efforts that we took as part of this year's annual action plan process.

I mentioned the public meeting we held on February 11th related to the public services funding.

We also sent out information related to the action plan to targeted email groups, uh posts posted about the action plan on social and traditional media outlets, the city's website and city connections letter newsletter.

The action plan was also made available for the 30-day public comment period, March 20th to April 20th.

And the public comment period, I would say our outreach culminates this evening with the public hearing.

Public comments received during the comment period or as part of this public hearing will be incorporated into the action plan prior to submittal to HUD.

And you can disregard this last bullet on the slide.

The final award allocations were covered in the presentation tonight and will be included in the final action plan.

With that, the housing and community services department recommends the council by resolution authorized submittal of the fiscal year 2026-2027 action plan to the U.S.

Department of Housing and Urban Development and authorize the city manager to execute any forms or documents required by HUD to implement implement the fiscal year 26-27 action plan.

This concludes my presentation.

Thank you.

Wonderfully succinct, Kelly.

Thank you so much.

Bringing it back to the council for questions.

I will I will ask one.

There's been so much so much percolating or so much discussion percolating around HUD funding at the federal level.

We know that everything's uncertain.

Do we have some sense of of what the atmosphere is, atmosphere there is like right now and potentially will be next year, especially around the funding that we're discussing.

I see I see I see Megan making her way to the front.

And if this is not an appropriate, if this is if this question is too broad or we're just it's just too uncertain, um we don't need to dive into it, but this has just been such a big topic of conversation recent months.

Thank you for your question, Mayor Stapp.

I'm Megan Bassinger, Director of Housing and Community Services.

Um I'd say through our federal lobbyists MMO partners, uh, we remain in contact with HUD and representatives from our area.

For this particular year's allocations, we're seeing a two percent reduction in funding, which is consistent with with previous years.

Um I think right now the president has put forward a proposed budget, but again, that needs Congress and Senate to approve.

Um so we're just taking this month by month as a various iterations of the budget move forward, but relatively stable at this point in time.

Okay, thank you for that.

And that's two percent on top of the fact that there wouldn't be any kind of inflation adjustment.

So the real like the the real world purchasing power is already declining at three plus percent a year, plus then a two percent on caught on top of that.

That is correct, and that becomes more compounded as we look at other programs that housing and community services operate, such as the voucher program, where we're looking at flat flat budgets but increasing costs.

Okay, thank you very much.

Um looking back to council for any any follow-up questions there.

All right, thank thank you, Bo.

Thank you, thank you for all the work in this area.

Uh, we'll throw this open to public comment.

Oh, actually, no, we gotta think we've got to do things more officially.

All right.

I am now gonna open the public hearing.

Are there any members of the public that would like to uh participate in the hearing and make comment on this item?

Now is your chance.

Please go ahead.

I regret not being here more often, but uh I'm back.

Victoria with homeless action exclamation point, and um this item approves funding for housing.

And I was wondering if there was uh any allowance for uh for residents um for residents with very low income or no income.

I was wondering if they were considered at all in this plan.

And um thank you for having me here.

Victoria, thank you very much.

Welcome back.

Uh and just to be clear, uh look to to Megan and to Kelly, but the the HUD funding that we're talking about would cover um essentially all income, all income levels, anybody who needs housing assistance potentially, is that correct?

That is correct, and these particular programs do fund um individuals with generally zero to sixty percent of AMI.

So thank you for that clarification.

Are there any other members of the public that would like to make comment?

Seeing none, we will close the public hearing and we will bring I will bring it back to the dais for a motion.

Uh let's see, did this go to Mr.

Vicemar or Krepke?

Do you have a motion for us?

Yes, I'll move to adopt the resolution as presented by staff.

Second.

We have a motion and a second by Mr.

Alvarez.

Uh any additional conversation?

Ms.

Rogers.

Not conversation.

I just wanted to thank you and your team.

I know that it's really hard to do more with less, and I know that uh you know the budget probably wasn't ideal in the first place of the amount of money that you guys have to work with, but you're doing a great job, and you may not be able to reach as many people as you want to reach when we see the numbers, but for the people that you can reach and the families, the couples, the children, you're making a big difference in their lives.

So I just wanted to let you know that we see you and we see the great work that you're doing, and please don't don't get discouraged.

Thank you, Ms.

Rogers.

Any additional discussion?

Then we have a motion and a second.

Madam City Clerk, you can call the vote whenever you're ready.

Thank you, Mayor.

Councilmember Rogers.

Council members McDonald, Fleming, and Ben Wellows are absent.

Councilmember Alvarez.

Vice Mayor O'Krepki.

Hi.

Mayor Stapp.

Yes.

The motion passes with four affirmative votes.

Thank you.

Uh we'll move on to item 18, our pub, our our second public comment on non-agenda matters.

Any members of the public wish to comment on any items not on the agenda.

Seeing none, we will close that second public comment.

And I should have thanked uh Megan and Kelly.

Thank you again for for taking the time to present.

And with that.

All right, Victoria, we're gonna we're gonna open it up again just for you.

Take it you have three minutes.

Thank you very much.

Chatty corner from the parking lot.

So it's a pleasure to be able to walk over here and uh be with you.

Now as a resident of Bethlehem Tower, I'm able to enjoy the neighborhood because we have houses and yards and gardens.

And then um very important service that we had was Sam's Market there on the corner of E and Um Tupper, Tupper Street.

So um they used to have a deli, but they don't anymore.

Not even coffee.

Everything is dedicated to hard liquor now.

Which I didn't mind.

I don't buy my beer there.

I buy it at grocery outlet if I even have a beer.

But anyway, um had to undergo um some suffering of racism, or I don't know what kind of ism it is that the owners there were treating uh their customers very badly.

Very rude.

I think they might have gotten some new people in there since then, but I don't shop there because the prices are crazy.

So uh I do like to walk there, you know, with somebody who wants to go to the store or something.

It's right, it's a part of our neighborhood.

The only thing that really gets to me, and the reason I found it interesting to the city council, is that they got the garb they got rid of the garbage can right by the front door.

So as much as they profit off of their sales to the local community.

Um we have to go around picking up papers and take it to our own garbage if they don't have a garbage can anymore.

And I want to uh talk to the people in uh the permits or somewhere with the city to see if we could put pressure on them to put back their garbage cat.

Thank you.

Thank you, Victoria.

Uh and we will again close public comment, and we are officially adjourned.

Thank you, everyone.