The URL can be used to link to this page

Home My WebLink About01-26-2015 REOC Agenda Packet City of San Luis Obispo, Council Agenda, City Hall, 990 Palm Street, San Luis Obispo Agenda Revenue Enhancement Oversight Commission Monday, January 26, 2015 5:30 pm REGULAR MEETING Council Hearing Room 990 Palm Street San Luis Obispo, CA CALL TO ORDER: James David ROLL CALL: Jeri Carroll, Amy Kardel, Ken Kienow, Michael Multari, and Hilary Trout PLEDGE OF ALLEGIANCE: Jeri Carroll MINUTES: N/A APPOINTMENTS 1. Oaths of Office for newly-appointed Commissioners. (Anthony Mejia) PUBLIC COMMENT PERIOD FOR ITEMS NOT ON THE AGENDA At this time, people may address the Commission about items not on the agenda. Persons wishing to speak should come forward and state their name and city of residence. Comments are limited to five minutes per person. Items raised at this time are generally referred to the staff and, if action by the Commission is necessary, may be scheduled for a future meeting. BUSINESS ITEMS 2. REOC Kickoff. Review purpose and scope of Revenue Enhancement Oversight Commission, elect officers, adopt bylaws, and set standard quarterly meeting schedule. (James David) 3. Budget and Local Revenue 101. Receive and file overview presentation of financial planning and local sales tax decision-making and reporting. (Joe Lamers) COMMENT & DISCUSSION 4. Staff Communications a. Agenda Forecast San Luis Obispo - REOC Agenda of January, 26th, 2015 Page 2 5. Commission Communications ADJOURNMENT Revenue Enhancement Oversight Commission January 26th, 2015 FROM: James David, Principal Analyst SUBJECT: INAUGURAL MEETING OF REVENUE ENHANCEMENT OVERSIGHT COMMISSION RECOMMENDATION 1. Review purpose and scope of newly formed Revenue Enhancement Oversight Commission (REOC). 2. Elect officers, adopt bylaws and set standard quarterly meeting schedule. 3. Review historical overview of budget and local sales tax decision-making and reporting. DISCUSSION Why are we here? On July 15th, 2014, Council adopted an ordinance establishing the Citizens’ Revenue Enhancement Oversight Commission (REOC), to review the half-percent sales tax revenues and expenditures, report on the City’s stewardship of this general purpose tax, and provide recommendations directly to the City Council regarding expenditures of these tax revenues as an integral part of the budget process. The establishment of the REOC became effective following the passage of an extension to the Essential Services Transaction (Sales) and Use Tax (Attachment 1, REOC Ordinance) during the November general election. The REOC is to consist of five members who must be residents of the City. The November 4th, 2014 general election results indicate that 70 percent of voters in the City of San Luis Obispo approved Ballot Measure G that stated: To protect and maintain essential services and facilities – such as open space preservation; bike lanes and sidewalks; public safety; neighborhood street paving and code enforcement; flood protection; senior programs; and other vital services and capital improvement projects – shall the City’s Municipal Code be amended to extend the current one-half percent local sales tax for eight years, with independent annual audits, public goal-setting and budgeting, and a Citizens’ Oversight Commission? Following certification of the election results, the Council and the People of the City of San Luis Obispo adopted an ordinance amending Chapter 3.15 of the Municipal Code to extend the existing Essential Services Transactions (Sales) and Use Tax (Attachment 2, Sales Tax Ordinance). This ordinance details the full text of amended Chapter 3.15, which includes specific citizen oversight and fiscal accountability provisions: A. Revenue Enhancement Oversight Commission. A citizen's commission will be established to provide transparency and maximize City accountability. The Commission will be responsible for reviewing and making budget recommendations directly to the City Council Inaugural Meeting of the REOC Page 2 City of San Luis Obispo, Title, Subtitle regarding expenditures from the essential services transactions (sales) and use tax, and reporting annually to the community on the City's use of these tax revenues. B. Accounting and Tracking Expenditures. The funds collected through the City of San Luis Obispo essential services transactions (sales) and use tax ordinance shall be accounted for and tracked by the City Treasurer separately to facilitate citizen oversight. C. Independent Annual Financial Audit. The amount generated by this general purpose revenue source and how it was used shall be included in the annual audit of the city's financial operations by an independent certified public accountant. D. Integration of the Use of Funds into the City's Budget and Goal-Setting Process. The estimated revenue and proposed use of funds generated by this measure shall be an integral part of the city's budget and goal- setting process, and significant opportunities will be provided for meaningful participation by citizens in determining priority uses of these funds. E. Annual Community Report. A written report shall be reviewed at a public hearing by the Revenue Enhancement Oversight Commission, and a summary will be provided annually to every household in the community detailing how much revenue is being generated by the measure and how funds are being spent. F. Annual Citizen Oversight Meeting. An invitation will be extended each year to the entire community inviting them to participate in a forum to review and discuss the use of the revenue generated by this measure. City staff will also be available to meet with any group that requests a specific briefing with their members to discuss and answer questions about the revenues generated by the measure and their uses. Purpose and Scope of the REOC The codified charge of the REOC is to review, report and provide recommendations. The REOC is an advisory body to the Council that will provide important citizen oversight of local sales tax revenues and expenditures. The REOC will not be making final decisions on City spending. REOC meetings will be open to the public and serve as a venue for citizen engagement on local sales tax revenues and expenditures. The REOC will also aid in community education and outreach about how much local sales tax is received and where that revenue is being expended. It is anticipated that the REOC will hold a minimum of four meetings annually. The following graphic illustrates the draft REOC standard schedule and how it integrates into the City’s typical financial planning process. Fiscal Year One (moving left to right on the graphic timeline) Meeting One. Review previous fiscal year end expenditures of local sales tax revenue including an examination of budget to actual. Identify what was accomplished and formulate recommendations to Council on progress in meeting local sales tax spending objectives. Form a subcommittee to work with staff on producing the Annual Community Report. Meeting Two. Review and provide comments on hearing draft of Annual Community Report presented by subcommittee. Determine if additional meeting is necessary to review final version or if it is ready for distribution to Council and community once edits are incorporated. Discuss logistics of Annual Citizen Oversight Meeting. Inaugural Meeting of the REOC Page 3 City of San Luis Obispo, Title, Subtitle Meeting Three. Host Annual Citizen Oversight Meeting. Present information from Annual Community Report as well as local sales tax information from the Comprehensive Annual Financial Audit (CAFR). Receive public input on local sales tax revenue and uses, and engage participants about spending priorities. Meeting Four. Reevaluate local sales tax spending priorities and confirm budget for second year of financial plan. Make recommendations to Council on use of non-programmed local sales tax revenue (carryover), staff-initiated significant operating program changes (SOPC) related to local sales tax funds, and any additional items for the Supplemental Budget. Fiscal Year Two (moving left to right on the graphic timeline) Meeting One. Same as Fiscal Year One Meeting One on year end expenditures (see above). Meeting Two. Identify REOC local sales tax spending priorities for Council goal-setting; the most important projects and tasks the City should pursue during the next two-year financial plan period. “Priorities” implies recommending fewer rather than more goals that can reasonably be accomplished within the two-year timeframe. Inaugural Meeting of the REOC Page 4 City of San Luis Obispo, Title, Subtitle Meeting Three. Review all other advisory body goals and finalize REOC local sales tax spending priorities for Council goal-setting. Review and provide comments on hearing draft of Annual Community Report presented by REOC subcommittee. Meeting Four. Review Council’s Major City Goals and local sales tax spending priorities. Examine and comment on staff’s draft expenditure plan to implement local sales tax priorities, which will be presented to Council at their Strategic Budget Direction hearing. Review new accounting procedures for funds generated by and expended from local sales tax. Current Schedule The City is in Fiscal Year Two of the 2013-15 Financial Plan, and the goal-setting process for the 2015-17 Financial Plan is well underway.1 In addition, the Annual Community Report has already been created for this fiscal year (Attachment 3, Measure Y Integration Report). Accordingly, the January 26th REOC meeting will deviate slightly from the standard content and schedule. The draft REOC standard schedule is open for discussion at the January 26th hearing as well as in the future. The REOC should consider the language of Chapter 3.15 of the Municipal Code and offer any direction to staff about the date, content and timing of proposed meetings that may enhance alignment with the codified intent of their newly created advisory body. REOC Bylaws The REOC bylaws contain the Commission’s purpose, and policies on conduct, membership, terms, officers, meetings, attendance, quorum, voting, subcommittees, public records and other rules and procedures (Attachment 4, Draft REOC Bylaws). The REOC should review the draft bylaws and provide direction to staff on changes as needed. The REOC shall select a Chairperson and Vice-Chairperson from among its members to serve for a one-year term. In general, REOC meetings will be run according to parliamentary procedures as defined by Robert’s Rules of Order. Superior Court Judge Dave Rosenberg has created an abridged version of Robert’s Rules that provides a good primer for typical meeting conduct (Attachment 5, Rosenberg’s Rules of Order). FISCAL BACKGROUND Decision-making The City utilizes a two-year financial planning process to create its budgets. This process includes extensive public outreach to assist the City Council in establishing Major City Goals. The benefits of this process are two-fold, it ensures that resources are provided in the budget to accomplish the community’s highest priority, most important objectives, and it helps create a mutual understanding among residents, decision makers, and staff about what can be achieved by working together (Attachment 6, Council Agenda Report on 2015-17 Financial Plan Process). The fundamental purpose of the City’s Financial Plan is to link what the City wants to 1 The agenda packet for the Council’s January 13th Community Forum and January 24th Goal-Setting Workshop can be reviewed at www.slocity.org. Inaugural Meeting of the REOC Page 5 City of San Luis Obispo, Title, Subtitle accomplish for the community with the resources necessary to do so. The City’s Financial Plan process does this by: clearly setting major city goals and other important objectives; establishing reasonable time frames and organizational responsibility for achieving them; and allocating resources for programs and projects. Reporting The City produces an annual Budget-in-Brief that summarizes the Financial Plan by highlighting the City’s budget progress, key budget features, and “budget facts” (Attachment 7, FY 2013-14 Budget-in-Brief; Attachment 8, FY 2014-15 Budget-in-Brief). A significant section of these documents is devoted to reporting on use of local sales tax revenues and expenditures. Past revenue from the local sales tax equated to $6.5 million annually. The following charts summarize uses of that local sales tax revenue over the last two fiscal years: In general, these Council-approved expenditures have been distributed 60 percent to capital projects and 40 percent to operating expenses associated with open space acquisition and preservation, traffic relief, infrastructure (bikes, streets, and parks), flood protection, and public safety. A more detailed breakdown on local sales tax expenditures over the life of the 2006-14 Essential Services Measure (Y) is listed in the annual audit results available on the local revenue page on www.slocity.org. CONCLUSION The extension of the Essential Services Transactions (Sales) and Use Tax for eight more years includes the existing checks and balances in place that ensure funds get spent appropriately, and two important new measures that enhance transparency and accountability: (1) the Revenue Enhancement Oversight Commission and (2) separate accounting and tracking of funds generated from and expended by the local sales tax. More information on the new accounting procedures will be presented at the next REOC meeting tentatively scheduled in March. 2013-14 Uses of Local Sales Tax Revenue 2014-15 Uses of Local Sales Tax Revenue Inaugural Meeting of the REOC Page 6 City of San Luis Obispo, Title, Subtitle ATTACHMENTS 1. Council Ordinance establishing the REOC 2. Council Ordinance extending the local half-percent sales tax 3. 2013-14 Measure Y Integration Report 4. Draft REOC Bylaws 5. Rosenberg’s Rules of Order 6. 12/16/14 Council Agenda Report on Financial Plan Process 7. 2013-14 Budget in Brief 8. 2014-15 Budget in Brief ORDINANCE NO. 1605 (2014 Series) ANORDINANCE OF THE CITY OF SAN LUIS OBISPO ESTABLISHING THE CITIZENS' REVENUE ENHANCEMENT OVERSIGHT COMMISSION (REOC) WHEREAS, the voters of the City of San Luis Obispo approved a half - percent sales tax in 2006, which is now codified as Municipal Code Chapter 3.15 Essential Services Transactions Sales) and Use Tax (Essential Services Tax); and WHEREAS, the Essential Services Tax is a general purpose tax and was established to protect and maintain essentialservices; and WHEREAS, Municipal Code Chapter 3.15.040 includes a number of accountability provisions to ensure citizen oversight and transparency of therevenues and expenditures collected through this general purpose tax; and WHEREAS, the Essential Services Tax will expire in March 2015 if it is not extended by the voters of San Luis Obispo during the November 2014General Election; and WHEREAS, the City Council of the City of San Luis Obispo plans to submit a ballot measure to the voters of San Luis Obispo to extend the Essential Services Tax for an additional eight years; and WHEREAS, the City Council wishes to enhance City accountability for the use of voter approved revenues and, therefore, is proposing to establish theRevenue Enhancement Oversight Commission (REOC) for the purpose of reviewing revenues and expenditures from the Essential Services Tax, reporting to the community and the City Council about the City's stewardship of these revenues, and recommending expenditures to the City Council that are consistent with the purpose of Municipal Code Chapter 3.15 and the preferences of City residents; and WHEREAS, Article XII of the City's Chartergives the City Council authority to establish new Commissions by ordinance as the Council deemsnecessary to give it advice or assistance. NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo as follows: SECTION 1. New Chapter 2.14 (Revenue Enhancement Oversight Commission) is hereby added to the San Luis Obispo Municipal Code to read as follows: Chapter 2.14 Revenue Enhancement Oversight Commission 2.14.010 CommissionEstablished andPurpose The Revenue Enhancement OversightCommission (REOC) is herebyestablished to review, report, and make recommendations regarding the use of revenues collectedthrough the City's 01605 Attachment 1 Ordinance No. 1605 (2014 Series) Page 2 voter - approved general purpose, half - percent sales tax authorized by Section 3.15 of the Municipal Code. The REOC is authorized to review these tax revenues and expenditures, report on the City's stewardship of this general purpose tax, and provide recommendations directly to the City Council regarding expenditures of these tax revenues as an integral part of the budget process. The establishment of the REOC shall be effective upon voter approval of a revenue enhancement measure to be proposed in November 2014 and shall continue in existence as long as Municipal Code Chapter 3.15, adopted by such measure, is in effect. 2.14.020 Membership and appointment. The REOC shall consist of five (5) members who are residents of the City. Members shall be appointed by the whole City Council through a public application and appointment process. When recruiting members, the City will seek members that have experience with finance, budgeting, or municipal accounting. 2.14.030 Term of office and Compensation. A. Terms. Of the members first appointed, three shall be appointed for the term of three years, and two shall be appointed for two year terms. Subsequent appointments to the REOC shall be for three years. Vacancies during the term shall be filled by the City Council for the unexpired portion of the term. Members may be removed by the City Council with or without cause by a majority vote of the City Council. B. Compensation. Members shall earn a stipend equal to that earned by the Planning Commission. The amount of the stipend shall be indicated in the Commission's by -laws. 2.14.040 Powers and duties. The REOC shall meet a minimum of four times per year to perform its duties, as follows: A. Generally. The REOC shall have the authority to conduct public hearings as directed by the City Council or city policy. The REOC shall exercise the duties conferred upon it by this ordinance, and as necessary to achieve its purpose. B. Annual Community Report. The REOC shall conduct a public hearing annually to review and take public testimony on the Essential Services Measure Annual Report. C. Annual Audit. The REOC shall meet annually to review the audited financial statements contained in the Comprehensive Annual Financial Report for the Essential Services Measure. D. Annual Citizen Oversight Meeting. The REOC shall hold an annual Essential Services Measure Community Forum for the purpose of taking input from residents and community members on preferences for the use of the revenues generated by the Essential Services Tax. E. Budget Recommendations. The REOC shall meet for the purpose of making recommendations to the City Council regarding the uses of revenue generated by the Essential Services Measure. The REOC shall take into consideration the input provided by residents and community members during the Annual Citizen Oversight Meeting, the purpose of the Essential Services Measure, the Major City Ordinance No. 1605 (2014 Series) Page 3 Goals established by the City Council, and the amount of revenue available from past fiscal years, and projected to be available during the next fiscal year, in making its budget recommendations to the Council. F. Outreach and Education. The REOC shall be authorized to perform outreach and educational activities so that residents and community members are informed about the costs and benefits associated with the collection and use of revenue generated by the Essential Services Measure. SECTION 2. Effective Date. This ordinance will become effective following the passage of an extension to the Essential Services Measure, San Luis Obispo Municipal Code Chapter 3.15, which will be voted on by the voters of the City of San Luis Obispo during the November 2014 General Election. In the event the revenue extension measure is not approved by the voters, this ordinance shall not take effect. SECTION 3. This ordinance shall expire with the City's authority to levy the tax imposed by Municipal Code Chapter 3.15, consistent with Section 3.15.030 of said chapter as it now exists or may hereafter be amended by the voters of the City of San Luis Obispo. SECTION 3. A summary of this ordinance, together with the names of Council members voting for and against, shall be published at least five (5) days prior to its final passage, in The Tribune, a newspaper published and circulated in this City. This ordinance shall go into effect at the expiration of thirty (30) days after its final passage. INTRODUCED on the 1 st day of July 2014, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the 15th day of July 2014, on the following roll call vote: AYES: Council Members Ashbaugh Smith, Vice Mayor Christianson and Mayor Marx NOES: Council Member Carpenter ABSENT: None ATTEST: tithony J. meka, CM City Clerk APPROVED AS TO MRM: Christine Dietrick City Attorney Mayor bin Marx ORDINANCE NO. 1604 (2014 Series) AN ORDINANCE OF THE CITY COUNCIL AND THE PEOPLE OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AMENDING CHAPTER 3.15 OF THE MUNICIPAL CODE TO EXTENDTHE EXISTING ESSENTIAL SERVICES TRANSACTIONS (SALES) AND USE TAX," FOR AN ADDITIONAL EIGHT YEARS (MARCH 31, 2023), TO BE ADMINISTERED BYTHE STATEBOARD OF EQUALIZATION; UPDATE THE PURPOSE STATEMENT; AND PROVIDE FOR ADDITIONAL CITIZEN OVERSIGHT AND ACCOUNTING TRANSPARENCY. WHEREAS, in 2006, the voters of San Luis Obispo approved the San Luis Obispo EssentialServicesMeasure (also commonly known as Measure Y, its2006 ballot designation) with 64.77% of the vote, establishing a half -centper dollar sales taxto address fiscal challenges including State takeaways totaling more than $22 million over the prior 15 years, and ongoing State funding reductions of $3 million annually; and WHEREAS, the purpose of Measure Y was to secure a local revenue source to protect and maintain essential community services such as neighborhood street paving and pothole repair, traffic congestion relief, police protection, fire and paramedic services, flood protection, senior citizen services and facilities, neighborhood code enforcement, open space preservation and other vital general purpose services; and WHEREAS, the voter's approval of Measure Y in 2006 allowed the City to: restore its neighborhood paving and flood protection programs; restore sworn police positions that hadbeen cut, as well as restore the City's FireMarshal to a full -time position; and restore its open space acquisition program, aiding in the purchase of portions of the Irish Hills, Stenner Canyon, and Reservoir Canyon natural reserves; and also gave the City the ability to provide added services for residents, including hiring two neighborhood services specialists, hiring twodowntown daytime police patrol officers, and hiring a ranger services maintenance worker; and WHEREAS, the City's financial challenges continued after the adoption of Measure Y due to the GreatRecession — which impacted all of the City's major revenue sources including property tax, transient occupancytax, and sales tax — but even during the Great Recession, the City was still able to maintain a highlevel of service for its residents; and, WHEREAS, due to Measure Y revenue and the financial stability created by City actions — including (1) compensationreductions agreedto by employees savingthe City over $3 million in ongoing, annual savings, and (2) pension reformefforts that requireemployees to pay their share of pension costs, and implementation of three tiers of retirement benefits so that, over time, the cost to the City for retirement benefits for new public employees will be significantly reduced — the City has invested in newCapital Improvement Projects, such as the SantaRosaSkate Park, the Bob Jones Trail bridge at Los Osos Valley Road, and is in a position to make new open space acquisitions in the City's greenbelt; and 01604 Attachment 2 Ordinance No. 1604 (2014 Series) Page 2 WHEREAS, the City Council appointed a 10- person citizen advisory committee to analyze the City's stewardship of Measure Y resources and report back to the City Council with its recommendations, and following several meetings, a public opinion survey, a public open house, and deliberations among the committee members, the committee recommended that the City Council place a measure before the voters to extend the Essential Services Sales and Use Tax for another eight years; and WHEREAS, the City's Essential Services Sales and Use Tax includes substantial accountability measures including: requirements for independent annual financial audits; integration of use of funds into the City's budget and goal- setting process; annual community reports; and annual citizen engagement meetings; and WHEREAS, the City Council desires to include additional accountability measures, including a Citizen's Revenue Enhancement Oversight Commission and a new Fiscal Responsibility Philosophy to increase transparency and accountability and to ensure the expenditure of revenue measure funds in alignment with evolving community priorities, as defined through citizen engagement and City Council direction; and WHEREAS, the City's Essential Services Transactions (Sales) and Use Tax Ordinance is found in Chapter 3.15 of the City's Municipal Code; and WHEREAS, Section 3.15.03 of this Chapter sets forth a expiration date of March 31, 2015, at which time Chapter 3.15 will expire, unless extended by the voters of the City at an election called for that purpose; and WHEREAS, the City Council desires to place a measure before the voters in the November 2014 General Election to extend the City's existing one -hall' percent Transactions and Use Tax, Chapter 3.15, for another eight years, to March 31, 2023. NOW, THEREFORE, BE IT ORDAINED by the Council and the People of the City of San Luis Obispo as follows: Section 1. Chapter 3.15 of the City's Municipal Code is hereby amended and re- enacted in full to read as follows: Chapter 3.15 ESSENTIAL SERVICES TRANSACTIONS (SALES) AND USE TAX 3.15.010 Title. This chapter shall be known as the "city of San Luis Obispo essential services transactions (sales) and use tax ordinance." The city of San Luis Obispo hereinafter shall be called the "city." This chapter shall be applicable in the incorporated territory of the city. 3.15.020 Pti rpose. . ............................ This chapter is adopted to achieve the following, among other purposes, and directs that the provisions hereof be interpreted in order to accomplish those purposes: Ordinance No. 1604 (2014 Series) Page 3 A. To protect and maintain essential services and facilities— such as open space preservation; bike lanes, sidewalks and other traffic congestion relief projects; public safety; neighborhood street paving and code enforcement; flood protection; senior citizen programs including services and facilities; and other vital general purpose services and capital improvement projects —by extending a general purpose retail transactions and use tax of one -half percent in accordance with the provisions of Part 1.6 (commencing with Section 725 1) of Division 2 of the Revenue and Taxation Code and Section 7285.9 of Part 1.7 of Division 2, which authorizes the city to adopt this general purpose tax chapter, which shall be operative if two - thirds of the council and a majority vote of the electors voting on the measure, vote to approve the extension of this general purpose revenue source at an election called for that purpose. B. To adopt a retail transactions and use tax chapter that incorporates provisions identical to those of the sales and use tax law of the state of California insofar as those provisions are not inconsistent with the requirements and limitations contained in Part 1.6 of Division 2 of the Revenue and Taxation Code. C. To adopt a retail transactions and use tax chapter that imposes a tax and provides a measure therefor that can be administered and collected by the State Board of Equalization in a manner that adapts itself as fully as practicable to, and requires the least possible deviation from, the existing statutory and administrative procedures followed by the State Board of Equalization in administering and collecting the California State sales and use taxes. D. To adopt a retail transactions and use tax chapter that can be administered in a manner that will be, to the greatest degree possible, consistent with the provisions of Part 1.6 of Division 2 of the Revenue and Taxation Code, minimize the cost of collecting the transactions and use taxes, and at the same time minimize the burden of recordkeeping upon persons subject to taxation under the provisions of this chapter. 3.15.030 Eight -,year sunset. The authority to levy the tax imposed by this chapter shall expire in eight years, on March 31, 2023, unless extended by the voters. 3.15.040 Fiscal accountability provisions — Citizen oversight and independent annual financial audits. Along with the city's ongoing commitment to citizen involvement as a fundamental principle of good government, specific citizen oversight and fiscal accountability provisions are hereby established as follows: Ordinance No. 1604 (2014 Series) Page 4 A. Revenue Enhancement Oversight Commission. A citizen's commission will be established to provide transparency and maximize City accountability. The Commission will be responsible for reviewing and making budget recommendations directly to the City Council regarding expenditures from the essential services transactions (sales) and use tax, and reporting annually to the community on the City's use of these tax revenues. B. Accounting and Tracking Expenditures. The funds collected through the City of San Luis Obispo essential services transactions (sales) and use tax ordinance shall be accounted for and tracked by the City Treasurer separately to facilitate citizen oversight. C. Independent Annual Financial Audit. The amount generated by this general purpose revenue source and how it was used shall be included in the annual audit of the city's financial operations by an independent certified public accountant. D. Integration of the Use of Funds into the City's Budget and Goal- Setting Process. The estimated revenue and proposed use of funds generated by this measure shall be an integral part of the city's budget and goal- setting process, and significant opportunities will be provided for meaningful participation by citizens in determining priority uses of these funds. E. Annual Community Report. A written report shall be reviewed at a public hearing by the Revenue Enhancement Oversight Commission, and a summary will be provided annually to every household in the community detailing how much revenue is being generated by the measure and how funds are being spent. F. Annual Citizen Oversight Meeting. An invitation will be extended each year to the entire community inviting them to participate in a forum to review and discuss the use of the revenue generated by this measure. City staff will also be available to meet with any group that requests a specific briefing with their members to discuss and answer questions about the revenues generated by the measure and their uses. 3.15.050 Transactions .(sales).. tax rate.,_...... W..,.- .,,.,- .....- ...,...........,_....., m.. .......... _.. ,.....,.__ ..._ ................_ ............. ..I............................ For the privilege of selling tangible personal property at retail, a tax is hereby imposed upon all retailers in the incorporated territory of the city at the rate of one -half percent of the gross receipts of any retailer from the sale of all tangible personal property sold at retail in said territory on and after the operative date of this chapter. 3.15.060 Use tax rate. An excise tax is hereby imposed on the storage, use or other consumption in the city of tangible personal property purchased from any retailer on and after the operative date of this chapter for storage, use or other consumption in said territory at the rate of one -half percent of the sales price of the property. The sales price shall include delivery charges when such charges are subject to state Ordinance No. 1604 (2014 Series) Page 5 sales or use tax regardless of the place to which delivery is made. 3.15.070 01) era tive date......._..,..W, ...,,_.... ....... ,,....,.._....... ., ...,...,........... _ __..,. Operative date" means the first day of the first calendar quarter commencing more than one hundred ten days after the adoption of the ordinance codified in this chapter. 3.15.080 Contract with state. Prior to the operative date, the city shall contract with the State Board of Equalization to perform all functions incident to the administration and operation of this transactions and use tax chapter; provided, that if the city shall not have contracted with the State Board of Equalization prior to the operative date, it shall nevertheless so contract and in such a case the operative date shall be the first day of the first calendar quarter following the execution of such a contract. 3.1.5.090 Place of sale. For the purposes of this chapter, all retail sales are consummated at the place of business of the retailer unless the tangible personal property sold is delivered by the retailer or his agent to an out - of -state destination or to a common carrier for delivery to an out -of -state destination. The gross receipts from such sales shall include delivery charges, when such charges are subject to the state sales and use tax, regardless of the place to which delivery is made. In the event a retailer has no permanent place of business in the state or has more than one place of business, the place or places at which the retail sales are consummated shall be determined under rules and regulations to be prescribed and adopted by the State Board of Equalization. 115.100 Adoption.of provisions of state law. Except as otherwise provided in this chapter and except insofar as they are inconsistent with the provisions of Part 1.6 of Division 2 of the Revenue and Taxation Code, all of the provisions of Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code are hereby adopted and made a part of this chapter as though fully set forth herein. 115410 Limitations on adoption of state law and collection of use taxes. In adopting the provisions of Part 1 of Division 2 of the Revenue and Taxation Code: A. Wherever the state of California is named or referred to as the taxing agency, the name of this city shall be substituted therefor. However, the substitution shall not be made when: 1. The word "state" is used as a part of the title of the State Controller, State Treasurer, State Board of Control, State Board of Equalization, State Treasury, or the Constitution Ordinance No. 1 604 (2014 Series) Page 6 of the State of California. 2. The result of that substitution would require action to be taken by or against this city or any agency, officer, or employee thereof rather than by or against the State Board of Equalization, in performing the functions incident to the administration or operation of this chapter. 3. In those sections, including, but not necessarily limited to, sections referring to the exterior boundaries of the state of California, where the result of the substitution would be to: a. Provide an exemption from this tax with respect to certain sales, storage, use or other consumption of tangible personal property which would not otherwise be exempt from this tax while such sales, storage, use or other consumption remain subject to tax by the state under the provisions of Part 1 of Division 2 of the Revenue and Taxation Code; or b. Impose this tax with respect to certain sales, storage, use or other consumption of tangible personal property, which would not be subject to tax by the state under the said provision of that code. 4. In Sections 6701, 6702 (except in the last sentence thereof), 6711, 6715, 6737, 6797 or 6828 of the Revenue and Taxation Code. B. The word "city" shall be substituted for the word "state" in the phrase "retailer engaged in business in this state" in Section 6203 and in the definition of that phrase in Section 6203. (Ord. 1495 §11,2006) 3.15.120 Permit not required. If a seller's permit has been issued to a retailer under Section 6067 of the Revenue and Taxation Code, an additional transactor's permit shall not be required by this chapter. 3.15.130 Exemptions and exclusions The following transactions shall be exempted and excluded: A. There shall be excluded from the measure of the transactions tax and the use tax the amount of any sales tax or use tax imposed by the state of California or by any city, city and county, or county pursuant to the Bradley -Burns Uniform Local Sales and Use Tax Law or the amount of any state - administered transactions or use tax. Ordinance No. 1604 (2014 Series) Page 7 B. There are exempted from the computation of the amount of transactions tax the gross receipts from: 1. Sales of tangible personal property, other than fuel or petroleum products, to operators of aircraft to be used or consumed principally outside the county in which the sale is made and directly and exclusively in the use of such aircraft as common carriers of persons or property under the authority of the laws of this state, the United States, or any foreign government. 2. Sales of property to be used outside the city which is shipped to a point outside the city, pursuant to the contract of sale, by delivery to such point by the retailer or his agent, or by delivery by the retailer to a carrier for shipment to a consignee at such point. For the purposes of this section, delivery to a point outside the city shall be satisfied: a. With respect to vehicles (other than commercial vehicles) subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, and undocumented vessels registered under Division 3.5 commencing with Section 9840) of the Vehicle Code by registration to an out -of- city address and by a declaration under penalty of perjury, signed by the buyer, stating that such address is, in fact, his or her principal place of residence; and b. With respect to commercial vehicles, by registration to a place of business out - of -city and declaration under penalty of perjury, signed by the buyer, that the vehicle will be operated from that address. 3. The sale of tangible personal property if the seller is obligated to furnish the property for a fixed price pursuant to a contract entered into prior to the operative date of this chapter. 4. A lease of tangible personal property, which is a continuing sale of such property, for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to the operative date of this chapter. 5. For the purposes of subsections (B)(3) and (4) of this section, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or Ordinance No. 1604 (2014 Series) Page 8 lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not such right is exercised. C. There are exempted from the use tax imposed by this chapter, the storage, use or other consumption in this city of tangible personal property: 1. The gross receipts from the sale of which have been subject to a transactions tax under any state - administered transactions and use tax ordinance. 2. Other than fuel or petroleum products purchased by operators of aircraft and used or consumed by such operators directly and exclusively in the use of such aircraft as common carriers of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of this state, the United States, or any foreign government. This exemption is in addition to the exemptions provided in Sections 6366 and 6366.1 of the Revenue and Taxation Code of the State of California. 3. If the purchaser is obligated to purchase the property for a fixed price pursuant to a contract entered into prior to the operative date of this chapter. 4. If the possession of, or the exercise of any right or power over, the tangible personal property arises under a lease which is a continuing purchase of such property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease prior to the operative date of this chapter. 5. For the purposes of subsections (C)(3) and (4) of this section, storage, use, or other consumption, or possession of, or exercise of any right or power over, tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not such right is exercised. 6. Except as provided in subsection (C)(7) of this section, a retailer engaged in business in the city shall not be required to collect use tax from the purchaser of tangible personal property, unless the retailer ships or delivers the property into the city or participates within the city in making the sale of the property, including, but not limited to, soliciting or receiving the order, either directly or indirectly, at a place of business of the retailer in the city or through any representative, agent, canvasser, solicitor, Ordinance No. 1604 (2014 Series) Page 9 subsidiary, or person in the city under the authority of the retailer. 7. A retailer engaged in business in the city shall also include any retailer of any of the following: vehicles subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, or undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code. That retailer shall be required to collect use tax from any purchaser who registers or licenses the vehicle, vessel or aircraft at an address in the city. D. Any person subject to use tax under this chapter may credit against that tax any transactions tax or reimbursement for transactions tax paid to a district imposing, or retailer liable for, a transactions tax pursuant to Part 1.6 of Division 2 of the Revenue and Taxation Code with respect to the sale to the person of the property the storage, use or other consumption of which is subject to the use tax. 3.1_5.140 Amendments. All amendments subsequent to the effective date of this chapter to Part 1 of Division 2 of the Revenue and Taxation Code relating to sales and use taxes and which are not inconsistent with Part 1.6 and Part 1.7 of Division 2 of the Revenue and Taxation Code, and all amendments to Part 1.6 and Part 1.7 of Division 2 of the Revenue and Taxation Code, shall automatically become a part of this chapter; provided, however, that no such amendment shall operate so as to affect the rate of tax imposed by this chapter. 3.15.150 Eqjoining collection forbidden. No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action or proceeding in any court against the state or the city, or against any officer of the state or the city, to prevent or enjoin the collection under this chapter, or Part 1.6 of Division 2 of the Revenue and Taxation Code, of any tax or any amount of tax required to be collected. Section 2. A summary of this ordinance, together with the names of Council members voting for and against, shall be published at least five (5) days prior to its final passage, in The Tribune, a newspaper published and circulated in this City. This ordinance shall go into effect upon adoption by the voters. INTRODUCED on July 1, 2014 AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on July 15, 2014 on the following roll call vote: AYES: Council Members Ashbaugh Smith, Vice Mayor Christianson and Mayor Marx Ordinance No. l 604 (2014 Series) Page 10 NOES: Council Member Carpenter ABSENT: None PASSED AND ADOPTED by the Voters of the City San Luis Obispo on November 4, 2014 by the following vote tally: AYES: 8,728 70.32% NOES: 3,684 29.68% Mayor`J n Marx ATTEST: APPROVED AS TO FORM: ristine Dietrick Attorney Measure Y Integration – 2013-14 Fiscal Year Attachment 3 MEASURE Y INTEGRATION REPORT - OVERVIEW The purpose of this report is to provide the Council with information about the reporting, uses, accountability, and priorities of Measure Y funds during the most recently completed fiscal year, 2013-14. Background Measure Y was approved by City voters in November 2006 to preserve essential services for the community. Measure Y established a one-half percent local sales tax with an eight-year sunset clause. The original measure would have expired on March 31, 2015, however voters approved its extension for an additional eight years during the 2014 General Election when they passed Measure G. This Measure Y Integration Report details how Measure Y revenue was integrated into the budget during the most recently completed fiscal year, 2013-14, and illustrates how Measure Y expenditures supported Council goals. In the future, this report will be adjusted to report on Measure G priorities, including the additional fiscal accountability provisions contained in the new measure. Measure Y includes provisions to ensure that consideration of this important revenue source is integrated into the financial planning process. The City’s goal-setting process is designed to meet two of these requirements, as follows. 1.Integration into the City's budget and goal-setting process. The estimated revenue and proposed use of funds generated by this measure shall be an integral part of the City's budget and goal-setting process, and significant opportunities will be provided for meaningful participation by citizens in determining priority uses of these funds. 2.Annual citizen meeting. An invitation will be extended each year to the entire community asking Community members to participate in a forum to review and discuss the use of the revenue generated by this measure. City staff will also be available to meet with any group that requests a specific briefing with their members to discuss and answer questions about the revenues generated by the measure and their uses. It is important to know that Measure Y is a general purpose measure, and the proceeds are not restricted to specific purposes. However, the language on the ballot measure approved by voters in 2006 provides examples of the types of uses that would be funded. The language on the ballot was: “To protect and maintain essential services - such as neighborhood street paving and pothole repair; traffic congestion relief; public safety, including restoring eliminated traffic patrol, Fire Marshal and fire/paramedic training positions; flood protection; senior citizen services/facilities; neighborhood code enforcement; open space preservation and other vital general purpose services - shall the sales tax be increased by one-half cent for eight years only, with citizen oversight and independent annual financial audits?” Measure Y Integration – 2013-14 Fiscal Year 2013-15 Measure Y Priorities Preservation of Essential Services (Public Safety, Maintenance Services) Infrastructure Maintenance Neighborhood Wellness Open Space Preservation Transportation (Traffic Congestion Relief) In short, while the ballot language provided examples of the types of uses that could be funded - based on community input received before placing the measure on the ballot - Measure Y is a general purpose tax providing Council with flexibility to respond to new circumstances and challenges. DISCUSSION How are Measure Y priorities determined? Measure Y is a general purpose revenue source and the City Council maintains discretion over decisions regarding how these funds are allocated. Initially the City did surveying and public education/outreach so staff would know where to start, but priorities can change over time, depending upon circumstances. The Measure Y ballot language is always an important source of information when determining Measure Y priorities. The public goal setting process also plays an important role, which is why the public has an opportunity to weigh in on Measure Y priorities during the Community Forum. Ultimately, the Council provided priority guidance on the use of Measure Y funds when they adopted the 2013-15 Financial Plan, and again when the Supplement and 2014-15 Budget was adopted. The Council has made great efforts in the past to connect Council goals with Measure Y priorities, and it is anticipated that this will continue to be the case as Measure G priorities are reviewed as part of the 2015-17 Financial Plan goal-setting process. How are Measure Y Funds Used? Measure Y funds have been used for both ongoing operations and capital projects to address the priorities identified. The following table identifies that approximately $2.44 million of Measure Y funds were incorporated into day-to-day operations during the 2013-14 fiscal year. Measure Y Integration – 2013-14 Fiscal Year Operating Program Operating Program Public Safety Sweeper Operator 54,264$ Traffic sergeant 163,547$ Stormwater management plan:81,344 Police patrol officer 175,883 Parks Maintenance Worker 73,102 Police Sergeant 200,199 CIP Project Management Downtown Patrol 310,400 Field Engineering Inspector II/III 102,617 Fire Marshall 140,289 Transportation (Mobility and Safety) Fire Training Officer 176,687 Building Code Enforcement Officer 91,940 Fire Administrative Assistant 81,000 Permit Technician (0.25)18,906 Streets & Sidewalks Student Neighborhood Assistance Pro53,079 Street Maintenance worker 71,368 Neighborhood Code Enforcement Sp137,905 Signal & Streetlight Tech 92,120 Traffic Engineer 92,520 Creek & Flood Protection Open Space Preservation Storm Water Code Enforcement Officer91,945 Ranger Services 47,534 Collection Operator 184,580 Open Space Wildfire reduction 3,433 Total Measure Y funding allocated to operating programs 2,444,662$ Measure Y funding allocated to ongoing day-to-day operations in 2013-14 To the degree that these operating programs remain priorities, the amount of Measure Y funding available for capital projects, or additional operating programs, is the difference between this amount and the total amount of Measure Y funding available. If Measure Y is expected to generate $7 million during the 2015-16 fiscal year, and $2.5 million is devoted to these ongoing operating programs, $4.5 million would be available to accomplish other Measure Y priorities. During the upcoming goal-setting process, Council will be asked to affirm if the ongoing operating programs remain a priority use of local sales tax revenues, and to prioritize the use of these funds. Provided at the end of this report is a list of the Measure Y uses during 2013-14. This list is included in the City’s Comprehensive Annual Financial Report (CAFR) and is currently being audited by the City’s independent auditors. It provides information on the operating and capital expenditures during 2013-14 as well as a reconciliation of all Measure Y revenues and uses since 2006-07. SUMMARY The City’s local sales tax measure is now expected to provide over $7 million in funding each year to enable the City to provide important and valued services to the community; for both day- to-day operating programs and one-time capital improvements. It is the Council’s obligation to prioritize the use of this resource, just as it is their job to prioritize the use of all City resources. For this reason it is important that as the Council sets goals for the 2015-17 Financial Plan, it also considers the prioritized use of local sales tax revenue. Measure Y Integration – 2013-14 Fiscal Year CITY OF SAN LUIS OBISPO, CALIFORNIA MEASURE Y FUNDING SUMMARY SCHEDULE FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Operating Programs Capital Improvement Plan Budget Actual Budget Actual Encumbered / Assigned Preservation of Essential Services Public Safety Police Services 869,583 850,029 - - - Police Vehicles - - 172,800 31,421 141,379 Public Safety Mobile Data Computers - - 184,500 - 184,500 Fire Prevention & Training 399,656 397,976 - - - Extrication Equipment - - 60,400 60,115 - Fire Engine/Truck Replacement: Debt Service - - 128,920 128,920 - Fire Station #2 Remodel - - 2,700 630 2,070 Quickest Route Software - - 20,600 18,630 1,970 Maintenance Services Streets, Sidewalks and Traffic Signal Operations 180,836 163,488 - - - Creek & Flood Protection 529,059 412,133 316,400 285,379 31,021 Parks 76,581 73,102 620,000 50,375 569,625 Project Management & Inspection 108,030 102,617 - - - Neighborhood Wellness Enhanced Building & Zoning Code Enforcement 113,441 110,846 - - - "SNAP" Enhancement 53,079 53,079 - - - Neighborhood Code Enforcement Specialists 139,183 137,905 - - - Traffic Congestion Relief Traffic Safety Report Implementation - - 25,000 - 25,000 Traffic Operations Report Implementation - - 30,000 - 30,000 Traffic Engineer 92,520 92,520 - - - Traffic Sign Maintenance - - - - - Bicycle Facility Improvements - - 100,000 18,936 81,064 Neighborhood Traffic Improvements - - 20,000 4,846 15,154 Measure Y Integration – 2013-14 Fiscal Year CITY OF SAN LUIS OBISPO, CALIFORNIA MEASURE Y FUNDING SUMMARY SCHEDULE FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Operating Programs Capital Improvement Plan Budget Actual Budget Actual Encumbered / Assigned Open Space Preservation Open Space Acquisition - - 200,000 - 200,000 Ranger Services Staffing 59,300 47,534 - - - Open Space Wildfire Reduction 5,000 3,433 - - - Infrastructure Maintenance & Improvements Santa Rosa Skatepark - - 1,226,300 16,313 1,209,987 Street Reconstruction & Resurfacing - - 1,400,700 939,572 461,128 Central Irrigation Controller Replacement - - 163,323 163,323 - Facility Maintenance - - 54,000 26,029 27,971 Jack House Exterior Painting - - 25,000 - 25,000 Johnson Avenue Underpass Pump - - 190,000 - 190,000 Library Restroom Remodel - - 39,000 39,000 - Marsh Street Bridge Replacement - - 19,300 19,300 - Mission Plaza Railing Upgrade - - 30,000 - 30,000 Olympic Pool Replastering - - 25,000 5,525 19,475 Pedestrian and Bicycle Pathway Maintenance - - 60,000 60,000 - Sidewalk Repairs - - 25,000 25,000 - Tree Maintenance Equipment - - 100,400 - 100,400 Sinsheimer Parking Lot Paving - - 80,000 166 79,834 Mission Plaza Master Plan - - 100,000 - 100,000 I.T. Replacement Fund - - 500,000 116,066 383,934 Facility Maintenance Reserve - - 500,000 293,479 206,521 Totals Current Projects 2,626,268 2,444,662 6,419,343 2,303,025 4,116,032 Measure Y Integration – 2013-14 Fiscal Year CITY OF SAN LUIS OBISPO, CALIFORNIA MEASURE Y FUNDING SUMMARY SCHEDULE FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Operating Programs Capital Improvement Plan Budget Actual Budget Actual Encumbered / Assigned Prior Year Encumbered/Assigned Amounts Transportation (Mobility and Safety) Traffic Safety Report Implementation - - 12,611 12,608 - Traffic Sign Maintenance - - 44,600 44,600 - Open Space Preservation Froom Ranch Improvement - - 10,934 8,247 2,687 Infrastructure Maintenance and Improvements Street Reconstruction & Resurfacing - - 114,516 114,516 - Broad Street Creek Bank Reinforcement - - 18,318 2,689 15,629 Olympic Pool Heater Replacement - - 176,721 166,345 - Playground Equipment Replacement - - 373,083 169,942 203,141 Maintenance Services Streets, Sidewalks and Traffic Signal Repairs - - 31,612 31,584 - Creek & Flood Protection - - 35,000 - - Sinsheimer Stadium Bldg. Assessment - - 34,556 7,780 26,776 SUB-TOTAL PRIOR YEAR AMOUNTS $851,951 $558,312 $248,233 Totals 2,626,268 2,444,662 7,271,294 2,861,337 4,364,265 Measure Y Integration – 2013-14 Fiscal Year Measure Y Revenues & Uses Summary Revenues: Carryover from 2006-07 1,000,000 Revenues for 2007-08 5,996,600 Revenues for 2008-09 5,641,400 Revenues for 2009-10 5,252,500 Revenues for 2010-11 5,616,300 Revenues for 2011-12 6,237,500 Revenues for 2012-13 6,493,800 Revenues for 2013-14 6,774,365 Total Revenues 43,012,465 Uses: Operating programs 2007-08 (1,463,700) Capital improvement plan 2007-08 (2,434,100) Operating programs 2008-09 (2,418,300) Capital improvement plan 2008-09 (3,684,400) Operating programs 2009-10 (2,267,100) Capital improvement plan 2009-10 (2,161,200) Operating programs 2010-11 (2,430,200) Capital improvement plan 2010-11 (3,443,000) Operating programs 2011-12 (2,203,900) Capital improvement plan 2011-12 (3,967,500) Operating programs 2012-13 (2,225,125) Capital improvement plan 2012-13 (2,320,712) Operating programs 2013-14 (2,444,662) Capital improvement plan 2013-14 (2,861,337) Total Uses (36,325,235) Contingency Reserve 2014 (1,700,000) Encumbered or assigned for carryover for future year expenditures (4,364,265) Net available for future year appropriations 622,964 Citizens’ Revenue Enhancement Oversight Commission The Citizens’ Revenue Enhancement Oversight Commission (REOC) has five members. Members must be residents and registered voters of the City. When recruiting members, the City seeks members that have experience with finance, budgeting, or municipal accounting, though this is not a requirement of membership. ARTICLE 1. MEETINGS A. The REOC shall meet a minimum of four times per year to conduct its business. B. REOC regular meetings will follow the diagram below and be integrated into the City’s budget processes for the two‐year financial plan, fiscal year‐end, and financial plan supplement. Meeting dates may change from year to year according to the actual budget schedule. Attachment 4 REOC Bylaws Page 2 C. Agenda items shall be completed by 9:00 p.m. unless the consent of a majority of commissioners agree to extend the meeting. D. Regular meetings shall be held in the Council Hearing Room, City Hall, 990 Palm Street, San Luis Obispo, California. E. Special meetings may be called by a majority of the REOC, or by City staff in consultation with the Chairperson, if additional meetings are necessary to accomplish the purpose and duties of the Commission. F. In the event that the REOC desires to hold all or any portion of a regular meeting at a place other than the Council Hearing Room, then the place of such meeting shall be posted on at the doors of the Council Hearing Room prior to the time designated for the meeting in accordance with law. ARTICLE 2. ELECTION OF OFFICERS A. The commission shall select a Chairperson and Vice‐Chairperson from among its members to serve for a one‐year term beginning with the first meeting following the start of each fiscal year (July 1). B. Commissioners shall serve as Chairperson or Vice‐Chairperson at the discretion of the Commission. C. The Chairperson shall preside at all meetings of the commission. The Vice‐Chairperson is Chairperson in the absence of the Chairperson or in case of inability of the Chairperson to act. ARTICLE 3. CONDUCT OF MEETINGS A. Commissioners should address questions through the chairperson. B. Members of the audience should address commissioners or other persons present through the chairperson. C. Procedure for reviewing public hearing items: After roll call the Chairperson shall announce to the public the procedures to be followed to consider the items listed on the agenda and then proceed as follows: 1. The Chairperson shall introduce the items and ask for oral staff reports, as appropriate. 2. The staff report previously submitted to the REOC shall be placed into the record with all communications received regarding the item. Staff reports shall be submitted for all public hearing items in a form acceptable to the Commission. 3. Members of the public wishing to speak on the topic of the agenda item shall be invited to make a presentation. Public comment shall be accepted for agenda items that are listed as presentations, business items, or public hearings. 4. Following public testimony on an agenda item, the public hearing or public testimony portion of the meeting shall be closed to the public and discussion confined to members of the commission; provided that the commission may reopen the public hearing or invite additional testimony at any time prior to a decision on an item on an affirmative vote of the majority of those members present. REOC Bylaws Page 3 5. The Commission, upon formal motion, shall take action on the item or recommendation. ARTICLE 4. QUORUM A. Three members of the commission constitutes a quorum for the transaction of business. B. No action of the commission shall become effective without receiving the affirmative vote of a majority of the members present. ARTICLE 5. VOTING A. Except as otherwise provided in the San Luis Obispo Municipal Code and state law, no motion or any other action shall be passed or become effective without receiving the affirmative vote of at least a majority of members present. B. Failure to receive such an affirmative vote shall result in failure or denial, as appropriate, of the motion or other action. C. Except as allowed under the Political Reform Action of 1974, any member abstaining due to a declared conflict of interest shall not participate in the discussion of the items or otherwise influence or attempt to influence in any manner the decision on the item. D. All members, when present, must vote except when refraining from participating due to actual or potential conflict of interest. E. Commissioners not supporting a motion for action shall summarize the reason for their vote. ARTICLE 6. PUBLIC RECORDS A. Records of all public hearings shall be made available to the public in the office of the City Clerk. B. Secretary – Duties: The secretary shall be a representative of the City Clerk’s Office, and shall keep minutes of each meeting and shall record the official actions taken. The records of all proceedings shall be available to the council and to the public. ARTICLE 7. ATTENDANCE A. Any member of the REOC who fails, for any reason, to attend three (3) regular, adjourned regular, or specially‐scheduled meetings, within any 12 month period, shall be reviewed by the Chairperson for possible referral to the City Council. ARTICLE 8. FILLING VACANCIES AND REMOVAL OF MEMBERS. A. Vacancies shall be filled for unexpired terms. The council, by majority action, may remove any commissioner as provided in the City Charter. ARTICLE 9. RULES, REGULATIONS AND PROCEDURES. A. The Commission may adopt rules, regulations and procedures as required for the transaction of its business. These rules shall become effective upon approval of the council. Rosenberg’s Rules of Order REVISED 2011 Simple Rules of Parliamentary Procedure for the 21st Century By Judge Dave Rosenberg Attachment 5 ii MISSION and CORE BELIEFS To expand and protect local control for cities through education and advocacy to enhance the quality of life for all Californians. VISION To be recognized and respected as the leading advocate for the common interests of California’s cities. About the League of California Cities Established in 1898, the League of California Cities is a member organization that represents California’s incorporated cities. The League strives to protect the local authority and automony of city government and help California’s cities effectively serve their residents. In addition to advocating on cities’ behalf at the state capitol, the League provides its members with professional development programs and information resources, conducts education conferences and research, and publishes Western City magazine. © 2011 League of California Cities. All rights reserved. About the Author Dave Rosenberg is a Superior Court Judge in Yolo County. He has served as presiding judge of his court, and as presiding judge of the Superior Court Appellate Division. He also has served as chair of the Trial Court Presiding Judges Advisory Committee (the committee composed of all 58 California presiding judges) and as an advisory member of the California Judicial Council. Prior to his appointment to the bench, Rosenberg was member of the Yolo County Board of Supervisors, where he served two terms as chair. Rosenberg also served on the Davis City Council, including two terms as mayor. He has served on the senior staff of two governors, and worked for 19 years in private law practice. Rosenberg has served as a member and chair of numerous state, regional and local boards. Rosenberg chaired the California State Lottery Commission, the California Victim Compensation and Government Claims Board, the Yolo-Solano Air Quality Management District, the Yolo County Economic Development Commission, and the Yolo County Criminal Justice Cabinet. For many years, he has taught classes on parliamentary procedure and has served as parliamentarian for large and small bodies. 1 Table of Contents About the Author ............................................................................................................ii Introduction ....................................................................................................................2 Establishing a Quorum ...................................................................................................2 The Role of the Chair ......................................................................................................2 The Basic Format for an Agenda Item Discussion ........................................................2 Motions in General .........................................................................................................3 The Three Basic Motions ................................................................................................3 Multiple Motions Before the Body .................................................................................4 To Debate or Not to Debate ............................................................................................4 Majority and Super-Majority Votes ...............................................................................5 Counting Votes ................................................................................................................5 The Motion to Reconsider ..............................................................................................6 Courtesy and Decorum ..................................................................................................7 Special Notes About Public Input ..................................................................................7 2 Establishing a Quorum The starting point for a meeting is the establishment of a quorum. A quorum is defined as the minimum number of members of the body who must be present at a meeting for business to be legally transacted. The default rule is that a quorum is one more than half the body. For example, in a five-member body a quorum is three. When the body has three members present, it can legally transact business. If the body has less than a quorum of members present, it cannot legally transact business. And even if the body has a quorum to begin the meeting, the body can lose the quorum during the meeting when a member departs (or even when a member leaves the dais). When that occurs the body loses its ability to transact business until and unless a quorum is reestablished. The default rule, identified above, however, gives way to a specific rule of the body that establishes a quorum. For example, the rules of a particular five-member body may indicate that a quorum is four members for that particular body. The body must follow the rules it has established for its quorum. In the absence of such a specific rule, the quorum is one more than half the members of the body. The Role of the Chair While all members of the body should know and understand the rules of parliamentary procedure, it is the chair of the body who is charged with applying the rules of conduct of the meeting. The chair should be well versed in those rules. For all intents and purposes, the chair makes the final ruling on the rules every time the chair states an action. In fact, all decisions by the chair are final unless overruled by the body itself. Since the chair runs the conduct of the meeting, it is usual courtesy for the chair to play a less active role in the debate and discussion than other members of the body. This does not mean that the chair should not participate in the debate or discussion. To the contrary, as a member of the body, the chair has the full right to participate in the debate, discussion and decision-making of the body. What the chair should do, however, is strive to be the last to speak at the discussion and debate stage. The chair should not make or second a motion unless the chair is convinced that no other member of the body will do so at that point in time. The Basic Format for an Agenda Item Discussion Formal meetings normally have a written, often published agenda. Informal meetings may have only an oral or understood agenda. In either case, the meeting is governed by the agenda and the agenda constitutes the body’s agreed-upon roadmap for the meeting. Each agenda item can be handled by the chair in the following basic format: Introduction The rules of procedure at meetings should be simple enough for most people to understand. Unfortunately, that has not always been the case. Virtually all clubs, associations, boards, councils and bodies follow a set of rules — Robert’s Rules of Order — which are embodied in a small, but complex, book. Virtually no one I know has actually read this book cover to cover. Worse yet, the book was written for another time and for another purpose. If one is chairing or running a parliament, then Robert’s Rules of Order is a dandy and quite useful handbook for procedure in that complex setting. On the other hand, if one is running a meeting of say, a five-member body with a few members of the public in attendance, a simplified version of the rules of parliamentary procedure is in order. Hence, the birth of Rosenberg’s Rules of Order. What follows is my version of the rules of parliamentary procedure, based on my decades of experience chairing meetings in state and local government. These rules have been simplified for the smaller bodies we chair or in which we participate, slimmed down for the 21st Century, yet retaining the basic tenets of order to which we have grown accustomed. Interestingly enough, Rosenberg’s Rules has found a welcoming audience. Hundreds of cities, counties, special districts, committees, boards, commissions, neighborhood associations and private corporations and companies have adopted Rosenberg’s Rules in lieu of Robert’s Rules because they have found them practical, logical, simple, easy to learn and user friendly. This treatise on modern parliamentary procedure is built on a foundation supported by the following four pillars: 1. Rules should establish order. The first purpose of rules of parliamentary procedure is to establish a framework for the orderly conduct of meetings. 2. Rules should be clear. Simple rules lead to wider understanding and participation. Complex rules create two classes: those who understand and participate; and those who do not fully understand and do not fully participate. 3. Rules should be user friendly. That is, the rules must be simple enough that the public is invited into the body and feels that it has participated in the process. 4. Rules should enforce the will of the majority while protecting the rights of the minority. The ultimate purpose of rules of procedure is to encourage discussion and to facilitate decision making by the body. In a democracy, majority rules. The rules must enable the majority to express itself and fashion a result, while permitting the minority to also express itself, but not dominate, while fully participating in the process. 3 Ninth, the chair takes a vote. Simply asking for the “ayes” and then asking for the “nays” normally does this. If members of the body do not vote, then they “abstain.” Unless the rules of the body provide otherwise (or unless a super majority is required as delineated later in these rules), then a simple majority (as defined in law or the rules of the body as delineated later in these rules) determines whether the motion passes or is defeated. Tenth, the chair should announce the result of the vote and what action (if any) the body has taken. In announcing the result, the chair should indicate the names of the members of the body, if any, who voted in the minority on the motion. This announcement might take the following form: “The motion passes by a vote of 3-2, with Smith and Jones dissenting. We have passed the motion requiring a 10-day notice for all future meetings of this body.” Motions in General Motions are the vehicles for decision making by a body. It is usually best to have a motion before the body prior to commencing discussion of an agenda item. This helps the body focus. Motions are made in a simple two-step process. First, the chair should recognize the member of the body. Second, the member of the body makes a motion by preceding the member’s desired approach with the words “I move … ” A typical motion might be: “I move that we give a 10-day notice in the future for all our meetings.” The chair usually initiates the motion in one of three ways: 1. Inviting the members of the body to make a motion, for example, “A motion at this time would be in order.” 2. Suggesting a motion to the members of the body, “A motion would be in order that we give a 10-day notice in the future for all our meetings.” 3. Making the motion. As noted, the chair has every right as a member of the body to make a motion, but should normally do so only if the chair wishes to make a motion on an item but is convinced that no other member of the body is willing to step forward to do so at a particular time. The Three Basic Motions There are three motions that are the most common and recur often at meetings: The basic motion. The basic motion is the one that puts forward a decision for the body’s consideration. A basic motion might be: “I move that we create a five-member committee to plan and put on our annual fundraiser.” First, the chair should clearly announce the agenda item number and should clearly state what the agenda item subject is. The chair should then announce the format (which follows) that will be followed in considering the agenda item. Second, following that agenda format, the chair should invite the appropriate person or persons to report on the item, including any recommendation that they might have. The appropriate person or persons may be the chair, a member of the body, a staff person, or a committee chair charged with providing input on the agenda item. Third, the chair should ask members of the body if they have any technical questions of clarification. At this point, members of the body may ask clarifying questions to the person or persons who reported on the item, and that person or persons should be given time to respond. Fourth, the chair should invite public comments, or if appropriate at a formal meeting, should open the public meeting for public input. If numerous members of the public indicate a desire to speak to the subject, the chair may limit the time of public speakers. At the conclusion of the public comments, the chair should announce that public input has concluded (or the public hearing, as the case may be, is closed). Fifth, the chair should invite a motion. The chair should announce the name of the member of the body who makes the motion. Sixth, the chair should determine if any member of the body wishes to second the motion. The chair should announce the name of the member of the body who seconds the motion. It is normally good practice for a motion to require a second before proceeding to ensure that it is not just one member of the body who is interested in a particular approach. However, a second is not an absolute requirement, and the chair can proceed with consideration and vote on a motion even when there is no second. This is a matter left to the discretion of the chair. Seventh, if the motion is made and seconded, the chair should make sure everyone understands the motion. This is done in one of three ways: 1. The chair can ask the maker of the motion to repeat it; 2. The chair can repeat the motion; or 3. The chair can ask the secretary or the clerk of the body to repeat the motion. Eighth, the chair should now invite discussion of the motion by the body. If there is no desired discussion, or after the discussion has ended, the chair should announce that the body will vote on the motion. If there has been no discussion or very brief discussion, then the vote on the motion should proceed immediately and there is no need to repeat the motion. If there has been substantial discussion, then it is normally best to make sure everyone understands the motion by repeating it. 4 First, the chair would deal with the third (the last) motion on the floor, the substitute motion. After discussion and debate, a vote would be taken first on the third motion. If the substitute motion passed, it would be a substitute for the basic motion and would eliminate it. The first motion would be moot, as would the second motion (which sought to amend the first motion), and the action on the agenda item would be completed on the passage by the body of the third motion (the substitute motion). No vote would be taken on the first or second motions. Second, if the substitute motion failed, the chair would then deal with the second (now the last) motion on the floor, the motion to amend. The discussion and debate would focus strictly on the amendment (should the committee be five or 10 members). If the motion to amend passed, the chair would then move to consider the main motion (the first motion) as amended. If the motion to amend failed, the chair would then move to consider the main motion (the first motion) in its original format, not amended. Third, the chair would now deal with the first motion that was placed on the floor. The original motion would either be in its original format (five-member committee), or if amended, would be in its amended format (10-member committee). The question on the floor for discussion and decision would be whether a committee should plan and put on the annual fundraiser. To Debate or Not to Debate The basic rule of motions is that they are subject to discussion and debate. Accordingly, basic motions, motions to amend, and substitute motions are all eligible, each in their turn, for full discussion before and by the body. The debate can continue as long as members of the body wish to discuss an item, subject to the decision of the chair that it is time to move on and take action. There are exceptions to the general rule of free and open debate on motions. The exceptions all apply when there is a desire of the body to move on. The following motions are not debatable (that is, when the following motions are made and seconded, the chair must immediately call for a vote of the body without debate on the motion): Motion to adjourn. This motion, if passed, requires the body to immediately adjourn to its next regularly scheduled meeting. It requires a simple majority vote. Motion to recess. This motion, if passed, requires the body to immediately take a recess. Normally, the chair determines the length of the recess which may be a few minutes or an hour. It requires a simple majority vote. Motion to fix the time to adjourn. This motion, if passed, requires the body to adjourn the meeting at the specific time set in the motion. For example, the motion might be: “I move we adjourn this meeting at midnight.” It requires a simple majority vote. The motion to amend. If a member wants to change a basic motion that is before the body, they would move to amend it. A motion to amend might be: “I move that we amend the motion to have a 10-member committee.” A motion to amend takes the basic motion that is before the body and seeks to change it in some way. The substitute motion. If a member wants to completely do away with the basic motion that is before the body, and put a new motion before the body, they would move a substitute motion. A substitute motion might be: “I move a substitute motion that we cancel the annual fundraiser this year.” “Motions to amend” and “substitute motions” are often confused, but they are quite different, and their effect (if passed) is quite different. A motion to amend seeks to retain the basic motion on the floor, but modify it in some way. A substitute motion seeks to throw out the basic motion on the floor, and substitute a new and different motion for it. The decision as to whether a motion is really a “motion to amend” or a “substitute motion” is left to the chair. So if a member makes what that member calls a “motion to amend,” but the chair determines that it is really a “substitute motion,” then the chair’s designation governs. A “friendly amendment” is a practical parliamentary tool that is simple, informal, saves time and avoids bogging a meeting down with numerous formal motions. It works in the following way: In the discussion on a pending motion, it may appear that a change to the motion is desirable or may win support for the motion from some members. When that happens, a member who has the floor may simply say, “I want to suggest a friendly amendment to the motion.” The member suggests the friendly amendment, and if the maker and the person who seconded the motion pending on the floor accepts the friendly amendment, that now becomes the pending motion on the floor. If either the maker or the person who seconded rejects the proposed friendly amendment, then the proposer can formally move to amend. Multiple Motions Before the Body There can be up to three motions on the floor at the same time. The chair can reject a fourth motion until the chair has dealt with the three that are on the floor and has resolved them. This rule has practical value. More than three motions on the floor at any given time is confusing and unwieldy for almost everyone, including the chair. When there are two or three motions on the floor (after motions and seconds) at the same time, the vote should proceed first on the last motion that is made. For example, assume the first motion is a basic “motion to have a five-member committee to plan and put on our annual fundraiser.” During the discussion of this motion, a member might make a second motion to “amend the main motion to have a 10-member committee, not a five-member committee to plan and put on our annual fundraiser.” And perhaps, during that discussion, a member makes yet a third motion as a “substitute motion that we not have an annual fundraiser this year.” The proper procedure would be as follows: 5 Motion to close nominations. When choosing officers of the body (such as the chair), nominations are in order either from a nominating committee or from the floor of the body. A motion to close nominations effectively cuts off the right of the minority to nominate officers and it requires a two-thirds vote to pass. Motion to object to the consideration of a question. Normally, such a motion is unnecessary since the objectionable item can be tabled or defeated straight up. However, when members of a body do not even want an item on the agenda to be considered, then such a motion is in order. It is not debatable, and it requires a two-thirds vote to pass. Motion to suspend the rules. This motion is debatable, but requires a two-thirds vote to pass. If the body has its own rules of order, conduct or procedure, this motion allows the body to suspend the rules for a particular purpose. For example, the body (a private club) might have a rule prohibiting the attendance at meetings by non-club members. A motion to suspend the rules would be in order to allow a non-club member to attend a meeting of the club on a particular date or on a particular agenda item. Counting Votes The matter of counting votes starts simple, but can become complicated. Usually, it’s pretty easy to determine whether a particular motion passed or whether it was defeated. If a simple majority vote is needed to pass a motion, then one vote more than 50 percent of the body is required. For example, in a five-member body, if the vote is three in favor and two opposed, the motion passes. If it is two in favor and three opposed, the motion is defeated. If a two-thirds majority vote is needed to pass a motion, then how many affirmative votes are required? The simple rule of thumb is to count the “no” votes and double that count to determine how many “yes” votes are needed to pass a particular motion. For example, in a seven-member body, if two members vote “no” then the “yes” vote of at least four members is required to achieve a two-thirds majority vote to pass the motion. What about tie votes? In the event of a tie, the motion always fails since an affirmative vote is required to pass any motion. For example, in a five-member body, if the vote is two in favor and two opposed, with one member absent, the motion is defeated. Vote counting starts to become complicated when members vote “abstain” or in the case of a written ballot, cast a blank (or unreadable) ballot. Do these votes count, and if so, how does one count them? The starting point is always to check the statutes. In California, for example, for an action of a board of supervisors to be valid and binding, the action must be approved by a majority of the board. (California Government Code Section 25005.) Typically, this means three of the five members of the board must vote affirmatively in favor of the action. A vote of 2-1 would not be sufficient. A vote of 3-0 with two abstentions would be sufficient. In general law cities in Motion to table. This motion, if passed, requires discussion of the agenda item to be halted and the agenda item to be placed on “hold.” The motion can contain a specific time in which the item can come back to the body. “I move we table this item until our regular meeting in October.” Or the motion can contain no specific time for the return of the item, in which case a motion to take the item off the table and bring it back to the body will have to be taken at a future meeting. A motion to table an item (or to bring it back to the body) requires a simple majority vote. Motion to limit debate. The most common form of this motion is to say, “I move the previous question” or “I move the question” or “I call the question” or sometimes someone simply shouts out “question.” As a practical matter, when a member calls out one of these phrases, the chair can expedite matters by treating it as a “request” rather than as a formal motion. The chair can simply inquire of the body, “any further discussion?” If no one wishes to have further discussion, then the chair can go right to the pending motion that is on the floor. However, if even one person wishes to discuss the pending motion further, then at that point, the chair should treat the call for the “question” as a formal motion, and proceed to it. When a member of the body makes such a motion (“I move the previous question”), the member is really saying: “I’ve had enough debate. Let’s get on with the vote.” When such a motion is made, the chair should ask for a second, stop debate, and vote on the motion to limit debate. The motion to limit debate requires a two-thirds vote of the body. Note: A motion to limit debate could include a time limit. For example: “I move we limit debate on this agenda item to 15 minutes.” Even in this format, the motion to limit debate requires a two- thirds vote of the body. A similar motion is a motion to object to consideration of an item. This motion is not debatable, and if passed, precludes the body from even considering an item on the agenda. It also requires a two-thirds vote. Majority and Super Majority Votes In a democracy, a simple majority vote determines a question. A tie vote means the motion fails. So in a seven-member body, a vote of 4-3 passes the motion. A vote of 3-3 with one abstention means the motion fails. If one member is absent and the vote is 3-3, the motion still fails. All motions require a simple majority, but there are a few exceptions. The exceptions come up when the body is taking an action which effectively cuts off the ability of a minority of the body to take an action or discuss an item. These extraordinary motions require a two-thirds majority (a super majority) to pass: Motion to limit debate. Whether a member says, “I move the previous question,” or “I move the question,” or “I call the question,” or “I move to limit debate,” it all amounts to an attempt to cut off the ability of the minority to discuss an item, and it requires a two-thirds vote to pass. 6 Now, exactly how does a member cast an “abstention” vote? Any time a member votes “abstain” or says, “I abstain,” that is an abstention. However, if a member votes “present” that is also treated as an abstention (the member is essentially saying, “Count me for purposes of a quorum, but my vote on the issue is abstain.”) In fact, any manifestation of intention not to vote either “yes” or “no” on the pending motion may be treated by the chair as an abstention. If written ballots are cast, a blank or unreadable ballot is counted as an abstention as well. Can a member vote “absent” or “count me as absent?” Interesting question. The ruling on this is up to the chair. The better approach is for the chair to count this as if the member had left his/her chair and is actually “absent.” That, of course, affects the quorum. However, the chair may also treat this as a vote to abstain, particularly if the person does not actually leave the dais. The Motion to Reconsider There is a special and unique motion that requires a bit of explanation all by itself; the motion to reconsider. A tenet of parliamentary procedure is finality. After vigorous discussion, debate and a vote, there must be some closure to the issue. And so, after a vote is taken, the matter is deemed closed, subject only to reopening if a proper motion to consider is made and passed. A motion to reconsider requires a majority vote to pass like other garden-variety motions, but there are two special rules that apply only to the motion to reconsider. First, is the matter of timing. A motion to reconsider must be made at the meeting where the item was first voted upon. A motion to reconsider made at a later time is untimely. (The body, however, can always vote to suspend the rules and, by a two-thirds majority, allow a motion to reconsider to be made at another time.) Second, a motion to reconsider may be made only by certain members of the body. Accordingly, a motion to reconsider may be made only by a member who voted in the majority on the original motion. If such a member has a change of heart, he or she may make the motion to reconsider (any other member of the body — including a member who voted in the minority on the original motion — may second the motion). If a member who voted in the minority seeks to make the motion to reconsider, it must be ruled out of order. The purpose of this rule is finality. If a member of minority could make a motion to reconsider, then the item could be brought back to the body again and again, which would defeat the purpose of finality. If the motion to reconsider passes, then the original matter is back before the body, and a new original motion is in order. The matter may be discussed and debated as if it were on the floor for the first time. California, as another example, resolutions or orders for the payment of money and all ordinances require a recorded vote of the total members of the city council. (California Government Code Section 36936.) Cities with charters may prescribe their own vote requirements. Local elected officials are always well-advised to consult with their local agency counsel on how state law may affect the vote count. After consulting state statutes, step number two is to check the rules of the body. If the rules of the body say that you count votes of “those present” then you treat abstentions one way. However, if the rules of the body say that you count the votes of those “present and voting,” then you treat abstentions a different way. And if the rules of the body are silent on the subject, then the general rule of thumb (and default rule) is that you count all votes that are “present and voting.” Accordingly, under the “present and voting” system, you would NOT count abstention votes on the motion. Members who abstain are counted for purposes of determining quorum (they are “present”), but you treat the abstention votes on the motion as if they did not exist (they are not “voting”). On the other hand, if the rules of the body specifically say that you count votes of those “present” then you DO count abstention votes both in establishing the quorum and on the motion. In this event, the abstention votes act just like “no” votes. How does this work in practice? Here are a few examples. Assume that a five-member city council is voting on a motion that requires a simple majority vote to pass, and assume further that the body has no specific rule on counting votes. Accordingly, the default rule kicks in and we count all votes of members that are “present and voting.” If the vote on the motion is 3-2, the motion passes. If the motion is 2-2 with one abstention, the motion fails. Assume a five-member city council voting on a motion that requires a two-thirds majority vote to pass, and further assume that the body has no specific rule on counting votes. Again, the default rule applies. If the vote is 3-2, the motion fails for lack of a two-thirds majority. If the vote is 4-1, the motion passes with a clear two-thirds majority. A vote of three “yes,” one “no” and one “abstain” also results in passage of the motion. Once again, the abstention is counted only for the purpose of determining quorum, but on the actual vote on the motion, it is as if the abstention vote never existed — so an effective 3-1 vote is clearly a two-thirds majority vote. Now, change the scenario slightly. Assume the same five-member city council voting on a motion that requires a two-thirds majority vote to pass, but now assume that the body DOES have a specific rule requiring a two-thirds vote of members “present.” Under this specific rule, we must count the members present not only for quorum but also for the motion. In this scenario, any abstention has the same force and effect as if it were a “no” vote. Accordingly, if the votes were three “yes,” one “no” and one “abstain,” then the motion fails. The abstention in this case is treated like a “no” vote and effective vote of 3-2 is not enough to pass two-thirds majority muster. 7 Appeal. If the chair makes a ruling that a member of the body disagrees with, that member may appeal the ruling of the chair. If the motion is seconded, and after debate, if it passes by a simple majority vote, then the ruling of the chair is deemed reversed. Call for orders of the day. This is simply another way of saying, “return to the agenda.” If a member believes that the body has drifted from the agreed-upon agenda, such a call may be made. It does not require a vote, and when the chair discovers that the agenda has not been followed, the chair simply reminds the body to return to the agenda item properly before them. If the chair fails to do so, the chair’s determination may be appealed. Withdraw a motion. During debate and discussion of a motion, the maker of the motion on the floor, at any time, may interrupt a speaker to withdraw his or her motion from the floor. The motion is immediately deemed withdrawn, although the chair may ask the person who seconded the motion if he or she wishes to make the motion, and any other member may make the motion if properly recognized. Special Notes About Public Input The rules outlined above will help make meetings very public- friendly. But in addition, and particularly for the chair, it is wise to remember three special rules that apply to each agenda item: Rule One: Tell the public what the body will be doing. Rule Two: Keep the public informed while the body is doing it. Rule Three: When the body has acted, tell the public what the body did. Courtesy and Decorum The rules of order are meant to create an atmosphere where the members of the body and the members of the public can attend to business efficiently, fairly and with full participation. At the same time, it is up to the chair and the members of the body to maintain common courtesy and decorum. Unless the setting is very informal, it is always best for only one person at a time to have the floor, and it is always best for every speaker to be first recognized by the chair before proceeding to speak. The chair should always ensure that debate and discussion of an agenda item focuses on the item and the policy in question, not the personalities of the members of the body. Debate on policy is healthy, debate on personalities is not. The chair has the right to cut off discussion that is too personal, is too loud, or is too crude. Debate and discussion should be focused, but free and open. In the interest of time, the chair may, however, limit the time allotted to speakers, including members of the body. Can a member of the body interrupt the speaker? The general rule is “no.” There are, however, exceptions. A speaker may be interrupted for the following reasons: Privilege. The proper interruption would be, “point of privilege.” The chair would then ask the interrupter to “state your point.” Appropriate points of privilege relate to anything that would interfere with the normal comfort of the meeting. For example, the room may be too hot or too cold, or a blowing fan might interfere with a person’s ability to hear. Order. The proper interruption would be, “point of order.” Again, the chair would ask the interrupter to “state your point.” Appropriate points of order relate to anything that would not be considered appropriate conduct of the meeting. For example, if the chair moved on to a vote on a motion that permits debate without allowing that discussion or debate. 1400 K Street, Sacramento, CA 95814 (916) 658-8200 | Fax (916) 658-8240 www.cacities.org To order additional copies of this publication, call (916) 658-8200. $10 © 2011 League of California Cities. All rights reserved. Printed on recycled paper. City of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number FROM: Katie Lichtig, City Manager Wayne Padilla, Finance and IT Director Prepared By: Michael Codron, Assistant City Manager Joe Lamers, Budget Manager SUBJECT: 2015-17 FINANCIAL PLAN PROCESS; AND CONSIDERATION OF PROPOSED CHANGES TO THE CITY’S BUDGET POLICIES RECOMMENDATION 1.Review and approve the 2015-17 Financial Plan Goal Setting Process and revision to the date of the Council’s Strategic Budget Direction meeting to April 21, 2015. 2.Receive and file the Local Revenue Measure (Measure Y) Integration Report. 3.Review and approve proposed changes or direction regarding the City’s budget policies, including: A. Direction to develop a new policy to support the creation of an Infrastructure Investment Capital Fund and return to the City Council for review in Spring 2015. B. Changes to existing reserve policies for the Fleet and Information Technology replacement funds. C. Direction to develop a new budget policy relating to reporting the City’s unfunded pension liabilities and to return to the City Council in Winter 2015 with further analysis of whether additional funding should be allocated to unfunded pension liabilities during the 2015-17 Financial Plan. D. Direction to update the City’s purchasing and procurement policies to improve operating efficiencies for City Council review in Winter 2015. REPORT-IN-BRIEF The City of San Luis Obispo utilizes a two-year financial planning process to create its budgets. This process includes extensive public outreach to assist the City Council in establishing Major City Goals. The benefits of this process are two-fold, it ensures that resources are provided in the budget to accomplish the community’s highest priority, most important objectives, and it is a method to help create a mutual understanding among residents, decision makers, and City staff about what can be achieved by working together. The process includes the Community Priorities Survey, the Community Forum, the Council Goal-Setting Workshop, and several other steps to prepare the City Council for selecting goals, and provide City staff with direction on work programs to support those goals. One of these steps is the City Council’s Strategic Budget Direction meeting. Staff is recommending that the date of this meeting be revised to April 21, 2015, to better accommodate the Mayor’s schedule. 12/16/2014 B2 Attachment 6 2015-17 Budget Process and Policies Page 2 The 2013-14 Measure Y Integration Report is included in this report as Attachment 8. The report is a requirement of the Measure Y ordinance. Staff is recommending that the City Council receive and file this report. This report, along with the 2014-15 Measure Y audit, will be presented to the Revenue Enhancement Oversight Commission during their first meeting on January 26, 2015. Four areas of discussion are included in this report regarding City budget policies. Staff is recommending the creation of an Infrastructure Investment Capital Fund, which would give the City the ability to facilitate important new infrastructure projects in support of new housing and the creation of head of household jobs. The fund would work in a similar fashion as the City’s Open Space Acquisition Fund. Second, revisions are proposed to the reserve policies for the Fleet and Information Technology Replacement Funds to accomplish the intent of maintaining a reserve while also ensuring that the City is not setting aside too much, which would limit its ability to accomplish fund objectives. Third, staff is recommending a new policy that will require the City to show its costs for paying unfunded pension liabilities in its Five-Year Fiscal Forecast. This new policy will improve transparency and create a better understanding of how the City is proactively addressing this component of its total PERS costs. While not yet perfected, PERS’ new methodology for creating and reporting rates will make fulfilling this policy possible. Staff is also seeking direction to return to the City Council in Winter 2015 with a completed analysis and recommendation whether additional funding should be allocated to unfunded pension liabilities during the 2015-17 Financial Plan period. Attachment 10 includes the analysis to date of this issue. Finally, staff continues to identify financial management efficiencies that enable its operations to be responsive and nimble, where appropriate. Recent work in this area has highlighted the potential for updates to the City’s purchasing policies and procedures. This report includes a brief discussion of these issues and recommends that the Council provide staff with direction to return with an updated policy in Winter 2015. DISCUSSION Two-Year Financial Plan Process The following four features describe the City’s Financial Plan process: goal-oriented, policy- driven, multi-year and technically rigorous. For over thirty years, the City has used a two-year financial planning process to create its budgets. The benefits of budgeting based on a two-year plan include: 1. Reinforcing the importance of long-range planning in managing the City's fiscal affairs. 2. Concentrating on developing and budgeting for the accomplishment of significant objectives. 3. Establishing realistic timeframes for achieving objectives. 2015-17 Budget Process and Policies Page 3 4. Creating a pro-active budget that provides for stable operations and assures the City's long-term fiscal health. 5. Promoting more orderly spending patterns. 6. Reducing the amount of time and resources allocated to preparing annual budgets. The fundamental purpose of the City’s Financial Plan is to link what the City wants to accomplish over a two-year period with the resources required to do so. Central to the effort is providing support for the City’s core functions, including the day-to-day responsibilities carried out by City employees to support residents’ quality of life. In addition, the process allows the City Council to engage the community to identify Major City Goals to be accomplished. 2015-17 Goal-Setting Process There are a variety of inputs to the City Council to enable them to establish Major City Goals. These inputs are highlighted on the following chart: *** Tentative revised date subject to Council approval (revised from April 14) Many of these efforts have already started. For example, City Advisory Bodies have developed goals, the Community Priorities Survey (Attachment 1) has been mailed out and posted on-line, and the Council has participated in the November 13 “Setting the Stage” workshop. Notice has also been sent to over 200 community groups and individuals inviting their input (Attachment 2). The two principal elements of the City’s goal setting process still to come are the Community Forum, to be held at 6:00 PM on Tuesday, January 13, 2015, at the Ludwick Community 2015-17 Budget Process and Policies Page 4 Center, and the Council Goal-Setting Workshop to be held all day on Saturday, January 24, 2015 at the City/County Library Community Room. Staff and facilitator Don Maruska plan to build on past successes in integrating Council goal- setting into the budget process following an approach similar to the one used for many years, including integration of proposed uses for the City’s local half-percent sales tax. The specifics are outlined below. 1. Community Forum The January 13 Community Forum is intended to solicit suggestions from Council, residents, community groups, other groups of stakeholders and interested individuals on proposed City goals. It is also intended to meet the requirements of the City’s half-percent local sales tax, by providing an opportunity for the community to “review and discuss the use of the revenue generated by this measure.” To ensure that adequate space is available for the forum, it will be held at the Ludwick Community Center. The proposed agenda and procedures for the Community Forum are attached (Attachment 3). 2. Council Homework Assignment (Due to Finance by January 22, 2013) The Council’s “homework assignment” for the January 26 workshop is attached (Attachment 4). Based on all input received, it is requested that Council members prepare and submit up to seven candidate goals as Major City Goals by 9:00 a.m. on Tuesday, January 20, 2015. Council members are also asked to indicate which of these goals should also be Measure G priorities, and to prepare and submit suggestions for changes in other programs and services that might help fund their desired goals. Staff will then compile verbatim, composite lists organized by common topics, without identifying who submitted the particular statements for review and consideration before the workshop. This list will be distributed to all Council members and the community at the close of business on Wednesday, January 21, 2015. While staff will retain individual submissions in the working files, it is recommended that Council members refrain from releasing their personal lists so that each Council member can review all of the submissions and discuss them at the Goal-Setting Workshop before taking a position. 3. Council Goal-Setting Workshop At the all-day January 24 workshop, the Council will review the consolidated goals presented by Council members to ensure clarity, completeness and understanding; and then narrow the list to finalist goals that are supported by at least three Council members. The discussion will note which goals address local sales tax priorities. While the Council proceeds with the discussion outlined above, the staff will prepare a final listing that the Council can use in prioritizing goals. In years past, the Council has used a ranking system of 5 through 0 for each candidate goal. Staff recommends continuing to use this ranking system for 2013-15, summarized as follows: Major City Goals represent the most important, highest priority goals for the City to accomplish over the next two years, and as such, resources should be included in the 2015-17 Financial Plan. 2015-17 Budget Process and Policies Page 5 5 Most important, highest priority for City to achieve over the next two years. 4 Very important goal to achieve. 3 Important goal to achieve. 2 Address if resources are available. 1 Defer to 2017-19 for consideration. 0 Not a priority goal. Depending on the number of candidate goals, total points available to individual Council members have ranged in the past from 50 to 75 based on 3 points per candidate goal. The exact number of points used for ranking is typically figured out on the day of the workshop. Following the ranking exercise, staff will summarize the results. Based on past experience, it is likely that two priority “tiers” will emerge from this process: 1. Major City Goals. These represent the most important, highest priority goals for the City to accomplish over the next two years, and as such, resources to accomplish them should be included in the 2013-15 Financial Plan. The initial list of Major City Goals following the ranking will include only those goals where a majority of Council Members rank the goal as a 4 or 5. Subsequent discussion will allow the Council to refine the goal list, however, the list should remain consistent with the “Criteria for Major City Goals” (Attachment 7). 2. Other Important Objectives. Goals in this category are important for the City to accomplish, and resources should be made available in the 2013-15 Financial Plan if at all possible. The outline for the goal setting workshop is provided in Attachment 5; and suggested guidelines for Council members during the goal-setting process are provided in Attachment 6. Included as Attachment 7 are the suggested “Criteria for Major City Goals” which have been used by the Council for many years. These criteria capture the relevant considerations to determine a Major City Goal , but the Council could refine the criteria at this time if desired. No follow-up meeting has been needed in the last several goal-setting sessions as the Council concluded all necessary actions at the Saturday Goal-Setting Workshop. Continued consideration of goals for 2015-17 will be scheduled for the next regular Council meeting following the workshop only if needed. The City Council is being presented with the elements of the financial planning process still to be executed to affirm. As such staff’s recommendation is to approve the remaining elements of the process and the revised schedule. Essential Services Measure - Integration Report Measure Y was approved by City voters in November 2006 to preserve essential services for the community. Measure Y established a one-half percent local sales tax with an eight-year sunset clause. The original measure would have expired on March 31, 2015, however voters approved its extension for an additional eight years during the 2014 General Election when they passed Measure G. The Measure Y Integration Report (Attachment 8) details how Measure Y revenue was integrated into the budget during the most recently completed fiscal year, 2013-14, and 2015-17 Budget Process and Policies Page 6 2013-15 Measure Y Priorities • Preservation of Essential Services (Public Safety, Maintenance Services) • Infrastructure Maintenance • Neighborhood Wellness • Open Space Preservation • Transportation (Traffic Congestion Relief) illustrates how Measure Y expenditures supported Council goals. In the future, this report will be adjusted to report on Measure G priorities, including the additional fiscal accountability provisions contained in the new measure. Measure Y includes provisions to ensure that consideration of this important revenue source is integrated into the financial planning process. The City’s goal-setting process is designed to meet two of these requirements, as follows. 1. Integration into the City's budget and goal- setting process. The estimated revenue and proposed use of funds generated by this measure shall be an integral part of the City's budget and goal-setting process, and significant opportunities will be provided for meaningful participation by citizens in determining priority uses of these funds. 2. Annual citizen meeting. An invitation will be extended each year to the entire community asking Community members to participate in a forum to review and discuss the use of the revenue generated by this measure. City staff will also be available to meet with any group that requests a specific briefing with their members to discuss and answer questions about the revenues generated by the measure and their uses. It is important to know that Measure Y is a general purpose measure, and the proceeds are not restricted to specific purposes. However, the language on the ballot measure approved by voters in 2006 provides examples of the types of uses that would be funded. The language on the ballot was: “To protect and maintain essential services - such as neighborhood street paving and pothole repair; traffic congestion relief; public safety, including restoring eliminated traffic patrol, Fire Marshal and fire/paramedic training positions; flood protection; senior citizen services/facilities; neighborhood code enforcement; open space preservation and other vital general purpose services - shall the sales tax be increased by one-half cent for eight years only, with citizen oversight and independent annual financial audits?” In short, while the ballot language provided examples of the types of uses that could be funded - based on community input received before placing the measure on the ballot - Measure Y is a general purpose tax providing Council with flexibility to respond to new circumstances and challenges. For 2013-14, total expenditures were $5,305,999 and an additional $4,364,265 in funding was encumbered or assigned for future projects (many of which are now under construction). These amounts and the specific operating and projects funded by Measure Y are detailed in Attachment 8. These are still the unaudited results. The final information will be 2015-17 Budget Process and Policies Page 7 included in the Certified Annual Financial Report, which will be published before the end of the calendar year. This year, the Community Forum will again give the community an opportunity to provide input to the Council as to their views on future Essential Services Measure spending priorities. For 2015-17, the budget and goal-setting process will shift to a discussion of Measure G priorities. This will help the Council connect Major City Goals and Measure G priorities. In addition, the Citizens’ Revenue Enhancement Oversight Commission will be reviewing this and future reports as part of their responsibilities for reviewing and reporting on local revenue measure expenditures. 2013-15 FINANCIAL PLAN POLICIES As noted in the discussion above, Council goal-setting is an important “first step” in the City’s Financial Plan process. The second major feature in the City’s Financial Plan Process is reliance upon clear polices. In looking at cities across the nation that have reputations for being financially well-managed, and have maintained their fiscal health through good times and bad, one finds that they have in common clearly articulated fiscal policies used in financial decision- making. This best practice, as implemented by the City of San Luis Obispo, has been acknowledged repeatedly by the bond rating agencies as an important factor in sustaining the city’s excellent credit rating. Formal statements of key budget and fiscal policies provide the foundation for assuring long- term fiscal health by establishing a clear framework for effective and prudent financial decision- making. The City’s Budget and Fiscal Policies are traditionally set forth in the Reference section of the Financial Plan. The policies cover a broad range of fiscal issues, including: • Financial Plan organization • General Revenue Management • User Fee Cost Recovery Goals • Enterprise Fund Fees and Rates • Revenue Distribution • Investments • Appropriations Limitation • Fund Balances and Reserves • Capital Improvement Management • Capital Financing and Debt Management • Human Resource Management • Productivity • Contracting for Services At the outset of each financial planning cycle, the City reviews the policies in place to see if any updating is necessary. At this point, a few policy changes are proposed. Changes are generally intended to create consistency amongst City fiscal policies and create a system that is efficient and effective to administer. In addition for 2015-17, a new policy is proposed to implement a current Major City Goal and strategy in the Economic Development Strategic Plan. Also, consideration of how to report and address unfunded pension liabilities is made. 2015-17 Budget Process and Policies Page 8 As staff begins preparing the 2015-17 Financial Plan, other additions or revisions to the City’s budget and fiscal policies may arise; if so, these will be presented for Council consideration at that time. Proposed Policy Changes 1. Infrastructure Investment Capital Fund Policy (New) In early 2014, the City Council concluded a series of study sessions regarding infrastructure financing alternatives. These study sessions were part of the implementation of the Economic Development Strategic Plan, which identified the lack of infrastructure in certain areas of the City as a barrier to the creation of new head-of-household jobs. Following the study sessions, Council directed staff to develop a prioritized list of infrastructure projects, as follows. Develop a prioritized list of infrastructure projects for the City to invest in from an Economic Development and Quality of Life perspective: The Economic Development Strategic Plan calls on the City to consider revisiting fair-share percentages in its fee programs, specifically for projects that include community-wide benefits. Based on input from City staff and the public, outside consultants would assist City staff in preparing a prioritized list of infrastructure projects that would provide the most benefit to the City from an economic development and quality of life perspective. This effort is included in the Economic Development Major City Goal work program and is funded in the second year of the 2013-15 Financial Plan. Staff carried out a portion of this work effort internally, and one of the outcomes was an awareness that many factors complicate the usefulness and effectiveness of a single list of priority projects. These factors include timing, the state of the larger economy, overall City budget goals, and project benefits (e.g. job vs. housing vs. traffic congestion relief, etc.). As a result, staff is proposing a different method for identifying the infrastructure projects in which the City could or should invest. Staff is recommending the creation of a budget and financial policy to support the establishment of an Infrastructure Investment Capital Fund (IICF) as part of the 2015-17 Financial Plan. This framework would allow the Council to evaluate the proposed investment in relation to current Major City Goals, the economic environment, and various other factors at the time of the decision, rather than having a static list of projects from which to choose. This concept is similar to the current Open Space Acquisition Fund, which has always sought to expand the greenbelt by being prepared when opportunities to acquire new open space arise. By setting up the IICF, Council would have the ability to set aside funding for future infrastructure projects that contribute to improved economic development and enhanced quality of life in the City of San Luis Obispo. The use of these funds would be at the discretion of Council based on funding guidelines approved by the City Council after an extensive public process. Consistent with the Economic Development Strategic Plan, these funds would not be used as a direct incentive to any developer, nor be used to subsidize a developer’s fair share payment towards infrastructure. To ensure that this is the case, any infrastructure project that is to be considered for possible support by the Council would have to meet certain minimum requirements as specified in any approved funding guidelines. The funding guidelines would be 2015-17 Budget Process and Policies Page 9 brought to the City Council for approval, and examples of these requirements may include the following: • The use of City funds shall not offset any cost that would be expected to be paid to meet the fair share obligation of any developer. • The use of City funds shall not offset a project specific cost identified through the environmental review process or under existing regulations or policies. • The use of City funds shall support a project that would not otherwise be feasible due to economic, timing or other issues outside the control of the project proponents or the City. • The project shall provide significant public benefit by contributing to economic development and quality of life within the City. Staff is recommending that the City Council provide direction to initiate the process to create a new budget policy and a public process to establish the fund. New language for the City’s budget policies would be proposed as part of the Strategic Budget Direction in April 2015, if not sooner. If the new policy is adopted by the City Council, then staff would begin the process of developing the criteria to be used in administering the fund. This policy and criteria will be developed with the benefit of public outreach, including presentations to residents, businesses, and the development community. 2. Fleet and Information Technology Replacement Fund Reserve Policies (Revision) Attachment 9 includes the City’s Budget and Fiscal Policies for consideration. Staff is proposing changes to the reserve policies for the Fleet and Information Technology Replacement Funds, as follows. B. Fleet Replacement. For the General Fund fleet, the City will establish and maintain a Fleet Replacement Fund to provide for the timely replacement of vehicles and related equipment with an individual replacement cost of $15,000 or more. The City will maintain a minimum fund balance in the Fleet Replacement Fund of at least 20% of the original purchase cost of the items accounted for in this fund. During the 2015-17 Financial Plan period, the City will establish and maintain a minimum fund balance in the Fleet Replacement Fund equal to $500,000 for the emergency replacement of vehicles that are damaged beyond repair, and are either not covered under the City’s property insurance program or the vehicle has a high replacement cost and insurance proceeds will be inadequate to provide for the vehicle’s replacement (fire engine). Above this contingency level, the amount retained in this fund, coupled with the annual contributions received by it from any source, shall be adequate to fully fund the equipment replacements approved in the Financial Plan. The annual contribution to this fund will generally be based on the annual use allowance, which is determined based on the estimated life of the vehicle or equipment and its original purchase cost. Interest earnings and the proceeds from the sales of surplus equipment as well as any related damage and insurance recoveries will be credited to the Fleet Replacement Fund. C. Information Technology (IT) Replacement Fund. The City will establish an IT Replacement Fund for the General Fund to provide for the timely replacement of information technology, 2015-17 Budget Process and Policies Page 10 both hardware and software, with an individual replacement cost of $25,000 or more. The City will begin building the fund balance with the long term objective of maintaining a minimum fund balance in the IT Replacement Fund of at least 20% of the original purchase costs of the items accounted for in this fund. During the 2015-17 Financial Plan period, the City will establish and maintain a minimum fund balance in this fund equal to $400,000 for the emergency replacement of equipment that is damaged beyond repair and not covered under the City’s property insurance program. Interest earnings and the proceeds from the sale of surplus equipment as well as any related damage and insurance recoveries will be credited to the fund. These proposed changes to the reserve level of the Fleet and I.T. Replacement funds provide for a reasonable contingency reserve level that can be drawn down in the event of an unforeseen loss without requiring a further draw from the General Fund or its reserves. These amounts are reasonable in light of potential losses and are sized to allow the funding level to be achieved during the Financial Plan period without creating a shortfall of resources needed for other important tasks. 3. Unfunded Pension Liabilities Included in the 2013-15 Major City Goal for Fiscal Health was the direction to staff to prepare a cost/benefit analysis regarding the City’s ability to prepay its unfunded pension liabilities. Attachment 10 is a white paper discussing what those liabilities are and includes a discussion about the City’s unfunded liability for its post-retirement insurance program. This information is presented in concept so that initial policy direction can be provided before Strategic Budget direction in April. This initial policy direction would be provided via a new policy that will require the City to show its costs for paying unfunded pension liabilities in its Five-Year Fiscal Forecast. This new policy will improve transparency and create a better understanding of how the City is proactively addressing this component of its total PERS costs. The city’s ability is dependent on this information being provided by PERS. While not yet perfected, PERS’ new methodology for creating and reporting rates will make fulfilling this policy possible. If the City Council supports the concept, the new policy will be developed and presented to the Council during Winter 2015. 4. Efficient Purchasing Policies and Procedures (New) One of the City’s adopted Financial Plan objectives states that the City will link resources with results by “proposing objectives for improving the delivery of program services” (2013-15 Financial Plan, Objective A5, Pg. H-4). Based on organization-wide feedback, it appears that some of the existing policies and procedures that govern purchasing activities are hindering staff’s ability to deliver services in an efficient and timely manner. With each required level of purchasing authority comes additional time, resources and review before a purchase can be made and related service delivered. In some circumstances, the additional levels of scrutiny do not appear to create additional value in terms of ensuring proper conduct, compliance with regulations, or other quality control benefits. 2015-17 Budget Process and Policies Page 11 While checks and balances are important for prudent fiscal management, there are opportunities to reevaluate purchasing authority levels or bidding procedures to keep pace with the current market and streamline the delivery of program services. This systematic review of operations is consistent with adopted Financial Plan budget policies governing productivity, and specifically responds to guidance for “Analyzing system and procedures to identify and remove unnecessary review requirements” (2013-15 Financial Plan, #A, Pg. H-26). Staff is recommending that the City Council adopt an additional budget and fiscal policy in the Productivity section (Pg. H-26) that specifically focuses on purchasing systems: H. Maintaining City purchasing policies and procedures that are as efficient and effective as possible. If adopted, staff will bring forward an analysis of existing purchasing practices, including comparison with other benchmark cities, and return to the Council in Winter 2015 with recommendations for improvement. CONCURRENCES The City’s internal Budget Review Team and the Department Head Team concurs with the recommendations included in this report. FISCAL IMPACT There is no fiscal impact associated with the conduct of the City’s two-year financial planning process. The City budgets for all of the planned activities. Preparing budgets are one of the core government functions that the City is responsible for carrying out. ALTERNATIVES 1. Modify the proposed Goal Setting activities. The Council could direct staff to pursue a different process for goal-setting this year. Staff does not recommend this alternative because there is value in conducting a similar process that residents are familiar with. If the Council is interested in making changes, staff recommends that they be incremental adjustments to the activities planned. If major changes are desired, they should be discussed and planned during the first year of the next financial plan. 2. Do not approve proposed budget policy changes. The City Council could decide not to approve one or more of the proposed budget policy changes. In this case, direction should be given to staff regarding the related issues and any other changes desired to the budget policies. ATTACHMENTS 1. Community Priorities Survey 2. Invitation to Community to Participate in Goal Setting 3. Outline for Community Forum 4. Homework for Council Goal-Setting 5. Outline for Goal-Setting Workshop 2015-17 Budget Process and Policies Page 12 6. Guidelines for Council Members During Goal-Setting Process 7. Criteria for Major City Goals 8. Measure Y Integration Report 9. Budget and Fiscal Policies for 2015-17 10. Pension Unfunded Liabilities White Paper t:\council agenda reports\2014\2014-12-16\15-17 financial plan process (codron-padilla-lamers)\car (process-policies).docx Budget-In-Brief 2013-15 Financial Plan With the 2013-15 Financial Plan and 2013-14 budget, the City of San Luis Obispo continues the approach embraced by the City Council to focus its financial planning efforts on achieving long-term, structural balance in the City’s budget. The plan therefore concentrates on the following key components: Aligning delivery of essential services with resources available on an ongoing basis; Reinvesting in the Capital Improvement Plan; Maintaining General Fund and other op- erating fund balances within policy re- serve levels; and Continuing to focus on delivering essen- tial services with local tax dollars gener- ated by the Measure Y ½ cent sales tax. General Fiscal Environment The City is experiencing a slow and steady eco- nomic recovery from the Great Recession. All City Revenue sources, including sales tax, are expected to increase slowly over the next five years, but growth rates are still anticipated to be gradual and will likely mirror the movement of the overall economy. General Sales Tax 26% Measure Y Sales Tax 12% Property Tax 16% TOT 10% Other Taxes 9% Utility Users Tax 9% Prop tax in lieu of VLF 6% Service Charges 10% All Other Revenues 2% 2013-14 General Fund Revenues $55.5 Million Major City Goals (Financial Plan Section C) For 2013-15, the City Council determined an ambi- tious Major City Goal work program based on citi- zen input and involvement. Within this program, the City will: Implement comprehensive strategies to re- duce homelessness Continue and enhance Neighborhood Wellness initiatives Sustain essential services, infrastructure and fiscal health Expand bicycle and pedestrian paths to improve connectivity and safety Implement the adopted Economic Devel- opment Strategic Plan Assess and renew the Downtown Complete construction of a new Skate Park Financial Highlights & Operating Budgets Pursuant to the City Council’s goals and the em- phasis on delivering essential services and rein- vestment in the City’s infrastructure, the 2013-15 budget makes the following appropriations for a total of $111.3 million among all City Funds: Governmental Funds Enterprise Funds Total Operating Programs52,283,70030,179,10082,462,800 CIP 9,620,70011,395,20021,015,900 Debt Service 2,760,2005,117,6007,877,800 Total $64,664,600$46,691,900$111,356,500 Cost Summary By Goal and Objective Operating and Capital Expenditures 2013-142014-15 Major City Goals Homelessness 95,058108,514 Neighborhood Wellness Essential Services & Fiscal Health 50,000 Bike & Pedestrial Paths 1,490,0001,547,500 Economic Development Strategic Plan 30,00065,000 Assess & Renew the Downtown 422,600912,900 Skate Park Construction 2,200,000 Other Important Council Objectives Open Space Expansion 269,300635,700 Infrastructure Maintenance 7,339,5007,003,000 Improve Transportation 263,00023,093,500 Total $12,159,458.00$33,366,114.00 Attachment 7 BUDGET-IN-BRIEF If you have any questions about the City's budget or would like a complete copy of the Financial Plan, please call us at 781-7125 or visit our web site at www.slocity.org. Appropriations for operating programs (day-to- day delivery of services) total $82.4 million for 2013-14 as summarized below: Governmental Enterprise Funds Funds Total Public Safety 24,481,500 24,481,500 Public Utilities 20,617,300 20,617,300 Transportation 3,110,700 5,020,300 8,131,000 Leisure, Cultural & Social Services 7,348,100 7,348,100 Community Development 7,734,900 7,734,900 General Gov't 9,561,700 4,588,300 14,150,000 Total $52,236,900 $30,225,900 $82,462,800 Public Safety 48% Transportation 6% Leisure, Cultural & Social Services 15% Community Development 12% General Government 19% 2013-14 General Fund Operating $50.5 Million The day-to-day services are delivered by 359 City employees in the following functions: Operating Budget Changes In addition to the investment in capital improve- ment projects, the City is adding resources to im- prove the delivery of services to residents. Public Safety  Addition of two Daytime Downtown Patrol Of- ficers, which will improve public safety throughout the City  Additional funding to reduce weeds, brush and other fire hazards along the boundary of City neighborhoods and open space Leisure, Cultural, and Social Services  Addition of one full-time maintenance worker to the Ranger Services staff with a focus on maintenance of open space areas  Conversion of a tree trimmer position from temporary to permanent to improve the func- tioning of the Trees Division Community Development  Implementation of the Economic Development Strategic Plan is a Major City Goal and addi- tional funding is provided in 2013-14 for permit streamlining activities.  In 2014-15, funding is provided for the City to identify strategic infrastructure investments that can support the creation of head-of-household jobs. Public Utilities  Replacing aged water distribution lines and upgrading the computer system that controls the delivery of drinking water to residents and businesses in the City  A sewer infrastructure replacement strategy is also in the works and will result in a prioritized approach to replacement and new installations General Government  The City Council has approved a local revenue measure advisory committee to analyze the City’s stewardship of Measure Y, the local half- cent sales tax, and make recommendations on its future. General Government 53.25 Transportation 31.80 Community Development 43.00 Leisure, Cultural & Social Services 34.00 Public Utilities 61.90 Public Safety 135.25 Total 359.20 Authorized Regular Staffing by Function 2013-14 BUDGET-IN-BRIEF If you have any questions about the City's budget or would like a complete copy of the Financial Plan, please call us at 781-7125 or visit our web site at www.slocity.org. Use of Measure Y Revenues The City’s ½ cent sales tax measure (Measure Y) continues to play a vital role in the delivery of es- sential services and infrastructure improvements to the City’s residents. In 2013-14, Measure Y is expected to generate approximately $6.6 million in revenues. As reflected below, 69% of Measure Y revenues will be devoted to maintaining the City’s infra- structure, street paving, and flood protection. Approximately 24% of the Measure Y revenues will be used for Public Safety services including additional patrol officers for the Downtown district. An additional 7% is allocated for open space acquisition and to support Neighborhood Wellness. Public Safety 24% Streets, Storm Drains 28% Neighborhood Wellness 4% Open Space 3% Infrastructure Maint. 41% 2013-14 Meaure Y Uses Measure Y – A Closer Look The City began collecting revenues from the Measure Y, ½ cent sales tax in 2007 following its approval by over 64% of the vote. Since that time, Measure Y funding has been allocated by the City Council to the City’s highest priority es- sential services. Through June 30, 2012, the City had spent $26.6 million to protect and maintain essential services. The decision about how to spend Measure Y is made by the City Council every year as part of the budget process. Expenditures are also audited on an annual basis, so the public can see exact- ly what its tax dollars are spent on Measure Y Expenditures Measure Y is used for both operating expenditures and capital improvement projects. Operating expendi- tures includes staff that provide essential municipal services, such as patrol officers, a Fire Marshal, maintenance workers, engineers, Neighborhood Ser- vices Specialists, and other key staff. Capital Improvement Projects are expenditures such as neighborhood street paving, replacement of storm drains, replacement of fire engines and police patrol sedans, open space acquisitions, bicycle facility im- provements, and traffic congestion relief projects among other project types. Project in Focus – Open Space Acquisition The City and its partners have used Measure Y to leverage outside funding for important conservation projects at the Stenner Ranch, Froom Ranch, O’Connor Ranch, and Reservoir Canyon adding miles of new trail and over 1,400 acres of permanent land conservation to the City’s greenbelt. For Example: • Patrol Officers • Neighborhood Services Specialists • Traffic Engineer For Example: • Bob Jones Trail • Fire Engine Replacement • Storm Drain Replacement Total Expenditures = $26,646,300 Through June 30, 2012 BUDGET-IN-BRIEF If you have any questions about the City's budget or would like a complete copy of the Financial Plan, please call us at 781-7125 or visit our web site at www.slocity.org. MEASURE Y FUNDING SUMMARY The uses of Measure Y revenues for 2013-15 in funding operating programs and capital improvement plan (CIP) projects are aligned with top Council goals and objectives, and closely match projected revenues. Two-Year 2013-14 2014-15 2013-14 2014-15 Budget Total Preservation of Essential Services Public Safety Police Services 873,119 868,118 1,741,237 Police Vehicles 172,800 175,600 348,400 Public Safety Mobile Data Computers 184,500 188,000 372,500 Fire Prevention & Training 395,838 399,058 794,896 Extrication Equipment - Fire Engines 60,400 60,400 Fire Engine Replacements (2): Debt Service 128,920 256,781 385,701 Fire Station #2 Remodel 2,700 27,800 30,500 Maintenance Services Streets, Sidewalks and Traffic Signal Operations 180,836 180,928 361,764 Creek & Flood Protection 572,059 575,623 316,400 450,000 1,914,082 Parks 78,188 76,581 620,000 580,000 1,354,769 Project Management & Inspection 108,030 113,205 221,235 Neighborhood Wellness Enhanced Building & Zoning Code Enforcement 113,441 117,871 231,313 "SNAP" Enhancement 50,544 53,079 103,623 Neighborhood Code Enforcement Specialists 139,183 145,708 284,891 Traffic Congestion Relief Traffic Safety Report Implementation 25,000 25,000 50,000 Traffic Operations Report Implementation 30,000 30,000 Traffic Engineer 97,905 102,161 200,066 Traffic Sign Maintenance 40,000 40,000 Bicycle Facility Improvements 100,000 100,000 200,000 Neighborhood Traffic Improvements 20,000 20,000 40,000 Open Space Preservation Open Space Acquisition 200,000 200,000 400,000 Ranger Services Staffing 59,300 75,700 135,000 Open Space Wildfire Fuel Reduction 5,000 5,000 10,000 Infrastructure Maintenance and Improvements Santa Rosa Skatepark 1,226,300 - 1,226,300 Street Reconstruction & Resurfacing 1,180,700 1,174,300 2,355,000 Downtown Renewal - 608,500 608,500 Facility Maintenance 54,000 94,000 148,000 Jack House Exterior Painting 25,000 - 25,000 Johnson Avenue Underpass Pump 190,000 - 190,000 Library Restroom Remodel 39,000 - 39,000 Marsh Street Bridge Replacement 19,300 - 19,300 Mission Plaza Railing Upgrade 30,000 30,000 60,000 Olympic Pool Replastering 25,000 310,000 335,000 Pedestrian and Bicycle Pathway Maintenance 60,000 60,000 120,000 Sidewalk Repairs 25,000 25,000 50,000 Parks Central Irrigation Controller Replacment 163,323 163,323 Tree Maintenance Equipment 100,400 - 100,400 TOTAL $2,673,443 $2,713,032 $4,998,743 $4,364,981 $14,750,200 Projected Measure Y Revenues 2013-14 6,600,000 2014-15 6,684,000 Prior Year Revenue Appropriated (See 2011-12 CAFR Pg. 88)1,466,200 Total 14,750,200 Operating Programs CIP BUDGET-IN-BRIEF If you have any questions about the City’s budget or would like a copy of the Financial Plan, please call us at 781-7125 or visit our web site at www.slocity.org. The purpose of this “budget-in-brief” is to summarize the second year of the City’s 2013-15 Financial Plan by highlighting the City’s budget progress, key budget features, and “budget facts.” Purpose of the City’s Two Year Financial Plan The fundamental purpose of the City’s Financial Plan is to link what the City wants to accomplish for the community with the resources necessary to do so. The City’s Financial Plan process does this by: clearly setting major city goals and other important objectives; establishing reasonable time frames and organizational responsibility for achieving them; and allocating resources for programs and projects. General Fiscal Environment The theme of the 2013-15 Supplement is “Steady Progress.” Revenues have rebounded and, based on the continued development review activity, it appears there is renewed optimism about – and opportunity to invest in – our community. Moreover, the City has made progress in its work to contain operating costs which in turn helps to improve overall fiscal health. Even with these positive fiscal signs, there are uncertainties and challenges looming. This is particularly true in relation to the on-going cost of retirement programs as well as insurance costs. These uncertainties are being monitored and will be addressed as more information is obtained and specific actions can be identified to mitigate negative impacts. More specifically, as part of the Fiscal Health Major City Goal, staff intends to prepare a strategy outlining the manner in which the City may pay down its unfunded retirement liabilities. This work plan will be undertaken once there is clarity from CalPERS regarding future rates and substantial changes affecting the retirement funding model that the CalPERS board is currently considering. Major City Goals (2013-15 Financial Plan Sec. C) For 2013-15, the City Council established an ambitious Major City Goal work program based on citizen input and involvement. Within this program, the City will: Implement comprehensive strategies to reduce homelessness Continue and enhance Neighborhood Wellness initiatives Sustain essential services, infrastructure and fiscal health Expand bicycle and pedestrian paths to improve connectivity and safety Implement the adopted Economic Development Strategic Plan Assess and renew the Downtown Complete construction of a new Skate Park Financial Highlights and Operating Budgets Pursuant to the City Council’s goals and the emphasis on delivering essential services and reinvestment in the City’s infrastructure, the 2014- 15 budget makes the following appropriations for a total of $134.2 million among all City funds: Governmental Funds Enterprise Funds Total Operating Programs 55,625,869 29,042,508 84,668,377 CIP 31,553,721 7,843,430 39,397,151 Debt Service 5,576,862 4,569,700 10,146,562 Total 92,756,452 41,455,638 134,212,090 Appropriations for operating programs (day-to-day delivery of services) total $84.7 million for 2014-15 summarized as follows: General Sales Tax 26% Measure Y Sales Tax 12% Property Tax 15% TOT 11% Other Taxes 9% Utility Users Tax 9% Prop tax in lieu of VLF 6% Service Charges 11% All Other Revenues 1% 2014-15 General Fund Revenues: $59.1 Million 2013-15 Financial Plan Supplement Attachment 8 BUDGET-IN-BRIEF If you have any questions about the City’s budget or would like a copy of the Financial Plan, please call us at 781-7125 or visit our web site at www.slocity.org. Governmental Funds Enterprise Funds Total Public Safety 24,430,510 24,430,510 Public Utilities 20,599,500 20,599,500 Transportation 3,321,300 4,984,300 8,305,600 Leisure, Cultural & Social Services 7,486,400 7,486,400 Community Development 9,048,344 9,048,344 General Gov't 11,346,815 3,451,208 14,798,023 Total 55,633,369 29,035,008 84,668,377 The day-to-day services are delivered by 362 City employees in the following functions: Authorized Regular Staffing by Function 2014-15 Public Safety 138.5 Public Utilities 61.9 Transportation 31.8 Community Development 44.0 Leisure, Cultural & Social Services 34.0 General Gov't 52.0 Total 362.2 Operating Budget Changes In keeping with the City’s two year budget process, the 2014-15 Budget is primarily intended to “stay the course” set in the 2013-15 Financial Plan while responding to changed circumstances since its adoption. The City is adding the following resources to better serve the community by building internal capacity within the organization to improve efficiency and effectiveness and/or meet legal or contractual requirements.  Additional resources to allow the Community Development Department to meet the workload demands created by the high volume of development applications and calls for inspection services  Temporary staffing for one year in the Finance Department’s Revenue Division to provide the resources needed to make operational changes that will make the department more efficient in its revenue collections  Additional contract services and temporary staffing for a one-year period to allow the IT division to complete 23 new projects and change the deployment of technology to increase system reliability, reduce overtime and institute a new project delivery model  Funding to cover increases in the cost of liability and worker’s compensation insurance  A new agreement with the county transit system to sell their bus passes in exchange for up to $25,000 in annual revenue for a one year trial period  Funding to develop a comprehensive employee development and leadership training program to improve workforce reliability and readiness to serve the community  Funding to provide for the on-going maintenance of the Santa Rosa Skate Park once it is completed Use of Measure Y Revenue The City’s ½ percent sales tax measure (Measure Y) continues to play a vital role in the delivery of essential services and infrastructure improvements to the City’s residents. In 2014-15, Measure Y is expected to generate approximately $6.8 million in revenues. As reflected in the following table, 63% of Measure Y revenues will be devoted to maintaining the Public Safety 46% Transportatio n 6% Leisure, Cultural & Social Services 14% Community Development 13% General Government 21% 2014-15 General Fund Operating: $53.3 Million BUDGET-IN-BRIEF If you have any questions about the City’s budget or would like a copy of the Financial Plan, please call us at 781-7125 or visit our web site at www.slocity.org. City’s infrastructure, street paving, and flood protection. Approximately 29% of the Measure Y revenues will be used for Public Safety services including additional patrol officers for the Downtown district. An additional 8% is allocated for Open Space acquisition and to support Neighborhood Wellness. Measure Y – A Closer Look The City began collecting revenues from the Measure Y, ½ percent sales tax in 2007 following its approval by over 64% of the vote. Since that time, Measure Y has been allocated by the City Council to the City’s highest priority essential services. Through June 30, 2013, the City has spent $31.0 million to protect and maintain essential services. The decision about how to spend Measure Y is made by the City Council every year as part of the budget process. Expenditures are also audited on an annual basis, so the public can see exactly what its tax dollars are spent on. Measure Y Expenditures Measure Y is used for both operating expenditures and capital improvement plan projects. Operating expenditures include the staff who provide essential municipal services, such as police officers, a Fire Marshall, maintenance workers, engineers, Neighborhood Services Specialists, and other key staff. Capital improvement plan projects include expenditures such as neighborhood street paving, replacement of storm drains, replacement of fire engines and police patrol sedans, open space acquisitions, bicycle facility improvements, and traffic congestion relief projects among other project types. Total Expenditures = $31,019,200 Through June 30, 2013 Project in Focus – Santa Rosa Skate Park Building a concrete skate park in San Luis Obispo is a Major City Goal and has been a goal for community members and user groups over many years. Construction of the new Santa Rosa Skate Park is scheduled to be completed in December 2014. Measure Y funding plays a major role in supporting this project. Streets, Storm Drains 30% Public Safety 29% Neighborhoo d Wellness 4% Open Space Preservation 4% Infrastructure Maintenance 33% Measure Y Uses For Example: •Patrol Officers •Neighborhood Services Specialists •Traffic Engineer For Example: •Bob Jones Trail •Fire Engine Replacement •Storm Drain Replacement BUDGET-IN-BRIEF If you have any questions about the City’s budget or would like a copy of the Financial Plan, please call us at 781-7125 or visit our web site at www.slocity.org. MEASURE Y FUNDING SUMMARY - REVISED FOR SUPPLEMENT The uses of Measure Y revenues for 2013-15 in funding operating programs and capital improvement plan (CIP) projects are aligned with top Council goals and objectives, and closely match projected revenues. Operating Programs CIP Two-Year 2013-14 2014-15 2013-14 2014-15 Budget Total Preservation of Essential Services Public Safety 1,269,239 1,374,494 569,920 638,903 3,852,556 Maintenance Services 894,506 823,969 936,400 1,030,000 3,684,875 Neighborhood Wellness 305,703 318,715 - - 624,418 Traffic Congestion Relief 92,520 100,351 175,000 185,000 552,871 Open Space Preservation 64,300 62,028 200,000 200,000 526,328 Infrastructure and Maintenance Improvements - - 4,538,023 2,301,800 6,839,823 SUB-TOTALS 2,626,269 2,679,557 6,419,343 4,355,703 16,080,872 Prior Year Encumbered/Assigned Amounts Transportation (Mobility and Safety) - - 57,211 - 57,211 Open Space Preservation - - 10,934 - 10,934 Infrastructure Maintenance and Improvements - - 682,638 - 682,638 Street Reconstruction & Resurfacing - - 101,168 - 101,168 SUB-TOTAL PRIOR YEAR AMOUNTS - - 851,951 - 851,951 Total Operations / CIP Spending 2,626,269 2,679,557 7,271,294 4,355,703 16,932,823 Contingency Reserve 1,700,000 Total Proposed Spending 18,632,823 Projected Measure Y Resources 2013-14 Revenues 6,684,000 2014-15 Revenues 6,775,000 Prior Year Encumbered/Assigned Value 851,951 Prior Year Revenue Available for Appropriations (See 2012-13 CAFR) 4,366,900 Total 18,677,851 * For a complete listing of the Measure Y Operating and Capital expenditures, see page A-17 of the 2013-15 Financial Plan Supplement, available at www.slocity.org.