The fifth meeting of the Financial Review Team (FRT) was convened by Chair Steve Magyary at 7:40 pm at the El Cerrito Open House Senior Center.
The Agenda was reviewed and set as follows:
Item 1: Report on the CotW/Council discussions concerning
FRT recommendations.
Item 2: Report on legal questions concerning RDA and
City agreements.
Item 3: RDA debt discussion/questions.
Peter Loubal question/comment.
Item 4: RDA repayment options/discussions.
Item 5: Report on other city budgets formats/accounting
methods.
Item 6: Other?
The following individuals were present:
Janet Abelson 525-7709 George Amberg 237-0591 Anne Delehunt 527-6264 Chuck Lewis 235-4200 (arrived 8:40 pm) Peter Loubal 233-8027 Steve Magyary 233-4611 Al Miller 526-4874 Kathleen Perka 236-0209 Marianne Selph 526-6631Discussion of Item 1: CotW/Council discussions concerning FRT recommendations.
Chair Steve M. stated that Council was very appreciative of recommendations and expects more detail in future recommendations.
M. Selph asked about the list of questions Sewel G. has submitted from the Chamber. Do we have to do something about these?
Steve M. said we would address them and all other questions that have been submitted at our July 14 meeting.
Anne D. suggested we deal with them by the next CotW meeting.
Janet A. suggested that it is time for the Budget Review Subcommittee (BRS) to start focusing on policy items rather than specific budget line items.
Steve M. agreed saying that for our review purposes, this budget cycle is over and that maybe by the first budget quarterly review, we may have some more comments.
Peter L. disagreed saying the BRS should continue its efforts for this cycle. He said that at their 6/15 meeting, the Council members were very reactive compared with past actions. They talked of balancing the budget with debt repayment by RDA and wanting to see options that did not involve using reserves to balance this year's budget, knowing this would require cuts. He thinks we should take advantage of this new interest.
Janet A. had questions regarding the City staff salary rates compared with other cities and though we should look at how they compare.
Peter L. disagreed suggesting that could be done later if desired.
Anne D. agreed with the comparison effort, but added that we must also compare the functions assigned to the staff positions being compared.
Al M., getting back to the issue of should we continue to try to influence this budget cycle, stated that he didn't think there was time for the BRS to review these items and make their recommendations to the FRT, for the FRT to discuss these recommendations and make their own to the CotW, and for the CotW to discuss these recommendations and make their own to the Council by the time the Council intends to pass a Budget on 6/22 or 6/29. His conclusion was that, at best, we can only influence the current cycle as individuals, and that we should.
George A. agreed with Anne D's comments on the need for including function comparison in any salary comparisons.
Janet A. said the BRS will compare El Cerrito's staff functions and salaries with those of comparable cities and report back to the FRT. The first cut of the list of comparable cities will be obtained from Gina B. 8:00 pm (about)
Discussion of Item 2: (Delayed until Chuck Lewis arrives)
Discussion of Item 3: RDA debt discussion/questions.
The following detailed and general discussions centered around the following three reports:
Steve M. didn't think the $1,382,541 amount for the RDA debt to the City is correct. Several round and round comments on various questions concerning the numbers use by Ernie S. and George A. occurred. Steve M. summed up the discussions by stating he wants two sets of numbers to discuss. The first is the $1,382,541 amount and the assumptions connected with it. The second number is the one you get assuming that the 96/97 agreement between the City and the RDA did not backdate the % of staff time or interest rates charged.
Peter L. said that he also has looked at these agreements and stated that the 1976 agreement said the RDA must borrow money from the City to cover staff support and Project Costs. He has identified $195K used to pay consultants in the Plaza project. He found another $461K borrowed at 10% in June, 1997, also for project costs. He is now looking at other redevelopment projects to identify additional project costs. He is particularly interested in these dollar amounts because he can find nothing to show that these amounts have ever been identified as RDA debts to the City. Also, he can not find any record that any repayments for these items have ever been made. At the 6/15 Council meeting, he asked for the total dollar amount of project costs be identified.
Steve M. mentioned that the review Chuck L. is making will, hopefully, clarify what the requirements actually are.
George A. reminded us that the repayment of any of this debt is second in line to the repayment of any bond debt.
M. Selph recalled that the project cost agreement wasn't used at first since the RDA did not have any project cost needs for awhile.
Peter L. made the point that the RDA actually did use project cost money for the items that were originally supposed to be borne by developers in both the Del Norte and Plaza projects. These items include EIRs, legal costs, and appraisal costs. Peter believes at $370K are involved for the Plaza alone.
Janet A. described exchanges she had with Jay C. and Gerry R. when discussing the city's para-transit program. While trying to compare the City's proposal to CC County for our Para-transit Program with the city Budget, there was nothing to compare. These funds seem to be co-mingled in the General Fund, including the amount for vehicle purchase. In this process, all visibility is lost. She suggested that the same thing may have happened to the RDA's project costs.
A general discussion on the disadvantages of co-mingling of funds by the City and the RDA followed. We reached a consensus on the need to determine the actual extent to which this is happening. We also need to develop recommendations on how to stop it.
8:36 pm (about)
Discussion of Item 4: RDA repayment options/discussions. Steve M. wants to present a range of options when recommending on this item to the CotW. As starters, he suggested 1. City forgive any RDA debt; 2. Continue current practice of accruing debt with no payments; 3. Continue current practice of accruing debt, but repay interest each year; 4. Use bond refinancing windfall to repay part of existing debt.
Anne D. suggested that discussion of any options should consider whether the RDA should have any reserves and the repayment requirements for existing bonded indebtedness.
Janet A. mentions that we have the repayment information.
George A. stated that the only money available to the RDA for anything is the $605k(approx.) gained from refinancing the existing loans. He went on to say that he has "run the number" assuming a 1 1/2%, 2%, and 3% increases in the Tax Increment funding coming to the RDA. All of these scenarios show an RDA deficit through the year 2003.
Chuck L. suggested yet another alternative. To reduce costs of redevelopment, terminate the RDA. Because of the importance of the Plaza, focus all redevelopment efforts there, paying any staff support and other project related costs from the General Fund.
After more general discussion, the following options were
identified:
Additional questions and comments led into the delayed
discussion of agenda Item 2.
Discussion of Item 2: Report on legal questions
concerning RDA and City agreements.
Chuck L. reported that the agreements between the
City and the RDA were structured to give maximum flexibility to both parties.
He mentioned several examples of this. One of particular importance is
the one that requires the City to provide an itemization of staff support
provided to the RDA at the end of each year. Chuck could not find any of
these listings. He suggested that since this required annual reconciliation
hasn't been done, apparently, no common understanding of, or agreement
on, the amount of debt that exists has ever been reached.
He also said the 20-20-10, etc. percentages of staff time
identified in the 6/17/1996 agreement appear to have been established to
meet the requirements the "Porterville" legal case. He ended his presentation
with a recommendation that, to remove the uncertainty surrounding the debt
amount, we should ask the City and the RDA to do what the agreements say
they should do, develop a yearly itemization of city staff time and other
support provided to the RDA.
Janet A. didn't think this was very practical because
of the time elapsed and changes in City staff involved.
Al M. suggested the question needs to be asked
if for no other reason that to emphasize that the agreements have not been
followed.
Peter L. asked that Chuck L. submit his report
in writing.
M. Selph asked if the more recent agreements supersede
the earlier ones.
Chuck L. responded by saying that the agreements
don't mention superseding.
This lead into another general discussion about what the
agreements do or do not, and should or should not say. This ended with
George A. stating that even if the RDA went away and all tax increments
reverted back to the City, the City would only get $350K.
Chuck L. said he would work to have a report by
our next meeting (7/14) and he would address the question of whether project
costs should be a part of the debt and subject to the annual interest charges.
Because we were almost out of time, Anne D. asked us to
consider one topic that would have been discussed under agenda Item 5.
She suggested that the FRT recommend to the CotW that our City Manager
be invited to make a presentation to the CotW and respond to questions
just like the Department Heads are.
After some discussion, which generally supported this
suggestion, she moved, and Janet A. seconded, "That the FRT recommend to
the CotW that the City Manager be invited to present to the CotW; time
to be determined."
Motion passed with 8 ayes, 0 nays, and 0 abstentions.
Discussion of agenda Item 4 resumed.
Chuck L. offered another option for RDA repayment
of the debt. He suggested that we consider the "negative 1" option of letting
the RDA borrow still more money from the city to ensure we get a version
of the Plaza project the people want, not one that only the plaza owners
want.
Anne D. commented that these options we were talking
about might not be options at all when you consider the money RDA has available
to it, so we need to put a dollar cost to each option.
Steve M. agreed.
Janet A. had a copy of the "Summary Debt Service"
of the RDA and suggested that this debt has priority over any debt owed
to the City by the RDA.
Steve agreed and reminded us that that document was the
source of the figures George A. used for his discussion on RDA deficits
through the year 2003.
We then had a general discussion concerning the RDA repayment
of the debt to the City in one year and each year thereafter by re- negotiating
a new loan each year at the current interest rate the City would earn on
this balance if these funds had remained invested with LAIF.
Steve M. set the following agenda items for our
next meeting on July 14.
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the Committee of the Whole
Meeting was adjourned at 10:00 pm.