HomeMy WebLinkAboutMinutes - September 8, 1971oc
CITY COUNCIL, CITY OF LODI
CITY HALL COUNCIL CHAMBERS
SEPTEMBER 8, 1971
A regular adjourned meeting of the City Council of the City of Lodi
was held beginning at 8:00 p.m, on Wednesday, September 8, 1971
in the City Hall Council Chambers
ROLL CALL Present: Councilmen - EHRHARDT, HUGHES
KIRSTEN, SCHAFFER
and KATNICH (Mayor)
Absent: Councilmen - None
Also present: City Manager Glaves, City
Attorney Mullen, Assistant City Manager
Peterson
SANITARY CITY Mayor Katnich announced that the purpose of
DISPOSAL COMPANY this regular adjourned meeting was to discuss the
ASSIGNMENT purchase by Mr. Rudolph Vaccarezza, a partner
in the Sanitary City Disposal Company, of the
interests of his deceased partner, Mr. Alfred
Barsotti. The Mayor introduced the following
persons who were in the Council Chambers:
Mr. Richard Johnson, attorney representing
Mr. Vaccarezza; Mr. Robert Mertz, attorney
representing the estate of Alfred Barsotti;
and Mr. Clifton C. Hite, accountant for the
Sanitary City Disposal Company.
City Manager Glaves explained that the Disposal
Company had sent a letter to the City of Lodi
requesting the City's authorization of the sale
of the Barsotti interest in the company to Mr.
Vaccarezza. A copy of the company's current
financial statement had previously been sent
to the City Council. The City Manager said
that Council guidelines in the past concerning
the return the company was entitled to were:
salaries to be paid to the partners equal to
the salary that would be paid to a Public
Works Department division head who would be
in charge of such an operation were the City
to provide this service; and a return of 12%
on the depreciated assets of the company. He
said the return has been in the 14- 16% area
during the past seven years.
Councilman Kirsten said he felt a return to the
company of 12-15% of net worth would seem
fair. He stated it was the Council's responsibility
to determine a fair profit and fair salaries
for the operators.
Attorney Robert Mertz, representing the Barsotti
Estate, told the Council there were other assets
involved in the proposed purchase, including
a ranch which might be valued at approximately
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Minutes of September 8, 1971 continued
$100,000, as well as equity in insurance_
policies. He said both parties have agreed to
the purchase price and that ability to pay was
no problem.
Representing Mr. Vaccarezza, Attorney Richard
Johnson also said the parties had agreed to the
purchase price and that there was no question
of Mr. Vaccarezza's ability to pay.
Councilman Kirsten said the citizens of the
City shouldn't have to pay on investments not
needed for adequate refuse service.
Councilman Kirsten said the company's rate
schedule should be reviewed before the sales
transaction is -authorized because rates are
a factor in the amount of profit realized. He
questioned whether or not the company's profits
were fair to the citizens of the City of Lodi.
Mayor Katnich questioned what would happen
if the company realized a 20% profit instead
of the 12P/o agreed to. The City Manager an-
swered that the only time an adjustment is
made is when the company asks for a rate
increase. City Manager Glaves went on to
say that since 1953 the City has used 12 Yo
of depreciated assets as a fair return. He
said it is very difficult to compare refuse
rates from one agency to another because of
the varying degrees of service performed.
Councilman Kirsten pointed out that while the
12% figure has been used in rate setting, he
thought 13% or 14% would be reasonable also.
In answer to questions from the Council, City
Manager Glaves said the current top of the
division head salary schedule is $13,524 per
year. Councilman Kirsten suggested that
since Mr. Vaccarezza had been performing
extra work due to the absence of his partner
as a result of illness, Mr. Vaccarezza should
receive a salary at one and one-half times
the division head rate or approximately $20,000.
Councilman Hughes said he felt the Council
was getting into an area that was not its
concern. He said the Council should have as
its primary concern the cost of the service
to the user. The City Manager pointed out
that if the City does not establish the basis
for regulating profit, then the only alternative
is to go to bid for the service. He said the
City has been opposed to this because there
is no way of evaluating the rates submitted
in a bid.
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Minutes of September 8, 1971 continued
Mayor Katnich suggested that the topic of rates
could be discussed later; the primary concerns
now were the percentage return on the investment
and the salary paid to Mr, Vaccarezza.
Councilman Kirsten said the Council must
first arrive at a rate that is fair because
rates affect profits. He then moved that
Mr. Vaccarezza's services be compensated
at one and one-half times that of a City division
head who would direct this service and that this
amount be $20,000, The motion was seconded
by Councilman Ehrhardt.
After discussion, the motion was withdrawn.
Councilman Kirsten then moved that the rate
of return be 13% of net equity. He defined
net equity asp , ^' a ;P..e^;��y
the difference iiAi-a� �
between assets and lRek ~ar^
liabilities. this instance, as of March 21, 1971, net equity
(See Minutes of 10/6/71) would total net profit of $87, 943. 94, plus
bb depreciation of $47,138.54, plus depreciation
on the ranch operation of $2,485.35. The
net equity would thus total $137, 567.83. His
motion also included the following guide lines:
a. All receipts direct and indirect flowing
from assets and services of property
and people associated with the company
will be reflected in annual statements
presented to the City Manager;
b. All assets needed in the business shall
be reflected in the balance sheet and
all assets not needed should not be
reflected;
C. All liabilities should be reflected in
the financial statement.
The motion was seconded by Councilman
Ehrhardt.
Councilman Hughes questioned what would be
the Council's alternative if the 13% return
proved inadequate. Councilman Kirsten then
proposed a substitute motion. He moved that
the return be established at 140/a of net worth,
in this instance net worth totaling $196,432.61
as of March 31, 1971, plus $20,000 annual
salary to the operator. Fourteen percent
of net worth would be $27, 500. 56. The sub-
stitute motion was seconded by Councilman
Ehrhardt.
After some discussion, Councilman Kirsten
proposed a second substitute motion. He moved
that to the net worth figure of $196, 432. 61
$52,000 as an average depreciation should then
be added over the next five years. The 14%
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Minutes of September 8, 1971 continued
rate of return would then be applied to the
total of $248,432.6i. The motion died for
lack of a second.
Councilman Hughes said the entire subject was
too complex to make a decision on at this
time. Mr. Johnson said a one-week deferral
was satisfactory. It was then moved by
Councilman Hughes, Schaffer second, and
unanimously passed. that the discussion be
tabled for one week.
Councilman Kirsten moved, Ehrhardt second,
that the City Manager present the appropriate
financial statements to the City Council as soon
as possible. The motion was passed unanimously.
ADMISSION DAY It was moved by Mayor Katnich, Ehrhardt
METER second, that Admission Day, September 9,
HOLIDAY 1971, now a City holiday, be declared a
parking meter holiday. Mayor Katnich explained
that this was necessary because the City Code
has not yet been amended to include this day
as a day on which City parking meters will
not be enforced.
CITY SURVEY Councilman Hughes requested a copy of a
OF REFUSE survey Mr. Johnson had compiled of refuse
RATES rates in other cities. Mr. Johnson said he
would supply a copy.
ADJOURNMENT There being no further business, at 11:05
p.m. the meeting was adjourned on motion
of Councilman Kirsten, Hughes second
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ATTEST: Thomas A. Pe erson
Deputy City Clerk