HomeMy WebLinkAboutMinutes - June 14, 2011 SSLODI CITY COUNCIL
SHIRTSLEEVE SESSION
CARNEGIE FORUM, 305 WEST PINE STREET
TUESDAY, JUNE 14, 2011
A. Roll Call by City Clerk
An Informal Informational Meeting ("Shirtsleeve" Session) of the Lodi City Council was held
Tuesday, June 14, 2011, commencing at 7:05 a.m.
Present: Council Member Hansen, Council Member Katzakian, Council Member Nakanishi,
Mayor Pro Tempore Mounce, and Mayor Johnson
Absent: None
Also Present: City Manager Bartlam, City Attorney Schwabauer, and City Clerk Johl
B. Topic(s)
B-1 Receive Presentation from John Johns, Financial Consultant for the Lodi Professional
Firefighters Association Regarding Revenue Creation Ideas (CM)
City Manager Bartlam and Firefighter Brad Doell briefly introduced the subject matter of the
presentation by John Johns, financial consultant for the Lodi Professional Firefighters
Association, regarding revenue creation ideas.
John Johns provided a presentation regarding revenue creation ideas as outlined in the Council
Communication. Specific topics of discussion included Mr. Johns' professional background,
analysis and findings regarding the 2011/12 fiscal year budget, realizing a prior year budgetary
surplus, participation in the CalPers pension pre -payment program, business license canvassing
and enforcement, recapturing wastewater enterprise contributed capital, and budgeted versus
actual funds and reserves.
In response to Mayor Pro Tempore Mounce, Mr. Johns stated the typical reserve amount for
cities in normal economic times is 12% to 24%, or about $5 million for Lodi. He stated in
abnormal times he has seen reserve amounts from zero to 15%.
In response to Council Member Hansen, Deputy City Manager Jordan Ayers stated the prior year
budgetary surplus reference refers to a budgetary variance, which may or may not be cash in the
pocket. Mr. Ayers stated the actual fund balance is cash in the pocket and the variance is the
difference between what was budgeted and what was actually generated as revenue or spent as
expenditures.
In response to Council Member Hansen, Mr. Bartlam and Mr. Ayers stated the CalPers pre-
payment program gives entities an opportunity to pre -pay the employer's share in exchange for a
discount, the number is calculated based on payroll numbers from two years prior, and
depending upon the variance an entity will have either pre -paid an additional amount or owe
more. Mr. Ayers stated that the program may not be viable because the number of employees in
the City has declined over the last two years.
In response to Council Member Nakanishi, Mr. Bartlam stated lower rates may or may not be
beneficial as the 2014-2015 rate of return for CalPers remains unknown and in the case of a
shortage the City will need to make up the difference.
In response to Council Member Nakanishi, Mr. Bartlam stated the City does pay in advance in
lump sum in some cases such as debt service.
Continued June 14, 2011
In response to Council Member Nakanishi, Mr. Bartlam stated there is a balance between the
reserve amount for utilities and the general fund, cash flow, operations, and the policy decisions
associated with the same.
In response to Mayor Johnson, Mr. Johns stated the amount of the employer's share is known,
the amount of the program discount is known, and the utilities would recover the amount
borrowed for the pre -payment over a 12 -month period, during which the General Fund would
make monthly payments to the utility funds.
In response to Council Member Hansen, Mr. Johns stated Santa Clara County and a few other
cities in the State are taking advantage of the pre -payment program and benefiting at the
expense of others not participating in the program.
In response to Council Member Nakanishi, Mr. Johns stated that, while he has not researched the
option, the City may have the ability to go outside and borrow for the pre -payment, although
it would not incur additional cost if it borrowed internally instead from utilities.
In response to Mayor Johnson, Mr. Johns stated he is not aware of anything unusual in the case
of Los Angeles and San Francisco airports or the Stockton Redevelopment Agency
participating in the capital contribution program.
In response to Council Member Hansen, Mr. Johns stated he did not factor into his analysis for
the capital contribution program current capital projects including the new treatment facility, pipe
replacement project, or water meter installations.
In response to Council Member Hansen, Mr. Ayers provided a brief overview of the business
license enforcement efforts through a program with the Franchise Tax Board. Mr. Ayers stated
the amount of revenue generation from the program is unknown at the current time.
In response to Mayor Pro Tempore Mounce, Mr. Bartlam stated staff will bring back to Council an
update on the proposed suggestions after the numbers have been reviewed in more detail.
C. Comments by Public on Non-Aaenda Items
None.
D. Adjournment
No action was taken by the City Council. The meeting was adjourned at 8:05 a.m.
ATTEST:
Randi Johl
City Clerk
N
AGENDA ITEM la 40
CITY OF LODI
COUNCIL COMMUNICATION
TM
AGENDA TITLE: Receive Presentation from John Johns, Financial Consultant for the Lodi
Professional Firefighters Association Regarding Revenue Creation Ideas
MEETING DATE: June 14, 2011
PREPARED BY: City Manager
RECOMMENDED ACTION: Receive presentation from John Johns, financial consultant for the
Lodi Professional Firefighters Association regarding revenue
creation ideas.
BACKGROUND INFORMATION: The Lodi Professional Firefighters Association has retained John
Johns to assist it with understanding the City's financial condition.
Mr. Johns has reviewed the City's revenue and expenditures. In a
meeting with Jordan Ayers and me several weeks ago, Mr. Johns informed us that he felt the City had
done an honest job in preparing the City's budget and could find no abnormalities.
Mr. Johns did outline several revenue -creation ideas that he felt should be presented to the City Council.
In an effort to provide open access to the Council, this Shirtsleeve meeting will allow Mr. Johns and the
members of the Association to present their concepts.
FISCAL IMPACT: No specific impact is noted. Potentially, additional revenues could occur
depending on City Council direction and action.
FUNDING AVAILABLE: Not applicable.
Konradt Bartlam
City Manager
APPROVED:
City Manager
John P. Johns
1109 Radcliffe Dr.
Davis CA 95616
650 644 7212
Employment History Background
2001-2010 John has 24 years' experience in state and local government both as a
Town of Atherton, consultant and as a corporate officer.
California From 2001 to 2010 John served as the Finance Director with the Town of
Atherton, California. In this role, Mr. Johns' was responsible for financial
2000-2001 planning and analysis, financial reporting, treasury, information systems
IBM Global Services and procurement.
During his 15 years as a management consultant, John held the position of
1999-2000
principal with IBM Global Services and as director with KPMG LLP as well
KPMG LLP
as senior management positions with smaller firms serving the state and
local government market.
1996-1999
Mr. Johns experience includes:
MAXIMUS
0 Budgeting and financial reporting
• Benchmarking and best practices analysis
1986-1996
Harvey M. Rose
• Financial, compliance and performance audits in accordance with US
Accountancy Corporation
GAO Auditing Standards
• Forensic accounting
Education
. Revenue enhancement
Bachelor of Science,
• Technology related consulting
University of California at
Berkeley
MBA, Santa Clara
Mr. Johns currently practices as an independent CPA providing auditing,
University
litigation support and management advisory services to state and local
governments and various private sector clients.
Relevant Experience and Qualifications
Certification
. Planned and directed a comprehensive performance audit of the City of
CPA
Seattle Public Utilities Department for the Washington State Auditor.
Awards
■ Served as contract auditor for the State of Alsaka Legislative Audit
Atherton Civil Interest
Division.
League of Merit, 2004
■ Conducted a quality assurance review of the City of Los Angeles'
Atherton City Council
efforts to modernize its treasury accounting systems used to manage a
Resolution of
$5 billion investment portfolio..
Commendation, 2010
• Analyzed revenues and expenditures accounts including personal
services, categorical aid payments and capital projects with a
combined value of nearly $500 million in support of the Santa Clara
County's independent review of the County Executive's proposed
operating and capital budgets.
■ Served as project manager for payroll implementation for Sutter
County, California an entity with a $300 million operating budget. His
Pagel 1
duties included requirements definition, the preparation of an RFP and
assistance in selecting a preferred vendor for both technology and
implementation support.
• Served as project manager for a comprehensive performance audit of
the Arizona Department of Transportation's 20 year, $7 billion regional
freeway construction program. This project entailed examining the
Department's to establish effective change controls, and to establish a
timely and reliable financial and management reporting capability.
■ Participated in the development of over 300 functional specific
performance metrics as part of a comprehensive strategic planning
project for an agency with over $1 billion in annual revenues and
expenses.
■ Identified alternatives available to the City and County San Francisco
Public Utilities Department to provide for greater interoperability
between the various systems used for maintenance scheduling,
materials management, customer service and general ledger, which
were based upon different programming languages and different
architectural standards.
Other Qualifications
• Over ten years of project management experience
■ Supervisory experience in a project management capacity as well as in
a department director capacity
■ Is an internationally recognized speaker in the topics of fiscal
stewardship and governance
■ Adjunct lecturer at Sacramento State University and UC Extension
Berkeley
Page 2
Transmitted Via Electronic Mail
John P. Johns, CPA
1109 Radcliffe Dr
Davis, CA 95616
650 644 7212
johnplohns@gmail.com
Mr. Brad Doel
President
Lodi Professional Firefighters
Local 1225
brad@lodifirefighters.com
May 24, 2011
Dear Brad:
Pursuant to your request, transmitted herein is my report upon the analysis of the City of Lodi City
Manager's recommended budget for Fiscal Year 2011-12.
Pursuant to my engagement letter of April 26, 20111 have:
• Assessed the reasonableness of the City's revenue and expenditure projections for FY 2011-12;
and,
• Sought to identify opportunities to mitigate the projected General Fund deficit without
impacting staffing and compensation levels within the City.
Based upon these activities my findings are as follows:
The City's projections of General Fund revenues and expenses for FY 2011-12 appear to be reasonable.
However the City's budget does not take into account the effect of favorable variances in the General
Fund balance that have accumulated during the past two fiscal years. Accordingly, as much as $1 million
in budgetary savings that have accumulated during the 24 months ended June 30th 20101 2 could be
drawn upon to mitigate the budgetary shortfall anticipated in 2011-12.
The City Manager's recommended budget includes a city-wide appropriation of $8.3 million in California
Public Employee Retirement System (PERS) contributions. As of June 30th, 2010 the City of Lodi had cash
available to invest in the amount of approximately $70 million. Of this amount approximately $56
million was invested in the State of California Local Agency Investment Fund (LAIF).
During the past 8 months, the effective yield on LAIF investments has ranged from .5% per annum to
.75% per annum. By the same token the State of California Public Employee Retirement System allows
1 http://www.lodi.gov/finance/pdf/CAFR-2009-10.pdf, page 79
2 http://www.lodi.gov/finance/pdf/CAFR2008-09.pdf, page 75
Mr. Brad Doel
May 24, 2011
Page 2 of 3
participating agencies to prepay the PERS obligation and realize an immediate savings of 7.75% of the
annual required contribution. Accordingly, if the City of Lodi were to engage in inter -fund borrowing to
pre -pay its annual required contribution to PERS it is estimated that the City of Lodi would save
approximately $280,000 in employee retirement costs net of interest expense.
From 1925 to 1965, the City of Lodi invested approximately $800,000 of discretionary funds to make
various improvements in its wastewater collection and treatment systems. This investment was over
and above improvements financed through general obligation or revenue bonds issued by the City.
When applying a capitalization rate of 4.5% per annum, the value of these improvements in FY 2011
dollars amounts to approximately $12 million.
I have inquired of the City Manager as to whether the City has ever requested or obtained repayment
from the Wastewater Enterprise Fund for this contributed capital. To date I have received no
information from the City Manager which would indicate such is the case. Hence, by requiring the
Wastewater Enterprise Fund to repay the General Fund in equal installments over the next six fiscal
years approximately $2 million would be available to the General Fund in FY 2011-12.
During FY 2011-12, the City of Lodi expects to realize $950,000 in business license tax revenue. This
represents a decline in the amount of $87,000 from the business license tax collections in FY 2008-09.
I have conducted limited canvassing of businesses in the City of Lodi. Additionally, I have inquired of the
City as to whether an ongoing program exists to audit businesses to ensure that businesses fairly
represent their income and related tax liability (such as validating merchant business license tax returns
with data provided by the California Board of Equalization). The results of this canvassing and the City's
response to my inquiries strongly suggest that at least $50,000 in annual revenue, net of related
expenses could be realized through an aggressive program of enforcement. This estimate is admittedly
subjective but is based upon my own personal experience in performing similar services to other
communities.
In conclusion I have identified budgetary savings of approximately $3.3 million as a result of my
research. These findings are summarized in the following table.
Mr. Brad Doel
May 24, 2011
Page 3 of 3
Item
Amount
Realize prior year budgetary surplus $1,000,000
Business License Canvassing and Enforcement 50,000
Total $3,330,000
According to the City Manager's proposed budget, an additional $4.2 million in savings must be achieved
in order to achieve a balanced budget3. Hence by incorporating the findings herein, the deficit could be
reduced from the current level of $4.2 million to approximately $870,000.
I will be available to present these findings and the supporting documentation thereto to the City
Council and the City Manager in a work session early next month. I thank you for the opportunity to be
of service.
Respectfully Submitted
J.,G ol'%isss, lcj6a
3 http://www.lodi.gov/finance/pdf/FY%2011-12%20Lodi/`20Budget.Draft.pdf, page 31
MY OF LODI
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
GENERAL FUND
Year aided June 30,2M
75
Vedanta whh
Origkiel
Final
Actual
Final Budget
'�
REVENUES
Tams
s 23,979,050
23,497,000
23,518,184
3 19,104
Lir www and pandits
79.900
79,900
61,793
(17,517)
lr&orgovwrffwM revenues
10.937.000
9,983.01X1
8,957,410
(se5,14Q
Charges for swAms
1.188,220
1.292.950
1.058,137
[297,813)
Fines, lblfam and pa wbas
1.257A00
1,267A00
1.475174
157.774
kwadmordandmitallrmme
270,500
270AM
231,181
!39.3191
U6009KNOW revenue
953.800
93.300
448A04
868.104
Told revenues
EXPENOITURE8
90�858�780
38.423.510
35. 8265_
7[ W 2_571_
Clfrant
Ga mA govenrne it:
Clty Ommcal
111,834
110,894
105,484
5,960
Clty LhrRW
1,138,130
1.08501
1,080,920
24,711
CRY Clerk
489.1198
458238
419,900
88.830
CIYAlbntey
400,687
524.184
518,959
5245
Flumen Remurces
828267
564588
521,447
33,119
hft.. umSyvmm
1,071,547
1,075,398
IRM70
50,9Q0
Frrtenriel SoMm
1.706,947
1,902,12D
1.542,780
19,352
BudgetandTmasury
842,798
551,319
542,945
8,374
Nm Departrnentel
1,400,106
1281.045
1,185,215
46,890
Totel9enerel go -frac -It
7,949,284
7,133,395
T 6,922 090
231,239
Pubic pwk cW:
Poke
15,904,805
15,481,474
15-W.921
81.553
Fim
9.140.875
9.177.988
9.083.850
114.136
Tolalpubkpr *Won
24.945,540
24.869.480
210,771
195m
PuhlacVVpks
3,508844
3,297,128
2,957AM
329.724
Lbr-Y
1.840.020
1,541.159
1.499.720
41.4M
Parke
2,200800
2.322,991
2,18Q095
162.956
Debt servile:
hnerest and %cat chargm
18,516
1&,516
18.518
Prindpal paw -ft
129,487
129,487
128.487
Total debtservko
148,009
148,003
148,000
TotaleWendltm
39,793,171
39,122,074
30,181,027
981,047
DEFICIENCY OF REVENUES
UNDER EXPENDITURES
(IJ34,3811
'. (2898.5041
{2.457.774)
230,790
OTHER FKkNCM SOURCES (USES)
Trandws in
5,502,330
5,357,953
5,387,953
Ttermers out
[9813,84414442803
[4442 803]
al
Totolher TirwmV sawees Puses)
1.885 885
- 925.100
NFT CHANGE IN FUND BALANCE
754296
11.778.484)
(1.542.874)
230,790
FUN] BALANCE. beginning 4f year
4.534,293
5,300+582
5.300.852
FUM BALANCE, end of year
5� 6288.588
3,585,390
3,7661 B8 s
The rim to, the requlwd aupplemenury k%b.,Blbn is an invWW part ct ft schedule.
75
EXPENDITURES
Current
Gackycerw pramcB em
C%yC
CrIY OF LODi
75,871.038 27.786
544
c4v mar1aw
SCHEDULE OF REVENUES, EIIPEMDP(URES AMD C&UkNM IN FOND SALANCE- BUDGETANOACTUAL
1.088.538
eeNERALFUND
CNY Clerk
416,820 406,600
400.145
6.754
Year ended Jerre $0, 2075
462.890 435.347
393AM
47.937
E>udaet
536.183 502,94$
454AN
Vsrwm wim
odmilmo(m syskm
Anel
_
Final
hZV
FAW 2a!!ei
REVENUES
Terms
$ 72939,797
72897,791
23,11S,46i
5 167.270
Lioer m artd perdu
87,950
87,950
-1,171
4,221
kowgoyer+imanw revenues
8=755
8,27&755
7,777,471
(E06.6")
Cl7erwforsonlim
901.122
901.122
1,343,189
442.071
Fires 1arleifa and per>a W
1219.000
1,279.000
1.441.854
752,354
InvosIrrlerdand (ental WK=w
449.475
449.475
518,804
86,829
MhEokffmwe revenue
132 001
782300
462,592
930292
Totalrerenues
34JMM
&0.039.790
34,:20.152_
_ 688,359._
EXPENDITURES
Current
Gackycerw pramcB em
C%yC
129,786 722,396"
75,871.038 27.786
544
c4v mar1aw
1A4137 1.040.544
1.088.538
7.006
CNY Clerk
416,820 406,600
400.145
6.754
C 4Y p,ft ney
462.890 435.347
393AM
47.937
Hurries Reeaeoae
536.183 502,94$
454AN
48,542
odmilmo(m syskm
965.135 W490
i1
24.SM
FimncWServices
1ADWO 1,620Am
1.878.792
7.774
Budgatand TMWLNY
556,680 480,278
476,068
8.710
NaYpapalEalBnlal11420634
1,098,779
982.144
104A
Tatd panarsi gmermnard
230317
Pd* proledim
Palo a
14,847,826 i5,888.824
75,871.038 27.786
FNe8,477.969
a 559,655_
23.898:479
_ 6543551 15788
28,8549W 43 A4
TalarpuLNloproledm
23285.797
putocvvom
1,978401_ 7.580573
7A71779 58794
Ub-y
15 A1R
32858
perks
2,W9M 22W;W2
2.234.949_ 7.978
Dept service:
karooand itedd oWs
12,578 12.578
72,579
1$SAM _ Imm
135
TcW daM serWm
140.000 148 0R3
148
TOW eoRerrdikm"
85.827 3walus
36,442.629 � 375.678
DEFICENCY OF REVENUES
UNDER EXPENDITURES
(1,787214) M�
(710677]_ 1,061,875
OTHER FINANCING SOURCES {USES)
Transfers In
5,867.963 5.881.983
5987 985
TransfaraaA
[4A32<2A� 4MM
[=.6312781_
TOtal ww t;r rg so__ (uses)
124571* 1
1.285.705
NETCFWNGE 6N FUNO BALANCE
(551.6081 (SQ,847)
MOM 1,067,875
F7INDBALANCE. boQWMin9dyeer
5,845,711 3,945,7i1
3,766.788 (179,523)
FUND BALANCE, end of Year
S� 5.894 3 El64
X162162 861367
17re note io � re4ugad supplernardarY illorrrurtlan � an part of 979 adladrle
79
ASSM
Cash and investments
Reabicted assets
Receivables:
Accounts, net
Properly #axes
Interest
Due from other funds
Due from other governmental agerKmm
Loan receivable
Imvent'ory
Advances to other funds
Other assets
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable and other liabilities
Aoratied salaries and wages
Due to other funds
Advances from other funds
Deferred revenue
Total gabts8es
Fund balances:
Reserved
Unreserved reported In:
General Fund
Special revenue funds
Capital proocts.funds
Total fund balances
Total liabilities and fund balances
CITY OF LODI
BALANCE SHEET
GOVERNMENTAL FUNDS
June 30, 2010
General
Fund
Other
Goverrunerdal
Funds
Total
Governmental
Funds
$ 2,304,189
14.400,143 $
16.704,332
1,687,521
1,687,521
2,691,688
1,277.473
309.159
1,537,234
1,537,234
7,770
15,818
23,588
1,327,820
214,910
1,542,730
125.085
1,670: 448
1.795, 473
1,084.000
1,084,000
844
844
305.560
343,385
648,945
291524
1,290
30,814
$ 8,329 892
20.694.948 $
29,024,840
$ 1,880,010
1,328,421 $
3,208,431
2,080,980
2,080,980
1.542,730
1,542,730
1,874,118
1,874,118
83.486
3.536,424
3,619,910
4,044,476
8,281,693
12,326,169
388,640
7.800.M
8,189,579
3,895,576
3,M.576
962,927
962,927
3,649,389
3,649.389
+1285,216
92,413255
16,698,471
$ 8,329,692
20,694,948 $
29,024,640
The notes to the financial statements are an integral part of this statement- 21