CORRESPONDENCE- 65A - Laserfiche WebLink

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The city has analyzed the city's Refuse Enterprise Fund and found that it has an available balance of $6.6M which can be transferred to the General Fund. It is proposed to utilize this $6.6M to help offset the decrease in revenue in the current fiscal year. The staff report indicates that this is from "franchise fee revenue". However, I am concerned that this is a violation of Proposition 218. Now, I honestly am not a Proposition 218 expert of an expert in the Refuse Enterprise Fund, so I would urge the council to ask for the opinion of the Finance Department and also the City Attorney to distinguish why the balance in this fund should not be utilized to reduce fees charged to the city's residents OR be directly refunded to the rate payers of the city since it appears that the amount that has been paid to the city exceeds the cost of providing such services to the residents of the city. I believe that Proposition 218 limits the ability of the city to charge residents fees for services beyond the cost of providing such services. If the rationale that this $6.6M buildup is due to "franchise fee revenue" charged by the refuse service provider, I would be very cautious about this because it simply feels like a shell game tome. It feels like if the city's refuse provider is required to pay to the city a "franchise fee" which is now deemed to be available to be used for the General Fund, that the service provider would simply build this "franchise fee" cost into the cost that they are charging the city's residents through fees that we, the residents, ultimately pay. Further, this one item accounts for a major component of making up for the 19/20 expected revenue shortfall due to COVID-19 and there literally is one paragraph, with three sentences included in the staff report. I believe that there should be major questions asked of this particular item especially as it relates to the legalities of the rates that residents have been charged historically in receiving of refuse services. I also question if this reserve has been built up over the past 10 years, why is it only coming to light right now. If it was able to utilized for General Fund purposes, why have we not accessed it historically. Is it possibly because now we are in very strenuous times and we may be pushing the boundaries of Proposition 218? Is it because the city did not want to be in a position that it may be required to pay back this balance to the residents? I urge the council to ask hard questions with regards to this particular item. This item deserves more than one paragraph with little explanation. If this actually represents fees charged in excess of the cost of providing of services, it feels like the city is balancing the budget on the back of residents who have been overcharged in the past ... using other people's money for a purpose it was not designated for. Please, pause and ask questions so that residents understand. As councilmembers it may make perfect sense to you, but to residents, this is certainly an area that feels like it is getting brushed under the rug to get onto the next item. Further, it would seem that due to the magnitude of this item and the possible violation whether perceived or actual, that council would direct staff to provide an analysis of whether this is a violation of Prop 218 prior to directing the funds over to the General Fund. More than three sentences is needed on this item to make an informed decision. 65A(4): Direct staff to prepare FY 20/21 budget using Reserve for Economic Uncertainty. Staff has preliminary indicated that FY 20/21 will have General Fund revenue reductions amounting to at least $15M as compared to the current year budget. That loss of revenue with the projected additional expenditures of $19.9M means that the city has approximately a $35M shortfall to budget for in the upcoming year in just the General Fund. I think we can agree that this pandemic is exactly what economic uncertainty reserves are for although just as the City Finance Department hinted at in the mid -year budget update, this reserve is likely too low, but now is not the time to right size it to 2% of revenue instead of the 1% it at. Although it would be nice to have that extra 1% if the Reserve were increased previously when times were not as rough. However, utilizing this Reserve only provides $3.1M of relief in FY 20/21. Major other measures are required especially considering the long-term lingering impacts that we may be facing with loss of property tax revenue in FY 21/22 and potentially sky rocketing CaIPERS pension obligations due to underperformance of the pension fund's investments in the 22/23 year.