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HomeMy WebLinkAboutMinutes 2014-01-15 @6:30SPECIAL MEETING MINUTES ° CITY COUNCIL cALIFOR�IA OF THE CITY OF SOUTH SAN FRANCISCO P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, California 94083 None. No changes. Meeting to be held at: CITY HALL CONFERENCE ROOM 400 GRAND AVENUE SOUTH SAN FRANCISCO, CA WEDNESDAY, JANUARY 15, 2014 6:30 P.M. Purpose of the meeting: 1. Call to Order. TIME: 6:30 p.m. 2. Roll Call. PRESENT: Councilmembers Addiego, Gupta and Normandy, Vice Mayor Garbarino and Mayor Matsumoto 3. Public Comments — comments are limited to items on the Special Meeting Agenda. 4. Agenda Review. Study Session: Overview of proposed three year sewer rate increase plan and approval of a resolution authorizing an application to the State Water Resources Control Board for a Clean Water State Revolving Fund loan for improvements to the Water Quality Control Plant ( "WQCP "). Public Works Director and City Engineer, Brian McMinn summarized the staff report and gave brief history of rate increases. The proposed plan would set the rate for the next three years, although staff recommended a shorter period due to the uncertainty of pending regulations. Council was also being asked to approve a resolution allowing the submission of a loan application to the state to fund improvements at the WQCP. Director McMinn reviewed the plant improvements to be made, which included the minimizing blending project, rebuilding three digesters, additional blower replacement, sewer collection system rehab, Pump 4 force main design, and completion of the backup generator replacement Director McMinn reminded Council that the last time rates had been set, there was a protest about equitability of fees as they related to multi -unit users. After studying the matter, it was discovered that multi -units did use slightly less, by approximately 10 percent. Adjustments were made this time around reflecting a three percent decrease for multi -units during the first year, so that by the second year the 10 percent would be realized. Council requested a visual breakdown of the different rates and statistics regarding multi - family units, single family units, trailer units and commercial be provided in the Friday memo. Director McMinn reviewed cash projections for the sewer fund and the timeline for completing the process. A public hearing would be held and rates would not be able to be raised if there was a majority protest received by the Clerk. Mayor Matsumoto reminded staff that Council would be attending Bio Conference and the last meeting of June was being cancelled. Director McMinn stated the public hearing could be held at the last meeting of May. Management Analyst Justin Lovell reported on the Clean Water State Revolving Fund loan application, reviewing the application process, the terms of the loan and anticipated timeframe. Councilmember Gupta asked why the Daly City discharge rate was so low comparatively. Director McMinn stated Daly City discharged directly into the ocean rather than the bay; requirements were different and without as many constraints when discharging into the ocean. Motion — Councilmember Addiego /Second — Vice Mayor Garbarino: to approve a resolution authorizing an application to the State Water Resources Control Board for a Clean Water State Revolving Fund loan for improvements to the Water Quality Control Plant ( "WQCP "). Unanimously approved by voice vote. 6. Study Session: Updating the City Council on the most recent actuarial study of the City's Other Post - Employment Benefits (OPEB). Finance Director Jim Steele presented the staff report which detailed the City's retiree health care obligations and their projected growth at the current rate of payment. Staff was also recommending an investment in one of the three investment vehicles from the Ca1PERS California Employers' Retiree Benefit Trust (CERBT), with strategy number one being staff s recommendation. Staff believed this strategy was the best option as it was long term and heavily weighted towards stocks. Strategy two was acceptable, but strategy three was not recommended as its focus was heavily weighted towards bonds and structured as a short term investment. Expected earnings over time were reported as comparable to Ca1PERS at 7.6 percent. Investments included Global Equity, US Normal Bonds, Global Real Estate, Inflation Linked Bonds, and Commodities. Over the long term, advisors recommend having a mixture. This mixture is achieved by strategy one. SPECIAL CITY COUNCIL MEETING JANUARY 15, 2014 MINUTES PAGE 3 project. The request also included a $5 million buffer for potential changes in future permits. Finance Director Steele stated the expected costs of the improvements over the next three years would be approximately $31.6 million, half of which was being requested in the state loan. Approximately $4 million would be paid from the other entities (San Bruno, SFO, Millbrae and Burlingame) and the remainder would be from the City's rates. Mayor Matsumoto asked if collecting from the other entities could present an issue. Director Steele noted that San Bruno has been given plenty of lead time for them to plan although they were told there may be some flexibility. For instance, if Council was agreeable, the City could take on more of the loan initially, with internal payback. Millbrae, Burlingame and SFO only pay for outfall, which is minimal. San Bruno would be impacted the most and accordingly a great amount of time has been spent with them. Councilmember Addiego noted San Bruno's ability to collect fees with their sewer bill. Residential rates were reviewed for years 2004 through present. Proposed rates were presented for a breakdown of 4, 4 and 2 percent for years 2014/15, 2015/16 and 2016/17 respectively. Cash flow model indicated the 2 percent for year 2016/2017 was not needed at the moment, but adoption was still recommended just in case the need arose. Nothing prevented Council from rolling them back if they were unnecessary. Mayor Matsumoto understood the necessity, but questioned how that would be communicated. She also asked about the effect of unfunded mandates. Director Steele stated this was very common and had been done for the last three rate periods. It's communicated as a "not to exceed" with the clarification given they would not go forward if unnecessary. He added this would be the likely outcome if the environmental issues did not move forward but that it was still good to have it as a contingency. He assured Council that communications had been sufficient in explaining it clearly and added that in previous instances, the City did not collect what it had proposed. Director McMinn stated the unfunded mandates were on the stormwater side, and were currently being dealt with. Interim City Manager Mattas stated the last two percent was included because requirements were still unknown and staff wanted to avoid a situation where there wouldn't be enough to fund all the requirements. So long as proper notification is done under Prop 218, Council can ask for an increase up to a certain percentage. Councilmember Addiego asked what two percent would generate. Director Steele stated two percent would generate roughly $500,000.00 SPECIAL CITY COUNCIL MEETING JANUARY 15, 2014 MINUTES PAGE 2 Council noted that strategy two was higher in bonds and asked how this related to earnings over time. Council expressed their wish that the portfolio not be static and asked if the ratios were imposed or flexible, with allowances for rebalancing. Director Steele stated strategy two, which had more of a percentage in bonds, was a more conservative strategy that would result in lower returns. It was his opinion that strategy two was too conservative and the City's investment firm agreed. Director Steele also assured Council the portfolio would be active as CaIPERS actively follows the market and makes investment adjustments based on the direction of the economy. In regards to the ratio, Director Steele stated the investment policies were approved by the Ca1PERS board and have remained constant over the years. He stated the ratios were constantly rebalanced and that Ca1PERS dedicates a lot of resources to this function. He further explained that Council was only allowed to select one option, but this did not preclude them from directing more conservative future strategies. A strategy must be selected before any investment could be made. Changes could be made later at Council's request and as the City gets closer to being fully funded, the amount being put in would get ramped down. Director Steele displayed charts illustrating the power of paying off the liability over time. Compared were the options of paying as you go, with payments continuing out until 2080, and investing $13.5 million from reserves plus $250,000.00 annually, with a payoff being in 2043. Graphic representation of $500,000.00 and $1 million annual investments were also shown. Direction was needed from Council on which strategy to pursue, then staff could come back with a formal resolution. Director Steele repeated staff's recommendation of strategy one, adding that strategy two was acceptable while strategy three was not recommended at all. Councilmember Addiego expressed his initial concerns about not having access to the money. The concerns had since been relieved given that Council would be able to use the funds to pay obligations during troubled times. Director Steele noted that money could not be pulled back, but staff could be directed to use it to pay for retiree health benefits. Though there would be more risk, Council could also authorize designated officers of the City to request drawdowns to pay retiree health care benefits. Councilmembers sought further clarification on the following matters: who would be the trustee of the account; the horizon of the OPEB payments; and inflation linked bonds. Director Steele replied that CalPERS would be the trustees; the timeline horizon would be the longest with pay as you go with a 2080 pay off. Each successive option would cut into that timeframe significantly. Lastly, Director Steele explained that inflation linked bonds paid a slightly lower interest rate but adjusted with inflation to protect against its effects. Interim City Manager Mattas added that he would have Chandler and Associates identify specific examples of inflation linked bonds. SPECIAL CITY COUNCIL MEETING JANUARY 15, 2014 MINUTES PAGE 4 Further discussion indicated Councilmembers were leaning between the first and second strategy. Interim City Manager Mattas reiterated that strategy one would present greater risk, but offer greater return. He added that 85 percent of public agencies were selecting the first strategy, 10 percent were choosing the second strategy and five percent were selecting the third strategy. In order to consider and understand the various calculations and timelines, Council requested the item come back on the agenda for the first meeting in February. 7. Adjournment. Being no further business, Mayor Matsumoto adjourned the meeting at 7:49 p.m. Submitted by: `->. -T3� Anna M. Brown, Deputy City Clerk City of South San Francisco SPECIAL CITY COUNCIL MEETING MINUTES Ap o ed b Ka Lusumoto, Mayor City of outh San Francisco JANUARY 15, 2014 PAGE 5