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HomeMy WebLinkAboutMinutes 2019-04-09 @6:00MINUTES SAN CITY COUNCIL A CITY OF SOUTH SAN FRANCISCO U O cACIFORN�P SPECIAL MEETING CITY HALL CITY MANAGER'S CONFERENCE ROOM 400 GRAND AVENUE SOUTH SAN FRANCISCO, CA TUESDAY, APRIL 9, 2019 6:00 p.m. CALL TO ORDER 6:03 p.m. ROLL CALL Present: Councilmembers Addiego, Nagales and Nicolas, Vice Mayor Garbarino and Mayor Matsumoto. AGENDA REVIEW No changes. PUBLIC COMMENTS None. ADMINISTRATIVE BUSINESS 1. Report regarding Study Session on potential regulation of plastic straws. (Christina Fernandez, City Manager's Office) Assistant to the City Manager Christina Fernandez presented the report and discussed the potential regulation of plastic foodservice ware, specifically plastic straws. She discussed the problem and indicated that the United States uses over 500 million straws every day. Many of these straws end up in the landfill or ocean, irreparably harming marine life and making its way into our water supplies. Plastic straws do not biodegrade, rather they breakdown into small pieces known as "microplastics". These microplastics never dissolve and are present in sea salt, tap drinking water, and shellfish. New studies confirm that some microplastics are smaller than dust particles or powdered sugar ingested by marine life, which threatens many species survival. Over 94% of tap water contains microplastics. Plastic straws are the focus of many of the current efforts to ban plastic food service ware due to its prevalence in the ocean. More than 8.3 billion straws pollute the world's beaches and if the current rate of usage continues, by the year 2050 there will be more plastic (by weight) than fish in our oceans. Straws are in the top 10 items of litter picked up during coastal cleanups. Too lightweight to make it through mechanical recycling sorters, plastic straws drop through sorter screens and mix with other materials too small to separate, contaminating recycling loads or getting disposed as garbage. Many of these straws end up in the ocean due to human error or blown out of trashcans. The City of South San Francisco is committed to sustainability, environmental preservation, and reducing greenhouse gas emissions and in 2008 adopted the City's Green Food Packaging ordinance which prohibited food vendors from dispensing prepared food to customers in disposable food service made from polystyrene (SSFMC Chapter 8.60). On April 22, 2013, the City adopted a reusable bag ordinance that prohibited the use of single use carryout bags at retail stores. It required retailers to charge customers for recycled paper bags and reusable bags at point of sale (SSFMC Chapter 8.64). In 2014, the City adopted the Climate Action Plan, which provided guidance in meeting the City's goals to reduce energy usage and greenhouse gas emissions communitywide. In 2016, the City joined the Peninsula Clean Energy, which gave residents and businesses the option to purchase energy from renewable sources. The City encourages residents and businesses to participate in various transit options including the free South City Shuttle service and SCOOP, the commute app. Assistant to the City Manager Fernandez stated that the City's Green Food Packaging ordinance defines the term "disposable food service ware" as "single or non -durable use disposable products used by food vendors in the restaurant or food serving industry for serving or transportation of prepared ready to consume food or beverages," which "includes, but is not limited to, plates, cups, bowls, utensils, cartons, trays, and hinged or lidded containers for takeout foods and/or leftovers from partially consumed meals prepared at food vendors." The City's current definition of "disposable food service ware" does not specifically include plastic straws or stirrers; therefore, plastic straws or stirrers are permitted in the City. Assembly Bill 1884 (AB 1884) prohibits full service restaurants from providing single use plastic straws unless requested by the customer. AB 1884 violations include fines not to exceed $300 annually, enforced by the California Retail Food Code, In San Mateo County, the San Mateo County Environmental Health Office does enforcement. South San Francisco's Green Food Packaging ordinance prohibits food vendors from packaging food in polystyrene. Containers must be biodegradable, compostable, reusable, or recyclable. City facilities are also subject to the Green Food Packaging ordinance as well. Exemptions are included for those situations where a suitable alternative does not exist. The City Manager's Office or designee does enforcement and violations are forwarded to the City Attorney's office for review. The City of Malibu's ordinance, MMC 9.24.045, is looked upon as a model ordinance. Effective June 1, 2018, the City banned straws, plastic stirrers, and plastic cutlery (including bioplastics), encouraging non -petroleum based alternatives only by request. Distribution at any city facility or city -sponsored event is prohibited. Alternative straws allowed in Malibu include paper straws, bamboo, glass, stainless steel, seaweed and sugar. Alternative cutlery allowed includes birchwood, Aspen Wood, bamboo, wheat bran and cornstarch, flours of Jowar, rice, and wheat. The South San Francisco Green Food Packaging Ordinance prohibits plastic cutlery and allows bioplastics. Local efforts include the City of Pacifica's ban on disposable food service ware. Effective November 13, 2018, all that rent or use the City of Pacifica's facilities are prohibited from using plastic straws, plastic stirrers, or plastic cutlery. Theirs is a phased in approach, which allows food vendors to apply for a one-year exemption due to financial hardship. The City Manager's office administers enforcement and is complaint based. SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 2 Over the past year, the San Mateo County's Office of Sustainability developed a Disposable Food Service Ware Ordinance, which bans the use of straws, stirrers, or cocktail toothpicks. Alternatives made of fiber based material such as paper, bamboo, sugarcane, and wheat stalk are encouraged. Bioplastics are not allowed. The ordinance would serve as a model for local governments and the draft will be presented to the Board of Supervisors in late spring or early summer of this year. On December 5, 2018, about 75 local government staff from the Bay Area participated in a daylong workshop called the NextGen Foodware Ordinances: A Policy Lab for Local Government, which focused on policy options for reducing single -use foodware items. As a result, local governments were able to share best practices and experiences regarding disposable food service ware ordinances. The workshop was sponsored by the County of San Mateo's Office of Sustainability and UPSTREAM. The County of San Mateo's Office of Sustainability is launching a door-to-door campaign targeting different food facilities throughout the county, including businesses in South San Francisco in order to obtain a better understanding of the needs, challenges, and opportunities for food service ware, especially around reusables. The County will be working in partnership with the non-profit organization, the Clean Water Fund to reach out to specific restaurants to learn if they might be interested in participating in their Rethink Disposable program, where facilities swap out disposables with reusables. For those interested, Clean Water Fund will offer technical assistance and grants up to $500 to help food facilities with this effort. Assistant to the City Manager Fernandez discussed the following policy alternative options: A. No Alternative: Do not adopt or amend any new ordinances relating to the prohibition of disposable food service ware. The City would continue enforcing the existing Green Food Packaging ordinance, which prohibits the use of polystyrene disposable food service ware and encourages the use of biodegradable, compostable, reusable, or recyclable food service ware. Plastic straws and stirrers would continue to be permitted in the City. B. San Mateo County Ordinance: Defer the drafting of an ordinance until the County completes its Disposable Food Service Ware Ordinance. The Board of Supervisors expected to review a proposed ordinance in late spring or early summer 2019. C. Draft an Ordinance: Direct staff to proceed in drafting a Disposable Food Service Ware Ordinance with guidance on the scope, implementation, and timing. Plastic straws and stirrers would be prohibited in the City. Mayor Matsumoto stated that the City was the first city in San Mateo County to ban styrofoam and suggested following the City of Malibu's ordinance with a phase-in period. She expressed her concern with microplastics and sea life. Vice Mayor Garbarino stated his support to implement an ordinance similar to the City of Malibu. He inquired about the inclusion of full service and fast food restaurants. Assistant to the City Manager Fernandez stated that staff reached out to local restaurants informing them of the meeting and encouraged their feedback. Councilmember Nagales inquired about the current practice of bioplastic recycling at South San Francisco Scavengers. Assistant to the City Manager Fernandez noted that Bioplastics are composed of renewable resources such as corn, sugar, and soy protein and labeled as "compostable." Bioplastics take an average of 4-6 months to degrade. The South San Francisco SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 3 Scavenger Company has the ability to compost some bioplastic materials if it is (1) received from industrial carts (metal carts from businesses) and (2) sent to an industrial composting facility, such as Z Bust. Bioplastics unable to be broken down at Z Bust sent to a landfill. Bioplastics found in residential recycling bins are sent to a landfill as the digesters are unable to break them down. Councilmember Addiego praised the Council on their efforts to ban plastic bags and indicated that the ban of recycled bags was not as successful as intended. He presented compostable products including straws and lids, made out of corn products and indicated that the product must be recycled in a business compost facility. He indicated that the proposed ordinance is a positive initiative and expressed his concern with the implementation of the ordinance that could affect small local businesses. He requested that staff reach out to businesses and other stakeholders and provide Council with an estimated cost for non -plastic alternatives. Assistant to the City Manager Fernandez indicated that the City of Malibu and the County's proposed ordinance do not allow bioplastics because they are not compostable unless recycled in an industrial facility. She indicated that the use of bioplastics would be addressed in the City's proposed ordinance and would only allow biodegradable products. Council directed staff to move forward with an ordinance similar to the City of Malibu and include silverware. Staff would provide Council with additional information pertaining to the possible impact on small local businesses, outreach efforts and the cost of implementing non -plastic alternatives. 2. Study Session: Review and Analysis of Minimum Wage Increase for City of South San Francisco Employees (Leah Lockhart, Human Resources Director) Human Resources Director Lockhart presented the report and discussed possibilities of increasing the minimum wage for City employees to $15 per hour, and consider internal and external factors as well as cost implications based on interest expressed by Council in prior meetings. The discussion would only focus on wage rates for City of South San Francisco employees, and not citywide. She indicated that pursuant to S133, signed by the governor in 2016, the minimum hourly wage for the State of California would incrementally increase to $15.00 by 2022 for employers with more than 25 employees. After 2022, the minimum wage will increase by the national Consumer Price Index. The Cities of Belmont, Daly City, Redwood City and San Mateo have adopted Minimum Wage Ordinances. She noted that the City of San Mateo was the first city to raise the minimum wage to $15.00 followed by the City of Daly City who reset the minimum wage from $11 to $12 as of January 1, 2019, and $13.75 as of January 1, 2020 up to $15.00 on January 1, 1, 2021. She provided an overview of other cities such as Alameda, Berkeley, Cupertino, El Cerrito, Emeryville, Fremont, Los Altos, Milpitas, Mountain View, Oakland, Palo Alto, Richmond, San Francisco, San Jose and San Leandro, which have taken steps to increase minimum wage to $15 in a more aggressive manner than the State's schedule. Most include a CPI Adjustment once they are at 15% with Alameda freezing at $15 until the State CPI adjustment kicks in. Human Resources Director Lockhart stated that the City has 184 hourly employees earning below $15 per hour. Of these, 17 are at the State minimum wage of $12 per hour. Recreation Instructors SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 4 have a general range (no steps) that varies depending on the type of class taught, skill and experience level required. She noted that most of the positions are exclusively hourly, however, there are permanent part-time Recreation Leader III's that are represented by AFSCME. (Rec Leader II represented when full time — currently no permanent employees are in this class). She provided an overview of the various positions and indicated that Recreation Leaders work in a variety of recreation and community service programs, including before and after school programs, preschool, summer camps, adult day care, sports and aquatics. The three levels are distinguished by level of experience or education and are required for the specific program and level of responsibility. Level I Recreation Leaders are frequently hired as high school students with limited work experience (do not supervise minors unassisted). A high school diploma is required for Levels II and III. Recreation Leader III are assigned to licensed childcare and pre-school programs are also required to have specific experience and education requirements (12 college semester units in specified areas of study). She indicated that a minimum wage increase would have a differential pay rate impact on the Library Clerk and Library Page positions. She presented considerations for increasing wages including recruitment and retention, fiscal impact, internal alignment/wage compression, other equity concerns. All adjustments for represented positions are subject to bargaining. Recruitment has been challenging for most positions within the City, particularly for the Parks and Recreation and Library Departments. These departments have had difficulty in recruiting and keeping employees due to higher wages in surrounding areas and the dramatic increase in the cost of housing. Internal alignment would look at reporting relationships and levels within a series, keeping the appropriate compensation for increased responsibilities as well as qualifications. She discussed other equity concerns such as providing adjustments for one group of employees and other groups expressing concern about equivalent adjustments. She indicated that the Recreation Leader II/III and higher positions in the series would need to meet and confer with appropriate bargaining units before implementing any changes. She discussed the Financial Impact, with an increase to $15 minimum wage and equity adjustments for the entire job series. The first assumes adjusting the entire job series through the Supervisor level by the same dollar amount. If the positions making $12 increase to $15, all positions within the series would receive the same dollar amount increase. The estimate based on budgeted FTE with CalPERS benefits included, for those positions in CalPERS. The estimated net cost for calendar year 2019 - $366, 911; calendar year 2020 - $556,364, calendar year 2021 - $279,892 with no difference in calendar year 2022 because the State Minimum Wage catches up. The second Financial Impact scenario increased only job classifications with steps below $15/hour, the impact would be much smaller. It included Recreation instructors, Recreation Leader I -III, Library Clerk and Library Page. The estimated net cost for calendar year 2019 - $83,432, calendar year 2020 - $122,481, calendar year 2021 - $61,290 with no difference in calendar year 2022. Human Resources Director Lockhart discussed Wage Compression, change in internal alignment if increase applied to only those below $15/hour (top step to top step). If Council chose to adjust only the positions below the minimum, there is an expected 20% reduction in the differential between SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 5 levels. Positions have a range of five (5) steps, which is a range of about 22%, so anything less than 22% would mean there is overlap between the levels. Generally recommend a minimum of 15-20% between levels however; staff would consider responsibilities and qualifications for each position. She provided Council with three options for their consideration. Maintain status quo (comply with State Minimum Wage) — consider stepping up in increments that are still earlier than state increases ($13.50, $15.00) 2. Pursue increase to classifications with steps below $15.00 only — consider exploring smaller increase or smaller increments. 3. Pursue increase with equity adjustments — consider exploring alternatives for limited equity adjustments at lower net cost, changes subject to bargaining approval. Councilmember Nicolas stated her support with minimum wage increase but expressed her concern with compaction rates between positions. Human Resources Director Lockhart indicated that the Recreation Leader II (hourly) and Recreation III would require restructuring of positions including salary. Vice Mayor Garbarino stated his concern with employees reaching the minimum wage salary of $15.00 and future salary increases. Human Resources Director Lockhart stated that cost of living adjustments in the future would keep staff above the state minimum wage Councilmember Nagales stated his support of an increase to meet the $15 minimum wage and requested a citywide salary evaluation. Mayor Matsumoto stated her desire to implement a $15 minimum wage increase by January 2020 and continue discussion of citywide implementation by July 1, 2020. She discussed the need for a salary increase to help employees afford everyday expenses. The following speakers addressed the City Council: Rayna Lehman, San Mateo Labor Council, thanked Council for their compassion and understanding of the county and regional needs. He stated his support of a citywide minimum wage ordinance that would apply to all employers and workers. Mr. Lehman stated that the $15 minimum wage salary increase is not enough but it is a good placeholder, taking into consideration yearly Cost of Living Increases. He suggested that the City implement and then pursue citywide ordinance by 2020 to bring the city into conformance into what other cities are doing. He thanked Council for their consideration on behalf of the San Mateo Labor Council. Rich Hedges, San Mateo Labor Council, congratulated Council on their housing project efforts and noted that the $15 minimum wage increase will help employees and their families. Jack Avery, United Way Bay Area, congratulated Council for their efforts in helping city employees and increasing the minimum wage to $15 and for their consideration of a citywide ordinance. City Manager Futrell provided an overview of the financial impact for the alternatives presented. He indicated that the cost for the first alternative would be $556,364 for calendar year 2020 and $279,892 for calendar year 2021. The second alternative, without addressing compaction and only considering employees that earn below $12.00 would have a cost of $122,481 for calendar year 2020 and $61,290 for calendar year 2021. SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 6 Council directed staff to increase minimum wage to $15 effective July 1, 2019, brining employees to the State's minimum wage and requested that staff create a citywide ordinance increasing the minimum wage throughout the City to be effective January 2020. The City Attorney and City Manager will create a draft ordinance for Council's consideration and outreach to the community and the South San Francisco Chamber of Commerce for their comments. 4. Report regarding a Study Session on the potential regulation of flavored tobacco, including e -cigarettes in South San Francisco. (Christina Fernandez, City Manager's Office) Assistant to the City Manager Fernandez presented the report and stated that according to the California Department of Public Health, 80% of young people who used tobacco started with a flavored tobacco product. A majority of youth report flavoring as a leading reason for using tobacco products. This includes 82% of e -cigarette users, 79% of hookah users, 74% of cigar users, and 69% of smokeless users. Flavors such as watermelon, cherry, chocolate, mint, and gummy bear appeal to kids and teens. Flavorings mask the taste of tobacco making it more palatable for youth to begin tobacco use. Flavored tobacco products also use the same flavoring chemicals as Jolly Rancher, Kool-Aid, and Life Savers. Certain minority groups also disproportionately use flavored tobacco products, including menthol cigarettes. In one survey, 82.6% of African American cigarette smokers reported smoking menthol cigarettes in the month prior. The U.S. Surgeon General warns that flavored tobacco products help new users establish habits that lead to long-term addiction. Flavors like menthol in tobacco products make it more difficult for users to quit. All nicotine products are addictive and increase the risk of developing serious health problems including cancer, heart disease, and emphysema. In 2009, the Federal Government passed the Family Smoking Prevention and Tobacco Control Act that banned the manufacture of flavored cigarettes. Menthol cigarettes were exempt from the ban. The ban also does not restrict non -cigarette tobacco products such as smokeless tobacco. More recently, the Food and Drug Administration announced a new plan to protect youth by preventing access to flavored tobacco and banning menthol in cigarettes. The proposed plan would ban menthol cigarettes finding that menthol cigarettes are easier to smoke and harder to quit. It is also the choice combustible cigarette for youth and underserved communities. Most commonly used among youth, e -cigarettes deliver flavorings, nicotine and other additives via an inhaled aerosol. E -cigarettes entered the marketplace in 2007, and since 2014 have been the most commonly used tobacco product among youth. E -cigarette use among U.S. middle and high school students have increased 900% between 2011-2015. During the past year, e -cigarette use has increased 78% among high school students. In 2018, more than 3.6 million U.S. youth, including 1 in 5 high school students and 1 in 20 middle school students currently use e -cigarettes. The chemical Diacetyl found in 75% of flavored e -liquids and linked to "popcorn lung" which causes irreversible lung damage. She stated that in 2008, the City enacted South San Francisco Municipal Code (SSFMC) Section 6.46.010 "Authorization of enforcement by San Mateo County personnel" which adopts by reference San Mateo County Ordinance Code Chapter 4.98 "Tobacco Retailer Permit." San Mateo County Ordinance Chapter 4.98 requires all retailers to obtain and maintain a valid tobacco retailer's permit from San Mateo County for each location where tobacco products are sold. Further, Chapter 4.98 authorizes the County's Environmental Health Division to hold hearings, SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 7 suspend permits, and issue administrative fines in enforcing the governing of tobacco retailer permits. The adoption of SSFMC Section 6.46.010 is significant as it serves as the mechanism for enforcement should the City Council decide to adopt a Flavored Tobacco Ban. In 2012, the City enacted SSFMC Chapter 20.420 "Prohibition on new significant tobacco retailers," which regulates a business whose principal or core is selling tobacco products and/or paraphernalia. Significant tobacco retailers are defined as any tobacco retailer with 20 percent or more of floor area and display area devoted to the sale or exchange of tobacco products, tobacco paraphernalia, or both; or 50 percent or more of completed sales transactions include tobacco products or paraphernalia. The city has two significant tobacco retailers, the Vaping Buddha and South City Smoke and Vape Shop. Prime Co Wholesale only sells to wholesale customers In 2009, the federal government passed the Family Smoking Prevention and Tobacco Control Act that banned the manufacture of flavored cigarettes but exempted menthol cigarettes. It also does not restrict e -cigarettes or smokeless tobacco. The FDA recently announced a new plan limiting youth access to menthol cigarettes. In June 2018, the County prohibited the sale of any flavored tobacco product, including flavored e - cigarettes. (See San Mateo County Ordinance Code Chapter 4.99 "Sales of flavored tobacco products and pharmacy sales of tobacco products.") In addition, the County prohibits the sale of any tobacco products by a pharmacy. The County prohibited menthol as a characterizing flavor and included electronic devices (i.e. e -cigarettes) in their definition of "tobacco," but duty-free retail stores at the San Francisco International Airport (SFO) are exempt. The County authorizes its Health System Chief for enforcement pursuant to the administrative procedures set forth in the Chapter 4.98 of the County's Code. In the fall of 2018, the Town of Portola Valley and City of Half Moon Bay have adopted flavored tobacco ordinances, which also prohibit flavored e -cigarettes. Like tobacco retailers operating in unincorporated areas, tobacco retailers in Portola Valley and Half Moon Bay will be prohibited from selling any flavored tobacco products in their retail stores. On March 25, 2019, the City of San Carlos also introduced an ordinance to prohibit the sale of flavored tobacco products and sale of tobacco products in pharmacies. The County of Santa Clara was the first city to ban flavored tobacco in 2015. However, adult only tobacco businesses are exempt from this ban. Adult only tobacco businesses generate more than 60% of their gross revenue from tobacco and do not allow minors on the premises without a parent. In June 2017, the City and County of San Francisco passed a citywide ban on the sale of flavored tobacco products such as menthol cigarettes, fruit flavored vape liquids, and any other tobacco products with flavoring. Local merchants gathered signatures for a referendum petition and launched a repeal campaign. The campaign was supported by $700,000 from tobacco company R.J. Reynolds. The petition required the Board of Supervisors to reconsider the ordinance in September 2017. The Board of Supervisors unanimously supported upholding the ban. Per San Francisco law, the referendum was automatically placed on the June 2018 ballot as Proposition E. Proposition E prohibited local tobacco retailers from selling flavored tobacco products and was passed by San Francisco voters by 68.39%. On March 19, 2019, the City and County of San Francisco in conjunction with the cities of Chicago and New York sent a joint letter demanding that the U.S. Food and Drug Administration (FDA) evaluate the effect of e -cigarettes on public health in a FDA review. Simultaneously, San Francisco SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 8 County Supervisor Shamann Walton introduced legislation banning the sale of e -cigarettes in San Francisco unless the FDA provides San Francisco with an FDA review. Supervisor Walton also introduced legislation that prohibits making, selling, or distributing tobacco on city property, namely aimed at the e -cigarette company Juul Labs located at Pier 70. In March of this year, the cities of San Francisco, Chicago and New York sent a joint letter to the FDA demanding a review of the effects of e -cigarettes on public health. A San Francisco Supervisor then introduced legislation banning the sale of e -cigarettes in San Francisco unless the FDA provides a review. The legislation also prohibits the making, selling, or distribution of tobacco on city property. She noted that, as with any new legislation there will be challenges surrounding implementation, enforcement, and scope. Cities and counties nationwide are exploring legislation to curb youth access to e -cigarettes and flavored tobacco. However, challenges around enforcement remain. The County of San Mateo enforces its ordinance by relying on the Health System Chief to enforce Chapter 4.99 by suspending a tobacco retailer's permit and/or imposing administrative fines following enumerated procedures and amounts. Administrative fines range from $100 for the first violation and range up to $500 for a third and subsequent violations. Each day that tobacco products are offered for sale without a permit constitutes a separate violation. Assistant to the City Manager Fernandez discussed policy alternatives such as A. Maintain and Enforce Existing Municipal Code SSFMC Chapter 20.420 prohibits the establishment of new significant tobacco retailers in all zones throughout the City. No permit or any other license will be approved or issued for the establishment of new significant tobacco retailers. Because the City adopted by reference the San Mateo County Ordinance prohibiting the sale of any tobacco products without obtaining a permit, the San Mateo County's Department of Environmental Health is authorized to enforce current regulations regarding tobacco sale in the county. (SSFMC § 6.46.010) Of note, the use of e -cigarettes is generally prohibited in City buildings, City -owned parking structures, City vehicles, the City's parks and recreations areas, within twenty feet of City buildings, all City -owned parking lots, the City's downtown core, any open-air public places on City -owned property, multi -unit residences, and common areas of multi -unit residences. (SSFMC § 8.50.090). However, the sale of flavored and unflavored e -cigarettes is permitted within the City. B. Ban Flavored Tobacco Products, Including Flavored E -Cigarettes but Not Unflavored E -Cigarettes Many cities have banned the sale of flavored tobacco products due to its prevalence among youth. The City may choose to ban all flavored tobacco products including flavored vape liquids and flavored e -cigarettes, but exempt unflavored e -cigarettes in order to make it available to adults who rely on unflavored e -cigarettes as an alternative to smoking traditional cigarettes. The FDA has proposed the ban on the sale of all e -cigarettes (with an exception of mint and menthol flavors) in stores that do not have areas prohibiting kids under the age of 18. However, a SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 9 2018 Truth Initiative survey of more than 1,000 people between the ages of 12-17 years old and more than 500 people between the ages of 18-24 years old found that mint is a top three flavor among JUUL users only behind fruit and mango. Similarly, on December 3, 2018, Senate Bill 38 (SB 38) was introduced in the California State Legislature to prohibit the sale of flavored tobacco products, which includes e -cigarettes. A hearing on SB 38 is set for March 27, 2019. C. Ban Flavored Tobacco Products and All E -Cigarettes There has yet to be a city to ban the sale of all e -cigarettes. Recently, the County and City of San Francisco introduced legislation to ban both flavored tobacco and all e -cigarettes if the FDA fails to provide them with a review of its effects on public health. The City may choose to ban the use of flavored tobacco and all e -cigarettes as the two products are frequently used together. Councilmember Nagales stated his concern with the use of flavored tobacco and e -cigarettes amongst youth and expressed his desire to help educate youth on the health impacts. He suggested following the County's direction with enforcement being complaint driven and imposing administrative fines with strict consequences. Assistant to the City Manager Fernandez stated that the County has power to suspend permits and indicated that repeat violations can lead to permit suspension. Vice Mayor Garbarino indicated that the tobacco industries have found a way to attract youth to purchasing of their products and suggested drafting an ordinance that includes serious fine for ordinance violations in an effort to protect the youth. Councilmember Addiego expressed his support in protecting youth access to tobacco products without imposing or affecting adult users. The following speakers addressed the City Council: Craig Wingate, Public Health Educator with the County of San Mateo discussed the County's Tobacco Prevention Program. He stated that flavored tobacco includes e -cigarettes and vapes and reported that youth consumption has increased significantly. Studies have shown that e -cigarettes contain aerosol with 35 cases identified where users have experienced convulsions and seizures. Mayor Matsumoto requested clarification of e -cigarettes and vaping. Mr. Wingate stated that e - cigarette became more of a device that looks like a USB and not a cigarette. Vaping is the product that comes out of vaping device (smells sweet). Beilal Chatila stated that his concern with the ban of tobacco products and noted that the City of San Pablo implemented a ban using the results of eight surveys. He suggested that future regulations and control be sensible and considerate of impacts. Aija Goto, owner of Vaping Buddha of South San Francisco, stated that youth are able to purchase tobacco products online and stated that Vaping Buddha has been in business for several years operating an age restricting facility -restricting access to minors. She requested that Council consider the possible impacts of a citywide ban and the affects it will have on local retailers. Anthony Raffaro, a customer of Vaping Buddha, expressed his support in regulating and restricting youth access to tobacco products. SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 10 Mohsen Mohsen, owner of South City Smoke and Vape Shop, discussed his investment in improving the appearance of his shop in the downtown corridor and indicated that his business is for adult user's only, restricting access to youth. Mr. Mohsen expressed his concern with a possible ban and requested that Council consider the impact it may have on the existing two businesses of the City. Evelyn Fung, representative of North County Prevention Partnerships, provided an overview of recent studies on products that contain Nicotine and youth consumption of those products. Surveys show that students get access to tobacco products at local stores, online and older family members. She stated a rise in the consumption of JUUL tanks amongst teenagers. JUUL is a cartridge that resembles a USB, and contains about the same amount of nicotine as one pack of cigarettes and delivers approximately 200 puffs. She indicated her concern with the South San Francisco Unified School District's current enforcement of e -cigarettes and tobacco products, noting that students are consuming during class time. Council directed staff to draft an ordinance similar to the San Mateo County, Town of Portola Valley and City of Half Moon Bay prohibiting the sale of flavored tobacco, including all types of e - cigarettes. The ordinance would restrict sales from major stores such as 7'11, Walgreens and Safeway, excluding adult only businesses with an increase in fines. Council also requested that staff present the County's enforcement history and fines, explore enforcement by City Manager vs the County of San Mateo — Environmental Health Services). City Attorney Chan stated that the County of San Mateo has done significant outreach to gain compliance. 5. Study session regarding a comprehensive financial review of the City of South San Francisco, including pension costs (Christina Crosby, Interim Director of Finance) Financial Services Manager Lovell presented a comprehensive financial review of the City of South San Francisco, including pension costs. He indicated that like other general law cities of its kind, the City of South San Francisco (City) obtains the majority of its funding through taxes to provide services to the community. The City's primary taxes are property tax, sales tax, and transient occupancy tax (TOT), all accounted for in the City's General Fund. The General Fund serves as the City's primary operating fund, and as such, is the primary focus of the study session. He provided an overview of the City's major revenues: Property Tax Since 1978, the property tax framework has been guided by Proposition 13, which includes the following principal tenets: 1. Annual property tax assessment is limited to one percent (1%) of the assessed value (AV) of land and improvements. 2. Annual increase in assessed value is limited to no more than two percent (2%). 3. Allocation of the 1% property tax between public entities is largely static. In San Mateo County, on average, school districts receive 43 percent, the County receives 26 percent, and local municipalities receive 18 percent. In other words, for every dollar.paid in property tax, local cities receive $0.18. 4. Property is re -appraised to current full value immediately upon a change in ownership. SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 11 At 30 percent of total General Fund revenues, property tax is the City's top revenue source. In Fiscal Year (FY) 2017-18, the City received $34.1 million in property tax, the majority of which came from current year secured property tax ($17.4 million). Sales Tax The State of California began imposing sales tax on retailers for the privilege of selling tangible personal property in 1933. In 1935, the state added "use tax" to protect retailers from then tax-free, out-of-state competitors. Over the course of a decade, 324 local cities established their own sales taxes. In an effort to promote administrative efficiency and uniformity, the Legislature passed the Bradley -Burns Local Sales and Use Tax Law in 1955 (Bradley -Burns). Of the current 9.25 percent sales tax rate in South San Francisco, the City receives 1.0 percent, pursuant to Bradley -Burns, and 0.5 percent, pursuant to Measure W, which was approved by South San Francisco voters in November 2015. In FY 2017-18, the City received $17.6 million in sales tax revenues, which represented 15 percent of total General Fund revenues. Measure W revenues totaled $11 million. Since inception, the City has received $21.5 million in Measure W revenues. Transient Occupancy Tax (TOT) TOT is a general tax imposed on occupants for the privilege of occupying a room in a hotel, motel, inn, etc. The City's current TOT rate is 10 percent per transaction, plus the South San Francisco Conference Center tax of $2.50 per night/room. FY 2017-18 TOT revenues were $14.0 million, or 12 percent of total General Fund revenues. On November 6, 2018, South San Francisco voters approved Measure FF, which will increase the TOT rate from 10 to 12 percent as of January 1, 2019, 13 percent as of January 1, 2020, and finally, 14 percent as of January 1, 2021. As illustrated in Attachment 1, tax revenues, including all of the aforementioned taxes, business license taxes, and property transfer taxes, totaled $71.6 million, or 64 percent of total General Fund revenues in FY 2017-18. Due to the reliance upon tax revenues for operational funding, local government entities, such as the City of South San Francisco, are susceptible to the ebb and flow of the local, state, and national economy. Reliance upon tax revenues poses a challenge to service delivery during periods of economic contractions, as employee salaries and benefits comprise 77 percent of the City's General Fund operating costs. Financial Services Manager Lovell presented the General Fund Expenditures for FY 2017/18 and noted that FY 2017-18, excluding transfers, from a department perspective, the City's Fire and Police departments comprised 55 percent of total General Fund expenditures, common for full service City government operations. He provided an overview of the General Fund expenditures by type, where employee salaries and benefits cost $74.7 million, or 77 percent of total General Fund expenditures in FY 2017-18. Within that expenditure category, $46.3 million spent on employee salaries, and the remaining $28.4 million for employee benefits. Of the $28.4 million in employee benefits in FY 2017-18, $15.3 million, or 20 percent of total employee costs, reflected the City's payment to Ca1PERS. SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 12 He provided Council with CalPERS background and indicated that it is the largest Public Pension system in the United States. He presented historical and projected CalPERS pension contributions and the percentage of total General Fund expenditures. He noted that pensions would continue to take on a greater proportional share of General Fund expenditures every year. He discussed CalPERS' Investment Earnings and stated that for every dollar of pension benefits paid to retired annuitants over the past twenty years, 59 cents is funded by CalPERS investment earnings, while 28 cents comes from contributions from CalPERS employers, and the remaining 13 cents comes from contributions from CalPERS members. CalPERS' dependence on its investment earnings to pay pension benefits, when in contrast against the investment volatility it has experienced, has played a major role in escalating pension costs. CalPERS' historical return on investment (ROI) in comparison to the discount rate, which is the expected rate of return over a long period. In CalPERS's case, the time horizon for measuring long- term investment returns is 30 years. Over the past 24 years, CalPERS' annual rate of return has been as high as 20 percent in FY 1996-97 to as low as negative 23 percent in FY 2008-09. In order to address the investment volatility while ensuring long-term sustainability, CalPERS has implemented a number of significant changes to its policies and actuarial assumptions. In 2013, CalPERS shifted from a 30 -year open amortization of its pension liabilities to a 30 -year closed amortization. In the former, the Unfunded Accrued Liability (UAL) refinanced each year for another 30 -year period. In the latter, the UAL would be fully paid by the end of the amortization period. Within the 30 -year amortization, Ca1PERS implemented a ramping method to mitigate the impact of investment gains/losses and changes in actuarial assumptions. Within the 30 -year period, the amortized cost of the first five years is gradually ramped up, 20 percent each year. If the annual cost of a particular amortization base $100,000 per year, the then the cost in Year 1 would be $20,000. In Year 2, the cost would increase to $40,000, and so on. While this methodology is favorable in the short term, it is more costly to the employer in the long term, as there is less principal being paid than would be under normal amortization, and the total principal balance to pay off ends up being higher than the actual UAL due to the cost of interest. This phenomenon is known as negative amortization. At the tail end of the 30 -year amortization period, the annual payment would go through a "ramp down" process, which is a reverse of the 5 -year ramp up process. In 2015, CalPERS adopted a funding risk mitigation policy, which established investment -related events that would be triggered if certain criteria were met. For example, if actual investment returns exceeded the discount rate by 4.0 percent, the discount rate would be reduced by 5 basis points (0.05 percent). While higher investment returns may be welcome by some, from CalPERS perspective, the deviation from expected outcome is an indication that the investment portfolio's risk profile (i.e. the proportion of CalPERS assets invested in higher risk investment vehicles) is too high. In December 2016, the CalPERS Board of Administration approved a reduction of the discount rate from 7.5 to 7.0 percent. The reduction reflects the impact of a relatively low interest rate market on Ca1PERS long-term investment projections. While Governor Brown preferred to implement the accompanying increase in employer contribution rate immediately, the sharp contribution increase would have put several CalPERS member agencies into fiscal duress. As a compromise, CalPERS agreed to phase in the discount rate reduction over a three-year period. Factoring in the five-year ramp up method, the full impact of the discount rate reduction would not felt until seven years after SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 13 implementation of the first amortization base. The CalPERS Board temporarily suspended the funding risk mitigation policy discussed above until further notice. In February 2018, CalPERS reduced the period to amortize gains and losses from 30 to 20 years. While the long-term cost to member agencies will be lower, the contribution rates will be higher in the short term. A similar analogy would be paying off a mortgage over 20 years rather than the traditional 30 years. The long-term cost is lower due to higher principal payments, shorter amortization period, and reduced interest expense. He provided an overview of key pension terms and concepts. Stating that Public pensions, such as those available through CalPERS, are defined benefit plans, where an employee's pension earnings are calculated based on the length of service and the highest salary, which typically is at the end of their career. CalPERS members are identified as either "Classic" or "PEPRA". Classic members were a member of CalPERS before January 1, 2013. Any new members hired on or after January 1, 2013 are subject to a less rich pension benefit pursuant to the Public Employees' Pension Reform Act (PEPRA). Prior to PEPRA, the City Council adopted a second Classic tier for both the miscellaneous and safety pension plans to address the City's pension liabilities. As such, pension benefit tiers are as follows in the City of South San Francisco, where the member earns a percent for every year of service, with the latter portion of the formula reflects the retirement age. Pension Plan Tier 1 Classic Tier 2 Classic PEPRA Miscellaneous 2.7% @ 55 2.0% 60 2.0% @ 62 Safety 3.0% a� 50 3.0% 55 2.7% a,, 57 A net pension liability exists when pension plan liabilities exceed pension plan assets. Pension plan assets include investment earnings, employer pension contributions, and employee pension contributions. Pension plan liabilities reflect investment losses and changes in actuarial assumptions. To avoid extreme volatility, the above liabilities are amortized or spread over a long period of time, similar to a mortgage. Each year, any investment deviation from the discount rate, whether a gain or loss, is recognized as an amortization base. Each subsequent year over the 20 -year amortization period, CalPERS assesses the annual amortized annual payment for each of the existing amortization bases. Attachment 6 provides the amortization bases as reflected in CaIPERS' annual actuarial valuation for the miscellaneous and safety pension plans. On July 17, 2018, County of San Mateo Civil Grand Jury released a report entitled "Soaring City Pension Costs - Time for Hard Choices." There were multiple recommendations, including scheduling public hearings, posting detailed pension obligations on the City website and have City staff prepare and post a plan to address pension costs by June 30, 2019. The City has addressed the first two recommendations but has not adopted a formal plan as of yet. He stated that the City Council already implemented a number of options to address pension liabilities such as in 2010, the City Council established a second pension tier for classic CalPERS members. Any employee hired on or after April 25, 2010 falls under the second pension tier. For any miscellaneous members (non-public safety), the pension formula is 2.0% @ 60, as opposed to 2.7% @ 55 for tier 1 members. Any safety members earn 3.0% @ 55, as opposed to 3.0% @ 50. SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 14 In FY 2015-16, the City established the Ca1PERS Stabilization Reserve to address pension contribution volatility. In July 2017, the Council approved agreements with public safety employees, which include International Association of Firefighters Local 1507 (IAFF), Police Officers Association (POA), Public Safety Managers (PSM), and Executive Management. These agreements outlined provisions for employee cost-sharing of City contributions to Ca1PERS as part of a long-term strategy to reduce the City's pension costs. The plan includes an increase in employee contributions to pension by 3% of salary, for a total employee contribution of 12% of salary. This will reduce the City's costs by the same amount. The increases scheduled to occur in 1% increments in each fiscal year from 2017 to 2019. In FY 19-20 City Council moved forward with two ballot measures to increase the City's tax base, Measure FF and Measure LL. Measure FF increases hotel Transient Occupancy Tax (TOT) by 2% in 2019. The ballot measure also authorized an additional 1% each year to a maximum TOT rate of 14%. Measure FF first increased the City's TOT rate to 12% effective January 1, 2019. Subsequently, it will then increase the City's TOT rate to 13% effective January 1, 2020. Finally, Measure FF would increase the City's TOT rate to a maximum of 14% effective January 1, 2021. This estimated to generate approximately $5.9 million of additional revenue annually for the General Fund. In addition to Measure FF, Measure LL set the business license tax for all types of commercial cannabis operations permitted within the City at a minimum rate of 1% for gross receipts. Additionally, it established maximum rates for permitted cannabis uses: a maximum of 2.5% of gross receipts for Testing, a maximum of 4% of gross receipts for Cultivation; a maximum of 3% of gross receipts for Distribution, a maximum of 5% of gross receipts for Manufacturing, and a maximum of 5% of gross receipts for Delivery Only. Interim Director of Finance Crosby provided an overview of options to address pension liabilities. 1. The City could consider paying funds in addition to the required annual contribution to pay down existing amortization bases. The additional funds would reduce the principal balance on the amortization base; shorten the period of time that the amortization base is paid, thus reducing the accompanying interest expense. The City's 10 -year financial forecast, depicts the projected outcome with no additional contributions to Ca1PERS. City staff projects operating outcomes that range from a deficit of $0.5M in FY 2028-29 to a surplus of $3.5M in FY 2021-22. The City's reserves, including General Fund Reserve, Infrastructure Reserve, and the Ca1PERS Stabilization Reserve are projected to end FY 2028-29 with a balance of $13.3 million, and a projected pension liability of $130.0 million. The City could contribute $1.0 million additional funds per year to Ca1PERS beginning in FY 2022-23. In this scenario, staff projects operating outcomes ranging from a deficit of $0.7 million in FY 2028-29 to a surplus of $3.7 million in FY 2021-22. Additional contributions to Ca1PERS reduce the pension liability by $6.8 million, from $130.0 million to $123.2 million in FY 2028-29. In February 2014, the City Council authorized investment of $13.5 million in funds with the California Employers' Retiree Benefit Trust (CERBT) that had accumulated over a number of years in an internal service fund, intended to address the City's Other Post -Employment Benefits (OPEB) liability. The trust fund assets included in CERBT can be directly netted against the City's OPEB liability on the City's Comprehensive Annual Financial Statement (CAFR). This figure is noted as the Net OPEB liability. Since that time, the City's operating budget has included budget appropriations to ensure ongoing contributions to CERBT. As of September 30, 2018, the City's CERBT balance is $22,526,702. SPECIAL CITY COUNCIL MEETING APRIL 9, 2019 MINUTES PAGE 15 2. Similar to the above concept, as one viable option to address pension liabilities, the City Council could invest funds into a Section 115 pension trust fund. However, there is one distinct accounting nuance with pension trust funds. Any assets from a pension trust fund are not directly netted against pension liabilities. Instead, they are reported as a restricted asset on the entity -wide financial statement in the CAFR. While the net position (the bottom line) is still the same, for some agencies, this nuance is a deterrent. If the City invested the current balance of $5.5 million in the CalPERS Stabilization Reserve, then beginning in FY 2022- 23, $1.0 million on an annual basis into a Section 115 pension trust fund with a discount rate of 5.0 percent, as illustrated in Attachment 9, the City's net pension liability would be reduced by $19.0 million, from $130.0 million to $111.0 million. 3. Most consultants recommend using a combination of different approaches to address outstanding CalPERS obligations. Below are some of the most recommended: • Continue to explore ways to raise revenue and increase the tax base. In addition to the above ballot measures the City is currently proactive in cost recovery and analyzes our Master Fee Schedule to ensure that we are charging adequately for service delivery. • Continue to explore potentially contributing a percentage of General Fund surplus at the end of the fiscal year to the existing CalPERS Stabilization Reserve. • Continue to work toward employee cost sharing for the City's contribution to CalPERS with additional labor groups to lower the City's contribution to CalPERS. • Continue to explore the possibility of creating a 115 Pension Trust fund with the existing $5.5 million in the CalPERS Stabilization Reserve. Interim Director of Finance Crosby stated that staff recommends Council consider expanding the current Multi -pronged approach expanding current revenue and tax base, potential surplus of General Fund to CalPERS Stabilization Reserve, lower the City's CalPERS contribution through continued and expanded cost-sharing with labor groups, and continue to explore the possibility of a 155 Pension Trust Fund. City Manager Futrell stated that the City has seen an impact on recruitment due to retirement benefits, indicating that the salary cap is $124k for purposes of calculating retirement benefits. In 2010, the City implemented 2% at 60 and 3% at 55 for member of the safety unit. He indicated that the City's 10 -year financial forecast, if forecasted correctly, is positive. Council directed staff to continue to explore Section 115 Pension Trust and noted that the City has paid $17 million to Ca1PERS. The City must ensure proper funding of pension benefits until legislators fix the problem. ADJOURNMENT Being no further business, Mayor Matsumoto adjourned the meeting at 8:45 p.m. Su itted by: i X M 4valx, Rosa Govea Acosta, CMC, CPMC City Clerk SPECIAL CITY COUNCIL MEETING MINUTES Approved by: i katsto Mayor APRIL 9, 2019 PAGE 16