‘MINUTES’ for Six Noteworthy 10 January 2012 City Council Agenda Items

“MINUTES”
REGULAR CITY COUNCIL MEETING
CITY OF CARMEL-BY-THE-SEA
Tuesday, January 10, 2012

Archived Video Streaming

City Hall
East side of Monte Verde Street between Ocean and Seventh Avenues

II. Roll Call

PRESENT: Council Members Burnett, Sharp, Talmage, and Mayor McCloud

ABSENT: Council Member Hazdovac

STAFF PRESENT (partial list): Jason Stilwell, City Administrator
Molly Laughlin, Deputy City Clerk
Don Freeman, City Attorney
Andrew Miller, Monterey Fire Chief

V. Announcements from Closed Session, from City Council Members and the City Administrator.

B. Announcements from City Council members (Council members may ask a question for clarification, make a brief announcement or report on his or her activities).

1. Receive Mayor’s Annual Report

Mayor McCloud did not present the Mayor’s Annual Report; the City said that the “2012 Annual Report has not yet been drafted.”

C. Announcements from City Administrator.

1. Present FY 2010-11 Draft Audited Financial Statements by Ralph Marcello, Marcello & Company CPAs.

Ralph Marcello presented a summary of the FY 2010-11 Draft Audited Financial Statements, including the City reported a loss of $340,000 (compared to a loss of $740,000 in FY 2009/10), $700,000 from State grants, total revenue increase of 3% from previous year and general revenue (discretionary) increase of 1% over the prior year. The major topic for cities is to get out of defined benefit pension plan and switch to a defined contribution plan. The City of Carmel-by-the-Sea provides salaries and benefits not available in the private sector today and therefore the City has the upper hand in union negotiations. Cities may be able to borrow money to pay off their pension obligations, but cities do not have the financial resources to make the debt service payments. The auditor’s opinion was “unqualified,” the highest rating opinion. The City will have to report its unfunded liability at a future date per GASB (Governmental Accounting Standards Board).

3. Fire Services contract update.

City Administrator Stilwell presented the Fire Services contract update. Stilwell announced the retirement of Carmel Fire Fighter Mitch Kastros and stated that Monterey Fire Captain Lou Valdez will move in to fill the vacancy. He announced two transitions beginning January 1, 2012; one transition of the Carmel Fire Department to Staff of the Monterey Fire Department and the other transition of the Carmel Regional Fire and Ambulance (CRFA) to the City of Carmel.

X. Resolutions

A. Consideration of a Resolution entering into a Joint Powers Agreement (JPA) for the purposes of water governance.

City Administrator Stilwell presented the staff report. The Mayors of the six Peninsula Cities of Carmel-by-the-Sea, Del Rey Oaks, Monterey, Pacific Grove, Sand City and Seaside decided to form the Monterey Peninsula Regional Water Authority, a Joint Powers Authority, for the purpose of developing a timely regional water project and/or water supply alternative projects. The City Councils of the respective cities will consider the JPA on their respective agendas in January 2012.

City Attorney Don Freeman, city attorney for the City of Carmel-by-the-Sea and the City of Seaside, stated that the document was prepared by the law firm BROWNSTEIN/HYATT/FARBER/SCHRECK of Santa Barbara and attorney Dan Archer, KENNEDY, ARCHER & HARRAY, reviewed the document for the City of Carmel-by-the-Sea.

Mayor McCloud stated that the JPA was decided upon mainly so that the mayors can speak with “one voice” concerning governance. The Mayors briefed Supervisors Dave Potter and Simon Salinas, Cal-Am President, Water District General Manager, Marina Coast General Manager, Monterey Regional Water Pollution Control Agency (MRWPCA) and Waste Management District. The Mayors agreed that the JPA documents preparation (legal costs) was not to exceed $15,000, funded by the six cities, and the JPA is not formed until all six cities adopt the JPA.

Council Member Burnett expressed his concerns about the ratepayers in the unincorporated areas. He stated the focus should be on replacement projects and the inclusion of the County for discussion purposes.

Mayor McCloud opened the meeting to public comment.

Dale Hekhuis expressed support for a JPA, but expressed serious concerns about JPA powers, membership, expertise, budget and the need for requirements for cost controls. He said the JPA was too generic and bureaucratic and recommended the cities start over and focus on cost control, efficiency and project focus.

Amy White, LandWatch Executive Director, expressed concerns about the lack of representation for the unincorporated areas, viable projects and lack of public participation in developing JPA.

Roger Dolan, representing Carmel Valley Association, endorsed the formation of the JPA but advocated for the inclusion of the Water Management District.

Rich Pepe advocated action on the JPA

Monte Miller asked whether the JPA could be modified to include the Water Management District.

Keith Israel, General Manager, Monterey Regional Water Pollution Control Agency (MRWPCA, a JPA) recommended appropriate representation for the unincorporated areas, a technical advisory committee and utilization of staffs of existing organizations to speed implementation and keep costs low.

Libby Downey, Board Member, MRWPCA, advocated for representatives with expertise, process openness and inclusion of Water Management District. She recommended continuance of agenda item.

Safwat Malek advocated for action because “time is of the essence.”

Roberta Miller expressed concerns about unintended consequences of JPA, including costs, and recommended continuance of agenda item.

Mayor McCloud closed the meeting to public comment.

City Attorney Don Freeman stated that it would be difficult to modify JPA at meeting.

Council Member Talmage said that the City either must learn to live within its means, which he prophesized would mean reduced services, or the City must find new revenue sources to increase revenue in order to accomplish needed projects, such as the Scenic Road/Santa Lucia Av. restroom facility. He recommended Council approve the Resolution and identify list of side issues, including identify alternative projects, include unincorporated areas, technical advisory committee, utilize existing staff and involve Water Management District, for the Mayor to discuss with other Mayors for action.

Council Member Burnett recommended giving entities an opportunity to participate.

Council Member TALMAGE moved to approve a Resolution entering into a Joint Powers Agreement (JPA) for the purposes of water governance and authorize the Mayors to execute the JPA and authorize the Mayor to discuss side issues, including identify alternative projects, inclusion of unincorporated areas, technical advisory committee, utilize existing staff and Water Management District involvement, for action, seconded by Council Member BURNETT, and passed by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: HAZDOVAC
ABSTAIN: COUNCIL MEMBERS: NONE

XI. Orders of Council

A. Receive report on the implementation plan for recommendations of the CalPERS Committee.

City Administrator Stilwell presented a Power Point Presentation.

Committee Recommendation #1: Pay the Side Fund Debt

Short-term
• One of several liabilities of the City that is unfunded or underfunded
• Prioritization of the liabilities
• Conduct a reserve analysis
• Spend available reserves in priority liabilities
-Recommend as component of budget process

Long-term
• Identify source of repayment
-Future revenue growth
-A new revenue source
-Include as long-term expenditure component in budget

• Debt analysis
-Impact of Pension Obligation Bond (POB) in City’s debt structure
-Analyze risk
-Engage financial advisor and underwriting

Recommended Actions for paying down the side fund:
• Engage financial advisor to prepare POB analysis

As part of the budget process:
• Complete reserve analysis
• Prioritize liabilities
• Indentify revenue sources available for liabilities
• Appropriate available one-time reserve balances

Determine Valuation

Committee Recommendation #2: “pass a non-binding resolution to terminate the CalPERS pension plans in order to obtain estimates of the termination unfunded liabilities and to make it possible to subsequently terminate the plans if this appears to be desirable at that time.”

• Termination is expensive and infeasible
• Valuation estimate is important
• CalPERS is required to complete the liability estimate as part of resolution to terminate
• City can complete actuarial analysis based on the CalPERS annual valuation estimate
• Both are estimates

Recommended Actions for adopting a resolution to terminate to determine valuation estimate:

• Do not adopt Resolution to terminate
• Develop a forecast estimate of the City’s pension liability

Committee Recommendation #3: “The Side Fund Debts and the Termination Unfunded Liabilities represent costs that will have to be paid either sooner (via termination and/or payment of the Side Fund Debt) or later, with pension contributions that would be greater than if those liabilities did not exist. In order that the City’s taxpayers and employees are fully informed about these obligations, the Committee recommends that the latest estimates of their magnitudes be included on the City’s Financial Reports, either in footnotes or comments.”

Committee Recommendation # 4: “while the City chooses to remain within the CalPERS pension system it negotiate with its unions and prospective employees to provide substantially lower defined benefits. This should be accomplished by adopting tiers with less generous terms and basing benefits on highest three-year average salaries.”

Lower Benefits
• City Council and labor organizations have approved lower second tier retirement benefits
-These second tier include lower defined benefits based on three-year average salary.

• CalPERS is developing valuations and legislative documents for City’s change
-The estimated timeframe to complete the CalPERS requirements to amend the contract is approximately 90 days including the actions required by the City.

• Other efforts require change in legislation at the State level and negotiation with the City’s remaining units.

Recommended Actions for adopting a lower benefits:
• Proceed with CalPERS contract change
• Continue negotiating with City’s labor organizations

SUMMARY: Recommendations #3 and # 4 are underway; Recommendation # 1 Paying down side fund debt requires policy direction from Council and requires policy direction for determination of valuation.

On Recommendation 1: Pay the Side Fund Debt

Council Member Burnett identified hybrid payment method to pay the Side Fund Debt involving reserve funds, pension obligation bond and revenue source.

Mayor McCloud opened the meeting to public comment.

Monte Miller advocated for increased revenues.

Barbara Livingston advocated for increased fees to hotel taxes, for example.

Carrie Theis, Hofsas House, stated that “things are improving,” but she would have difficulty explaining to guests that increase in rates are due to City’s funding city employees’ retirements.

Mayor McCloud closed the meeting to public comment.

Council Member Burnett stated that the Side Fund Debt interest rate is 7.75% and advocated for pursuing pension obligation bonds.

Council Member Talmage advocated for a “forward looking financial model.” for the next ten years prior to using not more than $2 million in reserve funds towards reducing Side Fund Debt, bond counsels and option alternatives to fund services “gap.”

Council Member Burnett recommended determining valuation by hiring an actuarial, not CalPERS termination process.

B. Approve deaccession of certain artwork.

Janet Bombard, Library Director presented the presentation.

Deaccessioning is defined as the formal process of removal of an object from a collection. The policy defines the scope of the collection parameters as follows:

• Work by artists who have lived, worked, or taught in Carmel, or who studied or belonged to regional art associations, such as the Carmel Art Association.
• Art of or about Carmel localities.
• Art pertaining to Carmel history.
• Art that can be safely, effectively, and appropriately cared for by City staff.
(concerns include stability, size, storage ramifications and possibility for public display).
• Contemporary art by established artists with subject matter, such as seascapes, that relate to the history or geography of Carmel.

The six paintings do not fit the collection parameters outlined above, but meet three of the 12 criteria listed in the Deaccession Policy:

• Retention is inconsistent with the established Scope of Collection.
• It cannot be adequately stored or cared for.
• The artwork will never, in all likelihood, be placed on display because of size, weight or lack of a suitable site.

Bombard reviewed the artworks; all artworks are large, Waisler (Los Angeles artist) artworks average 5.5’ high x 10’ wide and Rudolf Haegele (deceased German artist) artworks average 6’ high x 3’ wide.

Artist/Designer: Lee Waisler
Title/Description: "Passage" (Part One)
Date: 1993
Medium: Acrylic Sand Glass, Walnut Shell, & White Oak Wood on Canvas
Dimensions: 65" high by 101" wide

Artist/Designer: Lee Waisler
Title/Description: "Passage" (Part Two)
Date: 1993
Medium: Acrylic Sand Glass, Walnut Shell, & White Oak Wood on Canvas
Dimensions: 59" high by 125" wide

Artist/Designer: Lee Waisler
Title/Description: "Red Dutch House"
Date: 1992
Medium: Acrylic Sand Glass on Canvas
Dimensions: 66" high by 96" wide

Artist/Designer: Rudolf Haegele
Title/Description: "Dipped in Red"
Date: 1993
Medium: MT/PA
Dimensions: 74.25" high by 34.25" wide

Artist/Designer: Rudolf Haegele
Title/Description: "Static Interference"
Date: 1993
Medium: MT/PA
Dimensions: 74.25" high by 34.25" wide

Artist/Designer: Rudolf Haegele
Title/Description: "Island"
Date: 1993
Medium: MT/PA
Dimensions: 74.25" high by 34.25" wide

In response to Council Member Talmage’s query, Janet Bombard said the proceeds will be placed in a deposit account for the care and maintenance of existing City art. Consultant Sheryl Nonnenberg has made a list of auction houses to approach, including Clars and Michaan’s Auctions, as recommendations.

City Administrator Stilwell stated that the donor of the aforementioned artworks donated the artworks with the understanding that the artworks would be deaccessioned.

Mayor McCloud opened the meeting to public comment.

Barbara Livingston asked what the expected amount the sold artworks would bring and stated the Promenade at Sunset Center could be considered for the exhibition of these large artworks.

Mayor McCloud stated estimated proceeds in the “six figures.”

Paul Duncan advocated for the selling of City artworks in order to meet the City’s unfunded liabilities.

Janet Bombard stated that there is a difference between insurance valuations and auction values.

Mayor McCloud closed the meeting to public comment.

City Administrator Stilwell estimated that approximately 10% of total City artworks might meet criteria for deaccession.

Council Member Burnett requested a future city council agenda item for a discussion of the creation of a fixed term citizen committee to assist in advising for deaccession prior to the next round of deaccession.

Mayor McCloud stated that the City has had three different groups of people and it did not work.

Council Member SHARP moved to approve deaccession of six artworks, seconded by Mayor McCLOUD, and passed by the following roll call vote:

AYES: COUNCIL MEMBERS: BURNETT; SHARP; TALMAGE & McCLOUD
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: HAZDOVAC
ABSTAIN: COUNCIL MEMBERS: NONE