"MINUTES"
CITY COUNCIL MEETING
CITY OF CARMEL-BY-THE-SEA
Tuesday, July 3, 2012
City Hall
East side of Monte
Verde Street between Ocean and Seventh Avenues
PRESENT: Council Members Beach, Hazdovac, Talmage and Mayor Burnett
ABSENT: Council Member Hillyard
STAFF PRESENT (partial list): Jason Stilwell, City Administrator
Heidi Burch, Assistant City Administrator/City Clerk
Sean Conroy, Planning & Building Services Manager
Don Freeman, City Attorney
V. Announcements from Closed Session, from City Council Members and the City Administrator.
A. Announcements from Closed Session.
1. Public Employee Performance Evaluation - Government Code Section 54957. Title: City Attorney
City Attorney Don Freeman announced there were no announcements for the public.
C. Announcements from City Administrator.
3. Flanders RDEIR available and 45-day review period
Sean Conroy, Planning & Building Services Manager, announced the RDEIR for the Sale of Flanders Mansion Property was released on July 14 with a 45-day public comment period and comments will be received only on the revised Introduction and Alternatives Analysis section. The Planning Commission will hold a public hearing on the RDEIR on July 11 at 4:00 P.M. for the purpose of receiving public comment only. After the public comment period ends, all comments will be answered and the Final EIR will be prepared, reviewed by boards and commissions ad ultimately by the City Council. Comments may be sent via email, mail, in person or orally at the Planning Commission meeting.
H. Consideration of a Resolution designating Scenic Road a one-way street from Santa Lucia Avenue to Martin Way.
I. Consideration of a Resolution extending the Memorandums of Understanding (MOU) for represented LIUNA/UPEC Local 792 employees and the Police Officers Association.
Council Member HAZDOVAC moved to approve Consent Agenda Items A – C and E – M with edits to Items A and H, seconded by Council Member TALMAGE and carried by the following roll call vote:
AYES: COUNCIL MEMBERS: BEACH, HAZDOVAC; TALMAGE & BURNETT
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: HILLYARD
ABSTAIN: COUNCIL MEMBERS: NONE
VII. Orders of Council
A. Consideration of:
1) The first reading of an Ordinance imposing a transactions and use tax (sales tax) to be administered by the State Board of Equalization and
2) Consideration of a Resolution giving notice of a special Municipal Election for the purpose of submitting a proposal to temporarily increase the transactions and use (sales) tax rate 1% for a period of 10 years; finding and declaring an emergency exists that requires the voters to approve a transactions and use tax before the next Municipal Election; and requesting Monterey County provide for consolidation of this proposed sales tax increase election with the November 6, 2012 election.
Jason Stilwell, City Administrator, presented the report. The proposed temporary 10-year sale tax increase is for funding general governmental purposes, specifically preserving community character and levels of service, maintaining the City’s road infrastructure, maintaining the City’s capital investment, managing the debt service and stopping the use of reserves to balance budgets. Stilwell recommended the City Council find and declare an emergency in order to hold an election on the sales tax increase on the November 6, 2012. City Attorney Don Freeman read the language of the ballot measure:
“Shall Carmel-by-the-Sea increase transaction and use tax [sales tax] by 1% for 10 years, including an annual independent audit, to maintain essential City services of fire, ambulance and police emergency response times; fund capital needs, including streets, beach, parks, and trails; increase code compliance; maintain the City’s libraries and the Sunset Center; address CalPERS pension liabilities and other debt; and provide other general city services.” Freeman stated that it is a general tax, not a special tax, and therefore requires a 50% + 1 vote to pass.
Mayor Burnett opened the meeting to public comments.
Ron Kabot, CPA, stated that property tax will increase over the “next several years” and queried why the Council selected a 10-year period that will “tie the hands of future administrations,” city councils and mayors.
Barbara Livingston, President Carmel Residents Association, stated the 15-member Board strongly recommended the City Council move forward with the sales tax increase.
Jean Grace addressed the ballot language and emphasized the importance of the public knowing it is a “general tax” requiring a simple majority for approval.
Mayor Burnett closed the meeting to public comments.
Mayor Burnett justified the 10-year sunset period by citing long-term needs, including CalPERS side fund debt, deferred maintenance, including road maintenance, and other long-term needs.
City Administrator Stilwell stated that the City has a $2.8 million shortfall and the sales tax increase revenue of $2 million is a critical component towards sustainability.
Council Member Talmage stated that the City receives 15% of property tax collections.
Council Member Hazdovac queried if the ballot measure passed, is there a mechanism to change the sales tax rate if it is found to have a “detrimental effect on high-end businesses.” City Attorney Don Freeman clarified that the City Council can reduce the sales tax rate with an ordinance.
City Attorney Don Freeman clarified that the ballot measure can have up to 75 words, including the title. And Mayor Burnett stated the importance of the “logic” language in the ballot measure.
The City Council rewrote the ballot measure language:
“Shall Carmel-by-the-Sea increase transaction and use tax (sales tax) by 1% for 10 years, with an annual independent audit, to maintain essential services of fire, ambulance and police response times; fund capital needs, including streets, beach, parks, and trails; increase code compliance; maintain public libraries and the Sunset Center; address CalPERS pension liabilities and other debt; and provide other general city services.”
Mayor Burnett opened the meeting to public comments, especially comments on the ballot language.
Jean Grace, Kristy Downing, Barbara Livingston commented on the language, including “sales tax,” ”transaction and use tax, ”“Sunset Center,” and the addition of the word “forest.”
Mayor Burnett closed the meeting to public comments.
The City Council rewrote the ballot measure language:
“Shall Carmel-by-the-Sea increase transaction and use tax (sales tax) by 1% for 10 years, with an annual independent audit, to maintain essential services including fire, ambulance and police response times; fund capital needs, including streets, beach, parks, forest and trails; increase code compliance; maintain libraries, Sunset Center and other public facilities; address CalPERS pension liabilities and other debt; and provide other general city services.”
City Member TALMAGE moved to approve Resolution giving notice of a special Municipal Election for the purpose of submitting a proposal to temporarily increase the transactions and use (sales) tax rate 1% for a period of 10 years; finding and declaring an emergency exists that requires the voters to approve a transactions and use tax before the next Municipal Election; and requesting Monterey County provide for consolidation of this proposed sales tax increase election with the November 6, 2012 election, as amended ballot language, seconded by Council Member BEACH and carried by the following roll call vote:
AYES: COUNCIL MEMBERS: BEACH, HAZDOVAC, TALMAGE & BURNETT
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: HILLYARD
ABSTAIN: COUNCIL MEMBERS: NONE
Mayor Burnett opened and closed the meeting to public comments.
Council Member TALMAGE moved to approve the first reading of an Ordinance imposing a transactions and use tax (sales tax) to be administered by the State Board of Equalization, seconded by Council Member BEACH and carried by the following roll call vote:
AYES: COUNCIL MEMBERS: BEACH, HAZDOVAC, TALMAGE & BURNETT
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: HILLYARD
ABSTAIN: COUNCIL MEMBERS: NONE
B. Consideration of a Resolution authorizing the issuance of Pension Obligation Bonds to refinance the outstanding side fund obligations of the City to the California Public Employees’ Retirement System (PERS) and authorizing institution of judicial validation proceedings.
Mayor Burnett recused himself for “conflict of interest” reasons.
Jason Stilwell, City Administrator, presented the report. He reviewed the CalPERS Committee’s four recommendations, including adoption of second tier rates, addressing the CalPERS Side Fund Debt of $6 million at 7.75% interest. The goal is to refund to a lower interest rate and part of the City’s sustainability plan.
A Power Point Presentation was made by Craig Hill, NHA Advisors and Bond Counsel, Jones Hall.
Mayor Burnett recused himself for “conflict of interest” reasons.
Jason Stilwell, City Administrator, presented the report. He reviewed the CalPERS Committee’s four recommendations, including adoption of second tier rates, addressing the CalPERS Side Fund Debt of $6 million at 7.75% interest. The goal is to refund to a lower interest rate and part of the City’s sustainability plan.
A Power Point Presentation was made by Craig Hill, NHA Advisors and Bond Counsel, Jones Hall.
Topics of Presentation
Ø
Previous Discussion
Ø
Pension Obligation Bonds Basics
Ø
Process for Bond Financing
Ø
Preliminary Financing Options
Ø
Initial financial Analysis
Ø
Next Steps
Recap of Prior Pension Discussion
Ø
What is the City pension obligation?
Ø
What is a side-fund program?
Ø
What are the outstanding pension liabilities?
o Public
Safety and Miscellaneous Employees
Ø
How have the annual costs changed over time?
Ø
Objectives and Prior Policy Discussion
Existing Pension obligations
Ø
Public Safety Employees
o $3,376,278
Liability as of June 30, 2012 report
o Current
Contribution - $235,000
o Final
Payoff Date – June 2034
Ø
Miscellaneous Employees
o $2,750,158
Liability as of June 30, 2110 report
o Current
contribution - $315,000
o Final
payoff Date – June 2023
Projects Side-Fund Payment Schedules (Graph)
Miscellaneous and Public Safety Employees
Pension Obligation Bonds
Ø
How they work
Ø
Available Terms
o Repayment
period (shorter, longer)
o Amortization
(level annual, increasing payments)
Ø
Lock in fixed interest rate versus variable
nature of imputed rate for CalPERS
Ø
Does not guarantee future unfunded pension
liabilities
Benefits and Costs of Pension Obligation Bonds
Ø
Lower Cost of Funds (taxable municipal rates)
o Direct
investment to Bank (Private Placement)
Flat Interest Rate: 5-Year 3.00%;
10-Year 4.00%
o Issuance
of Bond (Public Offer)
Average Interest Rate:
5-Year 2.25%; 10-Year 2.55%;
15-Year 3.20%; 20-Year 4.05%
Ø
Amortization Period determined by City
Ø
Financing Costs – Validation Process, Bond
Documents and Financing Plan and Market/Underwriting Process
Ø
Fixed Interest Rate versus CalPERS Potential
Adjustments
Process for Pension bond
Ø
Initial City Council direction
Ø
Approval of Validation Action
o Court
action required prior to issuance of any obligation
Ø
Selection of Financing Structure and Terms
o Financing
source (publically offered bonds or private placement)
o Term
of repayment/annual repayment amount
Ø
Approval of Financing Documents
Ø
Lock Interest Rate/Submit Funds to CalPERS
Validation Action
Ø
POBs are payable from the General Fund on the
legal theory that they are “obligations imposed by law” under the California
Constitution
Ø
All POBs are reviewed by the Superior Court to
validate the Bonds under this legal theory
Ø
Judicial validation is a time-honored process
under specific legal procedural provisions
Ø
Process takes 90-120 days to complete
Ø
Bond Counsel will represent the City in the
validation process, working with the City Attorney
Term Will Dictate Funding Sources
Ø
Public Offering
o Official
statement (Disclosure Document)
o Underwriter
(reseller of bonds to investors)
o Rating
o Interest
rates dependent on maturity (serial bonds)
Ø
Private Placement
o Single
investor selected through proposal process (typically banks)
o No
official statement or underwriter required
o No
rating
o Single
interest rate set for bond
Miscellaneous – Preliminary Repayment Options
(11-Year Maximum Term) (Graph)
Savings in Interest with various terms
Combined Annual payments and Refinancing
(No Change in Repayment period) (Graph)
Note: Significant Interest Saving of in excess of $2 million
Combined Annual Payments & Refinancing
(Shortened Repayment Period) (Graph)
To payoff Side Fund Debt in 5 Years Combined $1.35 million
annual payments
To payoff Side Fund Debt in 10 Years Combined $750,000
annual payments
Note: Currently, City payment Combined $550,000
Nest Steps
Ø
Validation action
Ø
Drafting of bond documents
Ø
Refine financial analysis
Ø
Council approves financing (documents and terms
for bonds)
Ø
Lock in interest rates
Ø
Close and pay off existing obligations
Ron Kabot, CPA, queried if consultants have worked with cities in bankruptcy has CalPERS examined the City’s $6.2 million Side Fund Debt in terms of magnitude exactness, high health costs beginning in 2013.
Vice Mayor Talmage closed the meeting to public comment.
Consultant stated that he worked with the City of Stockton during bankruptcy proceedings and cost to City is a flat fee of $7500 through validation.
Vice Mayor Talmage addressed the Resolution and Union Bank, a trustee in 2010 for the City.
Vice Mayor Talmage opened and closed the meeting to public comment, specific to the language in the Resolution.
City Council Member HAZDOVAC moved to adopt the Resolution authorizing the issuance of Pension Obligation Bonds to refinance the outstanding side fund obligations of the City to the California Public Employees’ Retirement System (PERS) and authorizing institution of judicial validation proceedings, seconded by Council Member BEACH, and carried by the following roll call vote:
AYES: COUNCIL MEMBERS: BEACH, HAZDOVAC, TALMAGE & BURNETT
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: HILLYARD
ABSTAIN: COUNCIL MEMBERS: NONE
Vice Mayor Talmage stated that validation process into October 2012, sales tax initative vote in November, there are two options depending on whether sales tax if approved or rejected.
C. Public Meeting establishing the Carmel Hospitality Improvement District:
1) Consideration of Resolution declaring the City’s intention to establish the Carmel Hospitality Improvement District (HID) and
2) The first reading of an Ordinance establishing the Carmel Hospitality Improvement District.
Jason Stilwell, City Administrator, presented the report. On the agenda is a Resolution declaring the City’s intention to establish the Carmel Hospitality Improvement District (HID). The protest hearing is set for the City Council meeting on August 7, 2012.
Council Member Talmage stated a concern that money from HID should go to “running small conferences, not for overhead.”
Mayor Burnett opened and closed the meeting to public comment.
City Council Member TALMAGE moved to adopt the Resolution declaring the City’s intention to establish the Carmel Hospitality Improvement District (HID), deleting language related to “recovery of city costs for noticing meetings and hearings on this matter” and the first reading of an Ordinance establishing the Carmel Hospitality Improvement District, seconded by Council Member HAZDOVAC, and carried by the following roll call vote:
AYES: COUNCIL MEMBERS: BEACH, HAZDOVAC, TALMAGE & BURNETT
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: HILLYARD
ABSTAIN: COUNCIL MEMBERS: NONE
D. Consideration of a ban on the distribution of single-use plastic bags by retail establishments:
1) A Resolution adopting an Initial Study (IS)/Negative Declaration (ND) in accordance with the California Environmental Quality Act (CEQA) for the Single-Use Plastic& Carryout Bag Ordinance and
2) The second reading of an Ordinance amending the Carmel Municipal Code to ban the distribution of single-use plastic bags from retail establishments within the City of Carmel-by-the-Sea.
Mayor Burnett reviewed workshop involving voluntary effort to encourage reusable bags and discourage single-use paper bags, task force Sustainable Carmel and the Chamber of Commerce and measurements for a baseline which will be used for tracking purposes including bags businesses use, bags used by customers, and what is being collected on Carmel Beach and measure progress in a year
Sean Conroy, Sean Conroy, Planning & Building Services Manager, presented the report.
Council Member Talmage reviewed the exemptions (i.e., restaurants, nonprofit organizations, hardship cases) related to the negative declaration and two sets of documents “in conflict.”
Mayor Burnett opened and closed the meeting to public comment.
Council Member TALMAGE moved to approve Resolution adopting an Initial Study (IS)/Negative Declaration (ND) in accordance with the California Environmental Quality Act (CEQA) for the Single-Use Plastic& Carryout Bag Ordinance, as amended, seconded by Council Member BEACH, and carried by the following roll call vote:
AYES: COUNCIL MEMBERS: BEACH, HAZDOVAC, TALMAGE & BURNETT
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: HILLYARD
ABSTAIN: COUNCIL MEMBERS: NONE
Council Member TALMAGE moved to approve the second reading of an Ordinance amending the Carmel Municipal Code to ban the distribution of single-use plastic bags from retail establishments within the City of Carmel-by-the-Sea, and carried by the following roll call vote:
AYES: COUNCIL MEMBERS: BEACH, HAZDOVAC, TALMAGE & BURNETT
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: HILLYARD
ABSTAIN: COUNCIL MEMBERS: NONE
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