Western City November 2018

NOVEMBER 2018 |

The Monthly Magazine of the League of California CitiesÂŽ

ÂŽ

Hot Topics in California Municipal Finance p.15

Preparing for the Next Economic Downturn p.3 Finance Advisory Committees: Tips and Traps p.11

www.westerncity.com

Advertisement

With Pension Costs Rapidly Rising, There are Solutions That Cities Can Employ The California Public Employees' Retirement System (CalPERS) is currently underfunded by a significant amount.

As of January 2018, CalPERS had only 68 percent of the funds required to pay estimated retirement benefits. These rising costs will mean that contributions to CalPERS by public agencies participating in their pension program, may nearly double over the next seven years. This dramatic increase is unsustainable.

The Pension Stabilization Trust program is designed to:

Implications for Cities

Unlike other programs that are presented as “similar” solutions, Keenan’s Pension Stabilization Trust:

With pension costs increasing, more and more general fund dollars will need to be allocated to CalPERS. By 2024, cities foresee that they will spend an average of 15.8 percent of their general fund budgets on pensions. In comparison, cities currently contribute an average of 8.3 percent.

Additionally, about 10 percent of cities anticipate spending more than 21 percent of their general fund budgets on pensions in 2024.

Cities face difficult decisions when deciding how to address this budgetary catastrophe; cities can increase revenues or decrease spending through reducing services. Neither of these options are feasible for the long-term fiscal health of cities.

Dealing with the Problem Now Keenan’s OPEB and Pension trust programs have more than $1 billion in assets.

•

Pre-fund pension costs and address GASB 68 Net Pension Liabilities;

•

Mitigate long-term pension volatility;

•

Provide local control and investment flexibility; and,

•

Utilize a Section 115 IRS-compliant trust.

•

Provides an independent, discretionary trustee (industry-leader Benefit Trust Company) rather than solely utilizing a registered investment advisor, which mitigates fiduciary liability and meets the standards that are necessary for this type of program.

•

Offers six different investment portfolios with varying risk profiles to meet the goals of public agencies.

We provide a proprietary risk assessment tool for agencies to use to help identify the portfolio to select.

•

Provides assistance in running investment report meetings of the Trust to comply with the Brown Act.

With multi-employer and single-employer trust options, the program allows cities to invest in their future financial stability now.

Cities have the ability to participate in the Trust’s Board, and mitigate employee and service reductions that may otherwise be required without proper planning.

For more information on Keenan’s Pension Stabilization Trust program, please contact Nick Gedestad at 800.344.8507, ext. 8116, or by email at ngedestad@keenan.com.

Source: League of California Cities Retirement System Sustainability Study and Findings – January 2018, http://www.cacities.org/ResourcesDocuments/Policy-Advocacy-Section/Hot-Issues/ Retirement-System-Sustainability/LeaguePension-Survey-(web)-FINAL.aspx Western City magazine is published by the League of California Cities.

Specialized insurance and budgeting solutions for more than 950 Public Entities www.keenan.com/PST

License No. 0451271

CONTENTS 2 Calendar of League Events 3 Executive Director’s Message Preparing for the Next Economic Downturn

By Carolyn Coleman

ities can take proactive steps C to better position themselves for the impacts of the next major economic downturn.

6 City Forum

TRIP Offers Low-Cost Bond Financing for Cities in “Self-Help” Counties

By James Hamill

ince 2008, TRIP has helped 16 agenS cies finance more than $230 million for transportation projects.

9 News From the Institute for

11

Finance Advisory Committees: Tips and Traps

By Melissa Kuehne

inance advisory committees can F yield many benefits, but they can also generate unintended consequences if not carefully designed and managed.

15

Over 130 Public Agencies

across California put their TRUST in us,

because we check all the boxes when it comes to managing their investments.

ot Topics in California H Municipal Finance

By Michael Coleman and Michael G. Colantuono

he next recession may be just T around the corner, but the state is much better positioned to weather it — and that bodes well for local governments. Hot topics include sales tax and more.

Safety Liquidity Yield

Local Government

Tools to Engage Your Community in the Budgeting Process

By Melissa Kuehne

10

haring the city’s budget informaS tion with the community helps residents understand constraints and develop informed opinions on how limited financial resources should be allocated.

earn About California’s L Municipal Bonds With EMMA

Job Opportunities 24 Professional Services 30 Directory

33 On the Record

Council members describe their city’s top two fiscal issues.

Cover image: Henrik5000

Plus, get the added bonus of: High Performing Funds Simple Enrollment Greater Buying Power Trusted Investors Industry Leading Liquidity 138+ Years of Expertise

By Lynnette Kelly

he Electronic Municipal Market T Access (EMMA) website serves as a resource for local government officials whose agencies have outstanding debt or may be considering issuing new bonds.

Visit online or give us a call:

CALTRUST.ORG | (888) CAL-TRUST

®

President Jan Arbuckle Council Member Grass Valley

1400 K Street Sacramento, CA 95814 (916) 658-8200 Fax (916) 658-8240

Second Vice President John Dunbar Mayor Yountville

Immediate Past President Rich Garbarino Council Member South San Francisco

Executive Director Carolyn Coleman

For a complete list of the League board of directors, visit www.cacities.org/board.

Magazine Staff Editor in Chief Jude Hudson, Hudson + Associates (916) 658-8234; email: editor@westerncity.com Managing Editor Norman Coppinger (916) 658-8277; email: ncoppinger@cacities.org Contributing Editor Eva Spiegel (916) 658-8228; email: espiegel@cacities.org Advertising Sales Manager Pam Maxwell-Blodgett (916) 658-8256; email: maxwellp@cacities.org Administrative Assistant Savannah Cobbs (916) 658-8223; email: scobbs@cacities.org Contributors Dan Carrigg Norman Coppinger Corrie Manning Johnnie Piña Jennifer Whiting

leaguevents DECEMBER 12–13

Fire Chiefs’ Leadership Seminar, San Francisco The seminar covers challenging leadership topics such as succession planning, labor relations, emergency response, late-breaking issues and more.

12–13

Municipal Finance Institute, San Francisco This conference provides essential information for city officials and staff involved in fiscal planning for municipalities.

12–14

City Clerks’ New Law & Elections Seminar, San Francisco The seminar covers laws affecting elections as well as other aspects of clerks’ responsibilities.

Associate Editors Carol Malinowski Carolyn Walker

January 2019 16–18

Design Taber Creative Group

New Mayors and Council Members’ Academy, Sacramento This vitally important training prepares newly elected officials for the demands of office and introduces them to the legal constraints on city councils.

Advertising Design ImagePoint Design For photo credits, see page 26.

Western City (ISSN 0279-5337) is published monthly by the League of California Cities, 1400 K St., Sacramento, CA 95814. Subscriptions: $39.00/1 year; $63.00/2 years; student: $26.50; foreign: $52.00; single copies: $4.00, including sales tax. Entered as periodical mail January 30, 1930, at the Post Office, Los Angeles, CA 90013, under the Act of April 13, 1879. Periodical postage paid at Sacramento, Calif.

NT RI

ED US IN G

P

Postmaster: Send address changes to Western City, 1400 K Street, Sacramento, CA 95814. Western City Trademark Reg. U.S. Pat. Off. ©2018 League of California Cities. All rights reserved. Material may not be reprinted without written permission. This issue is Volume XCIV, No. 11.

W

R

0

GY

10

%

IND EN

E

Supplied by Community Energy

FSC ® is an independent, not-for-profit organization that promotes environmentally appropriate, socially beneficial and economically viable forest management worldwide. Products with the FSC label are independently certified to ensure that they come from forests managed to meet the needs of present and future generations.

2

First Vice President Randon Lane Council Member Murrieta

League of California Cities

17–18

Policy Committee Meetings, Sacramento The League’s policy committees review issues of interest to cities statewide and make recommendations to the League board of directors.

18

Legal Advocacy Committee Meeting, Sacramento The committee reviews and recommends friend-of-the-court efforts on cases of significant statewide interest to California cities.

30–February 1

New Mayors and Council Members’ Academy, Irvine This vitally important training prepares newly elected officials for the demands of office and introduces them to the legal constraints on city councils.

FEBRUARY 13–15

City Managers’ Conference, San Diego Geared to the unique needs of city managers, this conference covers issues affecting cities throughout California.

21–22

Board of Directors’ Meeting, Grass Valley The League board reviews, discusses and takes action on a variety of issues affecting cities, including legislation, legal advocacy, education and training and more.

www.cacities.org

Executive Director’s Message by Carolyn Coleman

Preparing for the Next

Economic Downturn The U.S. economy is entering its 10th year of expansion, which is the second longest in our nation’s history since World War II. In less than another year, it will be the longest stretch of economic growth ever for the United States.

Given the length of the current expansion, it’s no surprise that economists, Wall Street and policymakers at all levels of government are bracing for the inevitable next recession. When it will happen? That’s the million-dollar question. Although we can’t know for sure, rough consensus among economists polled by the Wall Street Journal indicates that the next economic downturn will arrive in 2020.

Despite this uncertainty, local governments can take action now to get ready. The quality of your preparation will determine how well and how quickly your city recovers from a downturn.

The Impact of a Recession on City Finances When preparing for the next recession, it’s important to understand how this phenomenon affects city finances.

The most commonly recognized impact is a decline in tax revenues. The Great Recession dramatically affected continued

www.westerncity.com

Western City, November 2018

3

Preparing for the Next Economic Downturn, continued

state and local governments: From the last quarter of 2007 to the second quarter of 2009, state and local government revenues (excluding federal grants) declined by $111 billion. In response to the considerable financial pressures brought on by the recession, states nationwide slashed over 130,000 jobs and local governments were forced to cut more than 524,000 positions.

Cities were also compelled to institute cuts in services and delay or cancel infrastructure projects.

Depending on the mix of services your city provides, a recession also affects the expense side of the budget. As the economy slows, unemployment rises and individuals need more assistance from government in the form of social safety net programs, many of which — such as unemployment insurance, food stamps and Medicaid — are administered at the state or county level. This increase in spending is often a better leading indicator of economic stress than tax collections, because it often occurs earlier than the decline in revenues. For example, state and local government spending on socialbenefit payments to individuals surged more than 25 percent in fiscal year 2008, a full three quarters before the first yearover-year declines in revenue.

In economic terms, a lag often occurs between economic conditions changing and those conditions having an impact on city revenue collections. In general, cities may begin to feel the impacts of changing economic conditions quite early; however, because most fiscal reporting occurs on an annual basis, those impacts tend not to become evident until some point after they have begun. For California cities, the lag attributable to property tax collections can be anywhere from 12 to 24 months because the recessionary effects on housing prices are not as immediate or precipitous compared with other economic activity such as jobs, income or taxable sales.

Property tax bills are based on assessments from previous years, so changes in assessed value rarely occur simultaneously with an economic downturn. Sales tax revenues, on the other hand, are more volatile and more immediate in terms of

4

League of California Cities

sensitivity to economic changes so the lag is only 60 to 90 days. Because business taxes are generally paid annually based on prior year gross receipts, there is also a lag between the change in the economy and this impact showing up in a city’s budget.

The lag is not as applicable for the state.

With the state’s heavy reliance on personal income taxes, a downward turn in the economy and income levels could show up fairly quickly and dramatically in state revenues. This means that before cities see the full impacts of a downturn in their revenues, the state is already grappling with fiscal distress and may be considering shifts and cuts to local governments.

Fortunately, Proposition 1A, Prop. 22 and other protections we have championed over the years provide cities with strong constitutional protections of our revenues from a state raid.

Practical Steps to Take Now Cities can do three things to help navigate the next downturn.

First, explore the use of budget forecasting tools or models to understand how different scenarios will impact the city’s long-term fiscal conditions. The City of Stockton’s experience with such a tool provides an instructive model. Like many cities, Stockton (pop. 320,554) formerly budgeted one year at a time and assumed that the next year would look like the previous one. When the Great Recession hit, high-cost decisions made in prosperous times ultimately led to bankruptcy for Stockton and serious cutbacks for other cities throughout California and the nation.

As part of its adjustment plan, Stockton prepared a 30-year budget forecast to demonstrate financial solvency to the bankruptcy court. The city continues to use a long-term financial plan in its recovery today. This tool has not only been beneficial for the city, but it also helps residents understand how new debt, pay increases, pension costs, revenue changes and inflation will impact the city’s finances — not just this year, but far into the future.

To better comprehend how a recession could affect your city and learn about your options to mitigate the impact of a downturn, look for a forecasting model that relies on a variety of data to examine various potential future scenarios. By looking at key variables such as payroll growth, pension rates, property taxes and sales taxes, cities can customize a forecasting model specific to their community’s unique situation.

Second, engage your residents in a meaningful way in the budgeting process if you’re not already doing so. Each year, cities throughout California face difficult budgeting decisions. The demand and need for services can far exceed the available resources. Because budgets communicate a very public message about the city’s priorities, it is essential that the community be involved in the budget’s development and understand the tradeoffs and compromises inherent in any budgeting process.

The need for public engagement in the local budgeting process is even greater when cities are in the midst of an economic downturn with revenue shortfalls and increasing expenses. To hold the line on costs, local policymakers will face difficult choices about whether to reduce staff, delay a much-needed infrastructure project, close parks and libraries and cut essential services — or a combination of all of these.

Engaging the public in the process of making these budget choices ensures that they have a better understanding of the process and how difficult decisions are made. Such engagement also increases the transparency of the city’s finances, promotes greater trust in government and builds a stronger community understanding of budgeting choices, taxes and public benefits.

In the mid-2000s, the City of Vallejo (pop. 116,224 in 2005) was enjoying a decade-long economic recovery following the decommissioning of Mare Island, a large naval base that had long been a mainstay of the local economy. Given its proximity to San Francisco and the state capital, Vallejo was positioned as a prime destination for private-sector companies that were drivers of the new economy.

www.cacities.org

Despite this rosy economic picture, cityfunded services were fiscally unsustainable.

The Great Recession and growing liabilities forced Vallejo to declare bankruptcy in 2008. As a result, the city drastically reduced services and programs, and its image suffered along with its credit rating. Residents’ frustration with their government became the new norm.

The city emerged from bankruptcy in early 2015 but continued to face public distrust due to a lack of transparency, accountability and resident involvement.

After voters narrowly passed Measure B, a 1 percent sales tax increase to restore and enhance services, a city council member proposed a bold idea: Invite residents to help decide how to spend a portion of the new tax revenues. In 2012, the city council established an innovative, award-winning citywide participatory budgeting program that directly engaged residents in developing and recommending projects for the annual budget. This program continues to be a mainstay of the city’s budgeting process today. Over the past five budget cycles, the city has engaged more than 20,000 residents and allocated over $8.3 million to fund a total of 47 projects.

The need for public engagement in the local budgeting process is even greater when cities are in the midst of an economic downturn.

For more information on public engagement in the budgeting process, visit www.ca-ilg.org/budgeting.

Third, cities should make it an ongoing practice to understand the connection between their fiscal systems and their underlying local economies. This helps build local policymakers’ awareness of which revenue streams are most vulnerable during a downturn and potential options for preserving essential services and navigating through the recession to the subsequent recovery.

Avoid a Fiscal Crisis Recessions are inevitable, but they don’t have to mean a fiscal crisis for your city.

It’s never too early to put in motion today strategies that will protect your budget and your local economy later. ■

www.westerncity.com

5

TRIP Offers Low-Cost Bond Financing for Cities in “Self-Help” Counties

by James Hamill

C

alifornia’s streets and roads system has been declining at an alarming rate for some time, something that drivers in the Golden State encounter daily in the form of potholes, cracked pavement and deteriorating roads and bridges. This welldocumented trend has generated concern statewide. The biennial California Statewide Local Streets and Roads Needs Assessment reported in 2018 that a $55.5 billion funding shortfall exists over the next 10 years for maintenance and repairs. Sponsored by a coalition that includes the League, California State Association of Counties (CSAC) and regional transportation planning agencies, the 2018 report notes, “The condition of California’s local streets and roads has continued to deteriorate significantly since the initial study [in 2008]. On a scale of zero (failed) to 100 (excellent), the average Pavement Condition Index is now 64.7 (“at risk” category).

Even more alarming, 53 of 58 counties are either at risk or have poor pavements.”

Total Road Improvement Program Offers Efficient, Cost-Effective Assistance With federal and state transportation dollars scarce in recent decades, city and county officials have acted locally to slow and prevent the degradation of their streets and roads. To reduce the severe impact of inadequate funding, 24 counties — encompassing 88 percent of the state’s population — have passed sales tax

measures to fund essential transportation programs and projects.

But even with added local dollars, these “self-help” counties and the cities in them continue to face a significant backlog that far exceeds annual revenues. Capitalizing on their self-help status, local officials are finding quick, efficient and cost-effective assistance through the Total Road Improvement Program (TRIP).

Established through the California Statewide Communities Development Authority (CSCDA), a joint powers authority cofounded and sponsored by the League and CSAC, TRIP provides cities located within a self-help county access to a low-cost bond financing program for transportation projects. Cities using TRIP borrow against their share of the countywide transportation sales tax revenue to generate funds that are available today to address critical transportation needs before projects become more costly in later years.

TRIP allows participating cities and counties to issue bonds through CSCDA either on a stand-alone basis or with other agencies. Secured solely by an agency’s local transportation sales tax revenue, each agency is responsible only for repaying its own debt. The program creates no exposure for the General Fund nor does it require the use of public assets as collateral. Offering flexible terms up to 30 years and rates ranging from 3 to 5 percent, depending on terms of the financing and market conditions, TRIP bonds are proving popular with investors.

James Hamill is managing director of the California Statewide Communities Development Authority (CSCDA) and can be reached at jhamill@cscda.org.

6

League of California Cities

www.cacities.org

A Practical Option for Financing Transportation Projects Since its inception in 2008, TRIP has assisted 16 agencies in financing more than $230 million for transportation projects. Most recently, the City of Salinas (in Monterey County) utilized TRIP in July 2018 to finance $40 million in transportation improvements throughout the municipality. Leveraging countywide voterapproved transportation revenues, the city is now undertaking projects that will address the backlog of deferred maintenance issues that have contributed to its at-risk pavement condition.

“Of all the options considered, TRIP was the best suited for Salinas. The city did not need to encumber any asset as security, and the process and team of experts were already in place, which made this approach very easy,” says Matt Pressey, finance director for the City of Salinas. “The TRIP financing worked out very well!”

The City of Claremont (in Los Angeles County) also took advantage of TRIP’s offerings in 2018. Claremont Finance Director Adam Pirrie says, “TRIP will allow the city to fully fund improvements to Foothill Boulevard, its largest thoroughfare.

The entire financing team was knowledgeable and responsive, making the process of obtaining the funds a smooth one.”

www.westerncity.com

For More Information CSCDA is sponsored by the League, and CSCDA financing activities help keep League membership dues low for California cities. Contact Norman Coppinger, League administrative services director, at ncoppinger@cacities.org or (916) 658-8277 for additional information on how California cities benefit from participating in CSCDA or the TRIP program. ■

Cities using TRIP borrow against their share of the countywide transportation sales tax revenue to generate funds that are available today to address critical transportation needs before projects become more costly in later years.

Western Western City, City, November October 2013 2018

7

Thank you to all of our 2018 League Partners Platinum ($15,000+) 1,2

1,2 2

2

2

2

2

1

2

2

1,2

1,2

2

2

1,2

2

2

1,2

1,2

2

1 BUILDING AMERICA®

Gold ($10,000+) ENGIE Services Inc. Hanson Bridgett LLP1,2 Interwest Consulting Group Inc.2 J Wallin Opinion Research1 2

Kronick Moskovitz Tiedemann & Girard1 LECET Southwest Lewis Investment Company2 Meyers Nave1,2

Morongo Band of Mission Indians2 Probolsky Research1 James Ramos Renne Public Law1,2

Silver ($5,000+) ABM AMR2 Albertsons American Fidelity Assurance Company CSCDA Open Pace2 Charles Abbott Associates2 California Contract Cities Association2

Californians for Energy Independence Comcast2 Dart Container Corp.2 Dividend Finance LLC EMS Management2 Fascination Ranch2 Garaventa Enterprises2 General Motors Goldfarb & Lipman LLP

Joe A. Gonsalves & Son2 Greenwaste Recovery Inc.2 Greystar2 HR Green2 Harris & Associates2 Mintier Harnish1 Mt. Diablo Recycling2 Northrop Grumman Public Financial Management Inc.

Redflex San Manuel Band of Mission Indians2 Sares Regis Group2 ServPro2 State Farm Stradling Yocca Carlson & Rauth Trane1

Republic Services Inc.2 Sherwin-Williams Transtech Engineers2 Western States Petroleum Association Young Homes2 Tribal Alliance of Sovereign Indian Nations Tripepi Smith & Associates1,2 Union Bank2 Vavrinek Trine Day & Co. LLP Walgreens Waste Management1 Ygrene2 Zanker Green Waste2

Bronze ($3,000+) AECOM Accela2 Advanced Disposal2 Alvarez-Glasman & Colvin2 Amador Valley Industries2 American Forest & Paper Association Association For Los Angeles Deputy Sheriffs2 Atkins Best Way Disposal2 Boulevard2 Brookfield Norcal Builders Inc2 CalPortland2 Cerrell Colantuono Highsmith & Whatley PC2

Commercial Bank of California DD Dannar LLC DW Development2 Desert Valley Medical Group Inc./ Prime Healthcare2 E&J Gallo2 Edgewood Partners Insurance Center Fieldman Rolapp & Associates ForeFront Power Genentech Geo-Logic Associates2 George K. Baum & Company Griswold LaSalle Cobb Dowd & Gin LLP2 Hill International2

Accretive Realtors2 Acquisition Partners of America LLC American Water Works Association CA-NV Section AndersonPenna Partners Inc.2 Athens Services2 Avery Associates2 BDE Architecture Inc. Blue Line Transfer Inc.2 CARE2 CIFAC CR&R2 CSAC EIA California Apartment Association2 California Consulting, LLC California Debt and Investment Advisory Commission

California Independent Petroleum Association California Refuse Recycling Council California Waste Solutions2 Carpenter/Robbins Commercial Real Estate Inc.2 Civil Engineering Associates2 Classic Communities2 Contra Costa Association of Realtors2 Contra Costa Building & Construction Trades Council2 Cost Control Associates Inc. Cunningham Davis2 Der Manouel Insurance Group2 Desert Valleys Builders Dividend Finance2 Dokken Engineering2

Holliday Rock Company ISES Corporation Kosmont Companies2 LaBarge Industries2 Library Systems & Services LLC Los Angeles Yellow Cab Madaffer Enterprises1,2 Marin Sanitary Service2 Matarango Inc.2 McKinstry Mid Valley Disposal2 Mitsubishi Cement2 Bob Murray & Associates NHA Advisors

NL Industries Inc. NV5 Inc. Nixon Peabody Norton Rose Fulbright2 PARS2 Peters Engineering2 Precision Engineering2 Prime Healthcare2 Prometheus Real Estate Group Inc.2 Psomas2 Quad Knopf2 Quality Management Group Inc. Recology2 Robson Homes LLC2

Rutan & Tucker LLP SCI Consulting Group SGI Construction Management2 San Bernardino County Safety Employees2 San Bernardino Police Officers Association San Diego County Water Authority Santa Ynez Band of Mission Indians2 SummerHill Homes2 TREH Development2 Townsend Public Affairs Inc.2 USA Properties Fund Inc. Willdan

Jones Hall2 Jones & Mayer Kasdan Lippsmith Weber Turner LLP Kaufman Legal Group1 Leibold McClendon & Mann Livermore Sanitation2 MCE Clean Energy Marchetti Construction Inc.2 Napa Recycling2 Newport Pacific Capital Company Inc. Norton Rose Fulbright2 Pace Funding Group LLC2 Pinewave Developmentgroup, Inc2 Pleasanton Garbage Services Inc.2 Ponderosa Homes II Inc.2 Riverside Construction2

San Jose POA San Mateo County Association of Realtors2 Santa Monica Police Officers Association Seifel Consulting Inc. Sobrato Organization2 South San Francisco Scavengers2 Specialty Solid Waste & Recycling2 Stifel Nicolaus Studio T SQ2 Swinerton Management2 TADD LCC2 Transwestern Vali Cooper & Associates Inc.2 Van Scoyoc Associates2 West Builders2 West Coast Arborists2

Basic ($1,000+) Dublin Crossing2 EMS Management LLC2 Emanuels Jones and Associates Envise/Southland Energy Fard Engineers2 FlashVote1 Forefront Power Fresno Police Officers Association GHD Inc.2 Giacalone Design Services2 Gilton Solid Waste2 Gray Bowen Scott2 Highridge Costa Housing Partners Hospital Council of Northern California Innisfree Ventures2 J.R. Roberts/Deacon Inc.2 Jamboree Housing Corporation

Join the Partners Program Today!

Contact Mike Egan | (916) 658-8271 | egan@cacities.org

1 – Institute for Local Government supporter 2 – CITIPAC supporter Partial list as of 10/15/2018

Tools to Engage Your Community in the Budgeting Process by Melissa Kuehne Budgeting comprises some of the most important decisions that cities make.

Taking steps to share the city’s budget information with the community enables residents to: • Better understand the overall budget and the local budgeting process; • Knowledgeably discuss budget issues among themselves and with decisionmakers; • Understand the constraints affecting the allocation of resources; and • Reach more informed opinions about how limited financial resources should be allocated.

Cities can use a variety of ways to engage the community in the budgeting process.

To pick the right approach, you need to consider: • What type of input do staff and officials want from the public related to budget decisions — a vision, an expression of broad community values, new ideas or choices among options or ranked or unranked sets of ideas or preferences?

• How will the public’s preferences and/or ideas be considered in final budget decisionmaking?

• What time period and financial and staff resources can be devoted to the effort?

• How comfortable are policymakers with public involvement in budget decisions? Are they willing to strongly consider community opinion, even if it means reducing spending elsewhere in the budget?

www.westerncity.com

Explore a Spectrum of Options Budget surveys collect public input by telephone and through mailings, online tools or in-person interviews at a community venue. Surveys can provide a relatively easy way to organize a snapshot of public opinion at any given time. Such snapshots can give decisionmakers a picture of the services that the public values most and least and the budget choices that garner varying degrees of support.

Online forums and social media allow for a virtual exchange of information and preferences. This allows you to gather input from a large number of people, at their convenience, from their home or office.

Budget workshops provide opportunities for public education, discussion and feedback on a city budget. Successful budget workshops require sound design and well-executed logistics, careful preparation of background materials, effective recruitment of participants and skilled facilitation. Budget workshops can offer the public and organized stakeholders an opportunity to question, comment on and shape budget goals and development.

Deliberative forums involve more intensive and/or longer-term facilitated processes than budget workshops. This type of engagement activity requires substantial time and resources — and the full understanding and support of elected

officials and senior staff. Deliberative forums can give a significant number of community participants an opportunity to grapple with budget issues in greater depth than a shorter workshop might allow.

Advisory boards, commissions and committees also offer ways to involve residents. Community members, typically representing interests, groups, areas of expertise or geographic areas are selected to provide input on budget goals, issues, priorities and decisions. For more information, see “Finance Advisory Committees: Tips and Traps” on page 11.

Participatory budgeting is a democratic process in which community members decide how to spend part of a public budget. This process can be helpful when seeking to develop extensive community involvement in budget choices, particularly when: • Significant differences of opinion exist in the community about spending new tax dollars or one-time funds; • Community trust in local government is low; and/or • “New” revenues need to be allocated.

Find Additional Resources Online For more information and examples of how these tools can be used, visit www. ca-ilg.org/engaging-public-budgeting. ■

Melissa Kuehne is communications and development manager for the Institute for Local Government and can be reached at mkuehne@ca-ilg.org.

Western City, November 2018

9

Learn About

California’s Municipal Bonds With EMMA

by Lynnette Kelly

More than 5,200 California cities, towns, other public agencies — and the state government — use municipal bonds to finance infrastructure and other community projects. In September, for example, the City of Long Beach issued $327 million of revenue refunding short-term notes related to the Port of Long Beach, and the California Pollution Control Financing Authority issued $100 million of revenue bonds to finance waste disposal facilities. In August 2018, $20 billion worth of California securities were traded, representing 15 percent of all municipal bonds traded that month.

This is just a snapshot of the information freely available to California municipal officials and citizens on the Electronic Municipal Market Access (EMMA®) website at emma.msrb.org. The EMMA website is operated by the Municipal Securities Rulemaking Board (MSRB), the congressionally chartered, self-regulatory organization whose mission is to promote a fair and efficient market for municipal bond offerings and other municipal securities that help finance local schools, parks and other public projects. EMMA can serve as a valuable resource for local government officials whose agencies have outstanding debt or may be considering issuing new bonds and want to compare

their financial situation with other bond issuers within California or around the country.

The EMMA website was created nearly a decade ago as a resource for investors seeking information when buying or selling a bond. Municipalities that issue bonds also make information available to investors through EMMA. The EMMA website provides free public access to important documents associated with nearly every municipal bond, from the official statement to the most recent annual financial filing from the government backing the bond.

Municipal bond issuers and others interested in the $3.8 trillion U.S. municipal bond market also use EMMA to inform their decisionmaking about issuing municipal bonds. When local governments are planning the timing of a new bond issue, they can access tools on EMMA such as a calendar listing upcoming bond offerings and another showing expected economic data reports or events.

In addition, EMMA provides access to several municipal market yield curves and indices. Many municipal issuers and their municipal advisors use yield curves as part of the bond pricing process to provide a benchmark when establishing offering yields on new bond issues.

The MSRB has been integrating new tools and resources on EMMA to enable users to explore and assess trends in the municipal securities market. As noted earlier, market statistics allow EMMA users to view aggregate trading activity in each state and territory. State statistics can be filtered by date range to view and compare trends over time. EMMA’s market statistics are updated daily and list the top 20 most actively traded municipal bonds and issuers throughout the nation.

Put EMMA to Work for Your City City officials with an interest in these issues can: • Keep up to date with new enhancements to EMMA by subscribing to EMMA Updates from the MSRB at msrb.org; • Hear from other local government finance professionals about how they use EMMA on the MSRB YouTube channel, MSRB News; and • Get frequent EMMA statistics and news updates from the MSRB Twitter feed @MSRB_News.

For links and related resources, read the online version of this article at www.westerncity.com. ■

Lynnette Kelly is president and CEO of the Municipal Securities Rulemaking Board and can be reached at thamlin@msrb.org.

10

League of California Cities

www.cacities.org

Finance Advisory Committees:

Tips and Traps

by Melissa Kuehne

In today’s environment of the 24-hour news cycle, social media and “fake news,” cities throughout California are working hard to engage their communities and strengthen trust in local government.

Residents increasingly question decisions made at all levels of government — particularly those related to use of taxpayer dollars and financial decisions. To help address such concerns, many cities are turning to finance advisory committees.

These committees, composed of community members, aim to increase city government transparency and build accountability. Including the community in the decisionmaking process beyond participating in elections and city council meetings helps people better understand the types of decisions made at the local level, the trade-offs to consider and how city councils arrive at final decisions.

“Involving residents in meaningful, inclusive and responsive ways benefits the city and the community alike,” says Tony Dahlerbruch, city manager of Palos Verdes Estates. “Advisory committees

can serve as a conduit between the city and community, which leads to increased transparency and trust.”

Avoiding Unintended Consequences: Issues to Consider Finance advisory committees can yield many benefits, but they can also generate unintended consequences if not carefully designed and managed. Without clear direction and strict oversight, a city runs the risk of the finance advisory committee duplicating staff work and challenging the governance and authority of the city council. Such committees are most effective when they are a conduit for residents serving in an advisory capacity to the city council to share opinions and offer recommendations — and least effective when they duplicate the efforts of the city’s finance director and Finance Department.

Committees that duplicate efforts can also create competing priorities for staff. When the committee’s purpose and tasks are not clearly articulated, cities run the risk of

committee members attempting to direct staff and drive projects. This potentially puts staff in an awkward situation where the committee issues directions that conflict with council-adopted goals and priorities and/or the directions of executive staff.

The amount of staff time needed to manage the committee is another consideration.

It’s likely that staff will need to respond to questions and requests from committee members and provide support for additional public hearings and meetings.

Depending on the number of meetings and the committee’s needs, this can significantly strain already stretched city staff.

Another problem can arise if the committee is given the authority to develop or recommend a budget because the committee may reach a conclusion that differs — perhaps radically — from the direction that the council deems to be the best option. This creates conflict between the continued

Melissa Kuehne is communications and development manager for the Institute for Local Government; she can be reached at mkuehne@ca-ilg.org.

www.westerncity.com

Western City, November 2018

11

Finance Advisory Committees: Tips and Traps, continued

CSCDA IS A JOINT POWERS AUTHORITY WITH TOOLS TO HELP FINANCE SOME OF THE MOST IMPORTANT PROJECTS IN YOUR CITY

LOCAL STREETS AND ROADS

council and the committee and, by extension, the residents of the community. In such a situation, if the council opts not to follow the committee’s direction, it can undermine the chances of achieving the primary goal of increasing trust between the city and community.

Best Practices To avoid these potential pitfalls, cities can take the following steps.

TOTAL ROAD IMPROVEMENT PROGRAMS (TRIP)

Articulate a clear mandate from the city council about the committee’s mission and role in the decisionmaking process.

Financing to help local agencies “catch up” with their street repairs/transit projects by funding more projects upfront.

AFFORDABLE HOUSING HOUSING BOND PROGRAM

Financing designed for cities to assist developers in accessing tax-exempt bonds for the financing of low-income multi-family and senior housing projects.

LEARN MORE AT WWW.CSCDA.ORG

Public Finance Law Experts Meyers Nave helps cities and counties master their financial futures in every economic climate. We help clients define their needs and goals, identify revenue possibilities, and access effective financial resources.

Our legal services include: • Bond/Disclosure/Issuer’s Counsel • Debt Management • Development Finance • Financing Districts • New Market Tax Credits • Propositions 26 and 218 • Revenue & Taxation

MEYERSNAVE.COM | 800.464.3559 OAKLAND | LOS ANGELES | SACRAMENTO | SANTA ROSA | SAN DIEGO

12

League of California Cities

www.cacities.org

This can avoid “mission creep” and support the efforts of staff and the council to keep the committee — as a whole and its individual members — focused and on task.

Set clear roles and responsibilities.

Providing clarity to committee members on their charge and the decisionmaking process is critically important. Committees are not in place to direct staff, duplicate staff efforts or make final policy or operational decisions. Their purpose is to serve in an advisory capacity to the city council, which in turn makes final policy decisions.

If a committee crosses the line into the operations, activities and recommendations that are the responsibility of the council or staff, the council risks unintentionally abdicating its role, losing control and creating unnecessary controversy.

Adopt a standing committee resolution or code of conduct for the committee.

This helps formalize the committee’s role and responsibilities and provides a mechanism for staff and the city council to keep the committee on track.

Provide training and/or orientation for new committee members. Standing committees are subject to the Ralph M. Brown Act. Thus, it may be wise to provide training to committee members on the laws governing open meetings, AB 1234 ethics education and/or conflicts of interest. City officials may also want to consider conducting an orientation for new committee members that covers: • The role and responsibilities of the committee; • Applicable city ordinances and ethics laws; • Adopted codes of conduct; and

Make certain that adequate staff support will

• Staff or council contacts.

be provided for the advisory committee and be specific about the limits of such support.

CONNECTED COMMUNITIES ARE SMARTER COMMUNITIES

continued on page 27

Tyler’s solutions can help you build a smarter community.

When information flows seamlessly between agencies and jurisdictions, California cities, schools, and courts become more effective. Civic leaders become more accessible and responsive.

Citizens become more informed and engaged. And the entire community benefits when everyone is headed in the same direction.

You’ll flip for our new wave of thinking at tylertech.com.

www.westerncity.com

Western City, November 2018

13

Hot Topics in California

14

League of California Cities

www.cacities.org

Municipal Finance

by Michael Coleman and Michael G. Colantuono At the recent League of California Cities 2018 Annual Conference & Expo, attendees learned about several new developments in the financing of municipal services in California. The many important things to know about the current state of local government finance include these items: 1. The state’s finances have improved substantially over the past six years, and constitutional protections for

local revenues are in effect. These two factors reduce local governments’ risks of losing revenue through budgetary takings, shifts and “swaps” by the state — particularly when the next economic downturn comes; 2. The U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., in June 2018 favored local governments and will improve fairness among retailers and collection of sales and use taxes at the state and local levels; and

3. A California Supreme Court decision in Citizens for Fair REU Rates v. City of Redding in August 2018 provides helpful support for transfers from municipal utilities to municipal General Funds, although other important questions related to this issue remain to be answered.

continued

Michael Coleman is principal fiscal policy advisor to the League and can be reached at coleman@muniwest.com. More information on city finance is available at www.californiacityfinance.com. Michael Colantuono is a shareholder in Colantuono, Highsmith & Whatley, PC, a municipal law firm with offices in Pasadena and Grass Valley. Colantuono is city attorney for the cities of Auburn and Grass Valley; he can be reached at mcolantuono@chwlaw.us.

www.westerncity.com

Western City, November 2018

15

Hot Topics in California Municipal Finance, continued

California’s Improved Financial Condition is Good News for Cities California’s General Fund revenues plunged from more than $100 billion in 2007 to roughly $85 billion in 2008 — mostly due to declines in revenues from the state personal income tax and sales tax. The state’s General Fund revenues are highly volatile compared with those of local governments and other states.

Because California’s progressive incometax structure levies increasingly higher marginal tax rates on higher-income earners, economic changes quickly and

dramatically impact state government revenues. Managing higher volatility and uncertainty requires stronger reserves and careful budgeting to avoid overcommitting to ongoing spending and instead favoring capital investments, building reserves and paying down debts.

In recent years, California voters have approved a number of ballot measures that have strengthened the state’s financial management and position. These include: • Proposition 2 (2014), which fortified the state’s rainy day reserve and debt pay-down rules;

• Prop. 30 (2012), which provided about $6 billion per year over seven years.

This was funded with additional upperbracket income taxes and a temporary sales tax. (California voters in November 2016 passed Prop. 55, continuing the higher personal upper-income tax brackets through 2030. Single-filers earning more than $263,000 and jointfilers making more than $526,000 pay a 10.3 percent tax on their upper income and those making more than $1 million will pay 13.3 percent. The Legislative Analyst’s Office estimates that these higher tax rates raise $4 billion to $9 billion a year); and

The Proposition 26 decision may have broader, helpful implications for local government revenue authority.

16

League of California Cities

www.cacities.org

• Prop. 25 (2010), which allows the Legislature to pass a budget with a simple majority and suspends legislators’ salaries if they fail to meet the constitutional June 30 deadline to adopt a budget.

And California has steadily built up its General Fund reserves to nearly 12 percent of annual revenues (see Figure 1, below).

This now puts California well above average among the 50 states and among the top 10 for healthy General Fund reserve levels.

Remarkably, since the passage of Prop. 25, the Legislature has passed balanced, on-time budgets, creating greater financial certainty for local governments at the outset of each budget year. More importantly, since the passage of Prop. 30, the state has largely erased its budgetary borrowing debt (interfund borrowing, deferred reimbursements and other maneuvers) that once perilously totaled over $35 billion.

The next recession may be just around the corner, but the state is much better positioned to weather it — and that bodes well for local governments dealing with their own financial challenges.

Figure 1

and Prop. 22 (2010) together prohibit the state from: • Transferring responsibility to local government for a program the state previously fully or partially funded; • Reducing the local Bradley-Burns Uniform Local Sales and Use Tax rate; • Shifting property taxes from cities, counties or special districts; and • Shifting locally approved taxes away from taxing agencies.

Constitutional protections further reduce the risk of actions by the state that might shift revenues and expenses. Prop. 1A (2004)

continued

California State General Fund Reserves 2010–18 (Percentage of General Fund Revenues)

15%

10%

5%

0% 2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

-5% Budgeted

Actual

-10%

Includes Budget Stabilization Account (BSA), Special Fund for Economic Uncertainties (SFEU) and other General Fund reserves.

www.westerncity.com

Western City, November 2018

17

Hot Topics in California Municipal Finance, continued

U.S. Supreme Court’s Wayfair Decision Levels the Playing Field In June 2018, the U.S. Supreme Court issued a long-anticipated decision in a dispute about the collection of sales tax revenues from out-of-state e-commerce retailers in South Dakota v. Wayfair.

Unlike an over-the-counter transaction where the collection duty, tax rate and allocation of a sales tax is straightforward, a “remote sale” — which includes online transactions, telephone orders, mail orders, etc. — involves a purchaser and seller in different locations and is more complex. In the case of a transaction where the seller is located out of state with no in-state physical presence (such as a warehouse or sales office), the U.S. Supreme Court previously ruled that a state cannot compel the retailer to collect

a tax due on the transaction. In California, as in other states, this has meant the purchaser is responsible for payment of use tax on the transaction. Businesses, audited for compliance by state taxing agencies, pay about 90 percent of use tax due in California. But consumers are much less likely to report and pay use tax that the retailer fails to collect. The growing volume of business-to-consumer sales by out-of-state retailers means an increasing amount of uncollected taxes.

This particularly affects states like South Dakota and North Dakota, where sales tax revenues are especially critical revenue sources and where retail businesses are less likely to have a physical presence than, say, California, Texas or New York.

Under the 1992 U.S. Supreme Court decision in Quill Corp. v. North Dakota, a state could not compel a seller to collect

with

BUILD BETTER BUILD SAFER BUILD

The Laborers’ Union (LiUNA) partners with responsible contractors to safely build and maintain the infrastructure needs of communities throughout California while providing residents a career in the construction industry.

PEOPLE

PROJECTS

855-532-3879

18

League of California Cities

state sales taxes if it had no property or employees in the state. The court signaled that Congress could compel out-of-state retailers to collect tax. But over the several decades since then, Congress has not come close to acting on the issue. Many retailers argued that the physical presence rule gave out-of-state sellers an unfair advantage.

South Dakota officials, acting in overt and intentional conflict with the 1992 decision, sought to force out-of-state retailers Wayfair, Overstock and Newegg to collect sales taxes on purchases by South Dakotans. They sensed that some members of the U.S. Supreme Court had grown impatient with Congress’s inaction and had begun to believe that in today’s digital economy, a retailer that does substantial business in a state has a business presence there even if it has no offices or employees there.

In a 5-4 decision, the court agreed with South Dakota and overturned Quill. The court held that the physical presence rule, as first formulated and as applied today, is an incorrect interpretation of Congress’s power under the so-called Dormant Commerce Clause to regulate taxation of interstate commerce. The decision noted that South Dakota limited its tax requirement to vendors with $100,000 in receipts or 200 transactions per year and its tax is therefore not an undue burden on interstate commerce, but signaled that

PARTNERSHIPS

www.LiUNAbuildsCA.org

www.cacities.org

Local governments may now maintain PILOTs and other transfers from power utilities — to the extent those transfers do not exceed nonretail-rate revenue — without violating Prop. 26.

requirements for smaller entities with fewer transactions in South Dakota might be unduly burdensome. As former Justice Kennedy’s majority opinion states: South Dakota’s tax system includes several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce.

First, the Act applies a safe harbor to those who transact only limited business in South Dakota. Second, the Act ensures that no obligation to remit the sales tax may be applied retroactively.

S.B. 106, Section 5. Third, South Dakota is one of more than 20 states

that have adopted the Streamlined Sales and Use Tax Agreement. This system standardizes taxes to reduce administrative and compliance costs: It requires a single, state-level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules. It also provides sellers access to sales tax administration software paid for by the state. Sellers who choose to use such software are immune from audit liability.

California has not yet implemented collection of out-of-state taxes under South

Dakota v. Wayfair, as its tax agencies and legislators are pondering the best way to do so. Nevertheless, the financial gain to California’s state and local agencies may be less than some suppose. Unlike in the Dakotas and other smaller states, it is more common for a business to have a physical presence in California and thus many may already be collecting and remitting sales tax as in-state businesses. Based on a recent study by the U.S. Government Accountability Office, California’s growing annual uncollected sales tax revenues from out-of-state transactions totaled somewhere between $1 billion and continued on page 21

www.westerncity.com

Western City, November 2018

19

New features make it easy to access and share our content from your mobile devices or your desktop.

www.westerncity.com Western City magazine is the monthly publication of the League of California Cities.ÂŽ

Hot Topics in California Municipal Finance, continued from page 19

Figure 2

$1.7 billion in 2017. Most of this comes from business-to-consumer transactions, rather than business-to-business transactions. Applying these estimates, the local Bradley-Burns 1 percent sales tax would be between $122 million and $211 million per year, about 2 to 3 percent of current Bradley-Burns allocations.

California Supreme Court Provides Helpful Support for Limited General Fund Transfers from Municipal Utilities Cities commonly transfer funds from their enterprise utilities to their General Funds. These transfers are often made as payment for services provided to the utility by General Fund-supported departments such as finance, information technology, personnel, legal and administration. In some cases, such as with the City of Redding’s electric utility, the transfers are payments in lieu of taxes (PILOTs) or franchise fees. Not only do these transfers compensate for costs of services provided to the utility and its customers, but they also allow the municipal utility to contribute to the community’s tax base just as a private utility would.

Uncollected Revenues From Out-of-State Sales Potential Revenue Gains From Expanded State Tax Collection Authority (United States, in billions of dollars, 2017) Low Scenario Business to Consumer Internet Retailers

$

E-Marketplace Sellers (Ebay, Amazon)

3.2

$

3.9

Other Remote Retailers (catalog, TV, etc.) (less consumer use tax compliance) Business to Consumer Total

$

4.8 6.2

1.5

1.8

(0.2)

(0.2)

8.4

$ 12.5

1.0

2.9

Business to Business Merchant Wholesale E-Commerce

(0.9)

(less business use tax compliance)

(2.0)

Business to Business Total

$

0.1

$

Grand Total (Business to Consumer + Business to Business)

$

8.5

$ 13.4

California

$

1.0

$

0.9 1.7

Totals may not add precisely due to rounding.

Uncollected Revenues From Out-of-State Sales Potential Revenue Gains From Expanded State Tax Collection Authority (California, in millions of dollars, 2017) Rate

Low

High

3.9375%

$ 480

$ 832

County Realignment

1.5625%

190

330

Proposition 172

0.5000%

61

106

State General Fund

County Transportation Development Act (TDA)

0.2500%

30

53

City* Bradley-Burns

1.0000%

122

211

varies

117

203

Total

$1,000

$1,735

Add-On Local Transaction & Use

continued

High Scenario

*A portion goes to the county to the extent of sales in unincorporated areas.

Source: Michael Coleman computations from U.S. Government Accountability Office, December 2017

www.westerncity.com

Western City, November 2018

21

Hot Topics in California Municipal Finance, continued

Such transfers were invalidated for water, sewer and solid waste under Prop. 218 (1996); (see 2002 Howard Jarvis Taxpayers Association v. City of Roseville and 2005 Howard Jarvis Taxpayers Association v.

City of Fresno). But Prop. 218 expressly exempts fees for gas and electric service from its rules for so-called “propertyrelated fees” — an exception apparently intended to preserve lifeline rates for lowincome seniors, a constituency important to Howard Jarvis Taxpayers Association.

At LCW we are not solely lawyers. For nearly 40 years, we have been your trusted partners, helping public employers avoid legal problems and navigate challenging situations.

California cities serve others, and we are honored to serve them in all areas of law, including: • • • • • • •

Employment Law Labor Relations Retirement Wage and Hour Public Safety Public Records Act Litigation

In November 2010, California voters passed Prop. 26, a tax- and fee-limitation measure sponsored by business interests.

Prop. 26 defines all local government charges as taxes requiring voter approval unless one of seven stated (and two implied) exceptions applies. Among the exceptions is a “charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to

“Never doubt that a small group of thoughtful committed citizens can change the world; indeed, it’s the only thing that ever has.”

Margaret Mead

You serve others and LCW is honored to serve you.

the local government of providing the service or product.” Thus, Prop. 26 limits gas and electric rates to the cost of service.

In December 2010, residents sued to challenge Redding’s electric utility rates as non-voter approved “taxes” under Prop. 26, claiming the rates funded the city’s PILOT and therefore necessarily exceeded the cost of service. The California Supreme Court ruled for the city, noting the record showed that the utility’s nonretail-rate revenues were sufficient to cover the PILOT and therefore the challengers could not show that retail power rates fund it. The Supreme Court treats revenues from wholesale transactions as unrestricted and not “imposed” on anyone, as participants in wholesale power markets are willing sellers and buyers. All of California’s initiative restrictions on local government finance — Propositions 13, 62, 218 and 26 — apply only to revenue measures that governments “impose” by compelling people to pay them.

Read About Other Hot Topics in California Municipal Finance For information about other hot issues in finance for California cities — funding stormwater compliance and property tax in lieu of the Vehicle License Fee for new cities and city annexations — read the online version of this article at www.westerncity.com. You will also find links to related resources and other useful information.

www.LCWLEGAL.com

22

League of California Cities

www.cacities.org

This means local governments may now maintain PILOTs and other transfers from power utilities — to the extent those transfers do not exceed nonretail-rate revenue — without violating Prop. 26.

The state Constitution “does not compel a local government utility to use other nonrate revenues to lower its customers’ rates.”

The decision may have broader, helpful implications for local government revenue authority. The court helpfully states that the “no free-riders” rule of Prop. 26 is not violated by a fee that not all customers pay or if some customers pay more than others without a cost differential — provided there are non-fee revenues to cover the difference. The court also stated that non-rate, discretionary revenues (such as rents, wholesale sales, royalties, etc.) need not subsidize retail rates: “such subsidization is not required by California law.”

The case did not decide two questions of vital interest to local governments:

Outstanding Questions Remain

1. Does Prop. 26 grandfather local legislation that predated it and that imposes costs on the utility that are not costs to generate, store and distribute power? This will affect not only General Fund transfers, but also such things as “public goods charges” that fund conservation and clean-energy programs and discounted rates for low-income and senior households.

2. Does Prop. 26 allow the theory that a PILOT is a reasonable service cost because it approximates costs a private utility would pay?

Further developments in this area of the law are likely.

Conclusion Prop. 26 cases have been coming down from the appellate courts in rapid succession over the past two years and more are in the offing. This area of the law is developing rapidly, and California state and local ratemakers should be alert for further developments. ■

The next recession may be just around the corner, but the state is much better positioned to weather it — and that bodes well for local governments.

www.westerncity.com

Western City, November 2018

23

J

O

City of

San Bernardino

Community and Economic Development Director Join a City on the Move. The City of San Bernardino is recruiting for a highly skilled, innovative, and results driven individual to lead the Department of Community and Economic Development. The new Director will play a critical role in realizing the City’s vision of being a world class, “Strong and Prosperous,” community.

The Director will report directly to the City Manager while maintaining close working relationships between departments and will be responsible for an eager staff of 29 and a 2018/19 budget of $11.5 million.

Any combination of education and experience that provides the required knowledge, skills, and abilities to perform the essential job duties of the position is qualifying. A typical way of obtaining the knowledge, skills, and abilities outlined above is a Bachelor’s degree and at least 10 years of progressively responsible community development and engineering services, including planning, building, economic development and housing; at least 5 years of which were in a management capacity or equivalent combination of training and experience. Salary range is $164,712$200,208 DOQ. Submit cover letter, resume, and 5 references to apply@ralphandersen.com. Confidential inquiries to 916.630.4900. Detailed brochure at www.ralphandersen.com.

Ralph Andersen & Associates

B

O

P

P

O

R

T

U

N

I

T

I

E

S

Display Advertising Call Pam Maxwell-Blodgett at (800) 262-1801 to place a display (boxed) ad or for rate and deadline information, or email admanager@westerncity.com.

Website Job Postings Display ads are posted on our website at no additional charge. But if you miss the deadline for getting your job opportunity ad into the magazine, you can post it on the Western City website right away.

To post your job opportunity ad on our automated website, visit www.westerncity.com or contact Savannah Cobbs, Western City administrative assistant; email: scobbs@ cacities.org; phone: (916) 658-8223.

Tranquility

in Municipal Temporary Staffing Relax. MuniTemps is your City’s Temp Staffing Department We work and act like a Department at City Hall, following all H.R. policies and procedures.

So relax. We’ve got your back!

MuniTemps.com 866.406.6864

“It’s not just a job, it’s public service”®

New!

CalPERS Compliance Program

Background Checks

CITY O F M E N D O TA

CITY MANAGER The City Council in the City of Mendota is conducting a search for an experienced public sector executive that has a passion for local government and serving the public to become the next City Manager. The City of Mendota needs a City Manager with skills and experience to enhance economic development and recreational opportunities as well as manage a city with increasing growth potential. The City Manager is responsible for an All Funds Budget of $6.8 million and a General Fund Budget of $2.1 million.

For more information, please see the complete recruitment brochure at http://ci.mendota.ca.us/employment/.

24

League of California Cities

Sick Leave

Workers Comp

ACA

CITY OF MARTINEZ The City of Martinez, with a population of approximately 36,700, is located along the Sacramento and San Joaquin rivers in the central part of Contra Costa County. As one of California’ first towns, Martinez retains a strong sense of history and family. One of the unique aspects of Martinez is its architecture. Many of the downtown shops still retain their early 20th Century look and charm, with some homes dating back more than 125 years. We welcome you to see for yourself all that Martinez has to offer!

Martinez is seeking an experienced, proven executive that is comfortable working in a team environment and exercising sound, independent judgment. The City Manager provides direction and oversight for the department heads in CITY addition to ongoing responsibilities that include managing the budget, preparing MANAGER Council meeting agendas and reports, initiating and implementing opportunities to enhance municipal service delivery, making improvements to city infrastructure, and striving for continuous improvement in all core City functions.

William Avery & Associates Management Consultants 31/2 N. Santa Cruz Ave., Suite A Los Gatos, CA 95030 408.399.4424

Fax: 408.399.4423 The new City Manager must be experienced in municipal finance and email: jobs@averyassoc.net maintaining a sustainable financial structure. Prior experience as a City www.averyassoc.net Manager, Assistant/Deputy City Manager, or as an Executive Director of a complex public sector organization is preferred. A Bachelor’s degree in a related field is essential and an MS/MA/MPA/MBA is highly desirable. To be considered, please visit the Avery Associates Career Portal at www.averyassoc.net/current-searches/ to upload your letter of interest, resume and contact information including email addresses for five work-related references to Bill Avery by November 26, 2018.

www.cacities.org

Current & Upcoming Opportunities City of Cotati, CA

Director of Administrative Services

City of Elk Grove, CA City Manager

County of Sonoma, CA

Director, Independent Office of Law Enforcement Review and Outreach

• City of Santa Rosa, CA – Chief Assistant City Attorney • City of Vancouver, WA – Assistant Chief of Police • Mendocino County Russian River Flood Control & Water

Conservation Improvement District, CA – General Manager

If you are interested in these outstanding opportunities, visit our website to apply online.

www.bobmurrayassoc.com

J

O

B

O

P

P

O

R

T

U

N

I

T

I

E

S

Current & upcoming openings . . .

Community Development Director City of Agoura Hills

Agricultural Commissioner – Director of Weights & Measures

Public Works Director/City Engineer CITY OF BEAUMONT Salary Range: Currently $11,696-$14,974 monthly

Under administrative direction, plans, oversees and directs the activities and operations of the Public Works Department, including engineering, street services, wastewater, land developments, traffic engineering, capital improvement programs, traffic planning and engineering, special projects, control staffing levels and department budget; coordinates assigned activities with other departments and outside agencies; and provide highly responsible and complex administrative support to the Assistant City Manager; and does related work as assigned.

Contra Costa County

Community Development Director City of Mountain View

Director of Development Services City of Indio

Please visit www.tbcrecruiting.com for latest info.

LA Headquarters • 424.296.3111

CITY OF RIVERSIDE The City of Riverside is a leading Southern California city offering a blend of hometown charm, history and hospitality with the vision, energy, culture, and diversity of a sophisticated metropolitan area. It currently ranks as the 12th largest city in California, 6th in Southern California, and is the economic powerhouse of one of the fastest growing regions in the U.S. Riverside is exceptionally well-positioned for its sustainable urban future, and is a very attractive place for businesses, young professionals and families alike.

This at-will position is a key member of the City Manager’s Executive Leadership Team and provides day-today management of the Community & Economic Development Department. It is important to note that the Community William Avery & Associates & Economic Development Director works closely with all other City Management Consultants departments – Riverside’s department heads are very collaborative and 1 3 / 2 N. Santa Cruz Ave., Suite A communicative, and have a shared ethic of working well together to Los Gatos, CA 95030 determine the best course forward for the benefit of the community.

COMMUNITY AND ECONOMIC DEVELOPMENT DIRECTOR

408.399.4424

The new Director must have a minimum of seven years of progressively Fax: 408.399.4423 responsible administrative and management experience in city planning, email: jobs@averyassoc.net economic development, community development, commercial real www.averyassoc.net estate, or a closely related field. This position also requires a Bachelor’s degree with major course work in city planning, urban design, public/business administration, real estate development or a closely related field. To be considered, please visit the Avery Associates Career Portal at www.averyassoc.net/current-searches/ to upload your letter of interest, resume and contact information including email addresses for five work-related references to Bill Avery by November 19, 2018.

Open Until Filled.

Contact: karim@beaumontca.gov

Photo/art credits

For full job description and how to apply: http://beaumontca.gov/jobs.aspx

Cover: Henrik5000 Pages 3 and 5: GeorgePeters Page 6: Adamkaz Page 9: DNY59 Page 10: Top, Lionvision; bottom, Zlisjak Pages 11 and 12: Erhui1979 Pages 14–15: Henrik5000 Page 16: Bottom, PPAMPicture

City of Beaumont 550 E 6th Street Beaumont, Ca. 92223 951-572-3228 Office

26

League of California Cities

Page 19: Top, Busracavus Page 23: Bottom, MarsYu Pages 27 and 30: Erhui1979 Page 33: Jude Hudson, Hudson+Associates

www.cacities.org

Finance Advisory Committees: Tips and Traps, continued from page 13

It may also be helpful to consider any unique qualifications and subject-matter knowledge or expertise that may be needed on the committee and to seek those skills in the recruitment process.

When recruiting members for a finance advisory committee, the city may require applicants to have finance, investment or banking experience; however, such private-sector experience differs significantly from public-sector finance, and committee members will still require training and oversight.

“The City of Los Altos Hills provides training and orientation for all new committee members and has adopted a code of conduct for all appointed commissioners and committee members,” says Carl Cahill, city manager for Los Altos Hills.

“This allows us to manage expectations and work more collaboratively with our advisory committees.” continued on page 30

J

O

B

O

P

P

O

R

T

U

N

I

T

I

E S

Finance Director Salary: $131,784 – 183,264, DOE, Excellent Benefit Package Filing Deadline: 11/25/18 | Interviews Scheduled: 12/10/18 Marina, CA is a growing coastal community. The City is seeking an effective teamoriented Finance Director to oversee the City’s financial affairs, provide fiscal direction and take the city to the next level by providing crucial leadership during a time of rapid growth. Human Resource & Risk Management experience is desirable.

Qualifications: At a minimum, candidates should possess: a Bachelor’s degree with major coursework in finance, business administration, public administration or a closely related field. Masters degree preferred; seven (7) years of demonstrated experience overseeing a finance department or division in a government agency, with at four (4) years management policy-making level, and two (2) years supervisory experience.

Visit www.cityofmarina.org or call 831-884-1283 for application. EOE

Discover where your talents can take you next NOW RECRUITING FOR

Finance Director

$135,541 - $184,131

The City of San Marcos runs more like a business than a bureaucracy.

So, if you’re more of an innovator than a bean counter, consider this exciting opportunity to head up our finance department.

Learn more about our unique environment and apply at:

san-marcos.net/jobs

www.westerncity.com

Western City, November 2018

27

PeckhamMcKenney & Director of Human Resources County of Santa Barbara, CA With its spectacular natural setting and robust economy, Santa Barbara County has evolved into one of the most desirable places in the world to live, work, and recreate. The county offers a paradise-like setting for tourists, vacationers, and more than 429,000 residents. The County of Santa Barbara is seeking its next Human Resources Director to build and shape the county’s organizational culture and create a dynamic HR department. The ideal candidate will be a strategic thinker with extensive knowledge of human resources fundamentals and serve as a change agent to transform government. The Director will be forward thinking, energetic and enthusiastic, with stamina to stay the course yet bring others along on the transformation journey. He or she will serve as a business partner to other county leaders to address their human capital and talent needs into the future. Santa Barbara County has a workforce of over 4,000 employees spread through 22 county departments. The current Human Resources departmental operating budget is $8.5 million with 25 full-time equivalent positions. At least 10 years of increasingly complex human resources responsibility in a public sector setting (county, city, special district or educational institution), including at least three years of experience in a senior management capacity is required. A Bachelor’s degree in a relevant discipline is required; however, a Master’s degree is highly desirable. The negotiable range for this executive-level position is $162,000 to $195,000 depending on experience and qualifications and is supplemented with an executive benefit package. The top of the range for salary advancement is $215,244, and the county provides an outstanding benefit package.

Filing deadline is November 20, 2018. Contact Bobbi Peckham.

Human Resources Director Placer County, CA Placer County is characterized by a healthy and diverse economy, attractive business environment, and 373,796 residents who benefit from high quality educational, safety, and healthcare infrastructure. Stretching over one hundred miles, from the breathtaking vistas of the truly one-of-a-kind Lake Tahoe down through the verdant foothills of the Sierra Nevada Mountains to the lush Sacramento Valley, Placer County encompasses some of the most beautiful and diverse scenery in Northern California. The County provides a wide range of services to its residents through approximately 20 departments and 3,000 employees with a 2017-18 budget of $866.2 million. With a staff of approximately 50 employees, the new Director will be responsible for planning, organizing and directing a comprehensive Human Resources Department, serving at-will to the County Executive Officer, and receiving direction from the Civil Service Commission in those areas of human resource administration set forth in the Civil Service Enabling Ordinance or Placer County code. The candidate of choice will be a visionary leader, respecting the abilities of the management team and valuing professional input from staff. In addition to a minimum of five years of increasingly responsible managerial experience, including at least three years of public sector experience, this position requires a Bachelor’s degree from an accredited college or university with major course work in business, public, or personnel administration or a related field. A Masters degree and/or professional certification in Human Resources is/are preferred. Salary range from $157,395 to $191,256 DOQE with excellent benefits. .

Filing deadline is November 12, 2018. Contact Phil McKenney.

City Manager City of Rio Rancho, NM With stunning, high-desert landscapes and magnificent views of the Sandia Mountains, the City of Rio Rancho, New Mexico (pop. 96,159, 103.7 sq. mi., elev. 5,290 ft.), is southwestern living at its best. Incorporated in 1981 and a home-rule municipality since 1995, it is the third largest and fastest growing city in the state. Northwest of Albuquerque, Rio Rancho is just 45 minutes from Santa Fe and its world-class art, cuisine, and culture. Near perfect weather year-round, affordable housing, abundant outdoor recreation, and an outstanding school system are just some of the reasons Money magazine (Sept., 2018) named Rio Rancho the 30th Best Place to Live in America. Bachelor’s degree (public administration, business, or related), and five to seven years as a city manager, assistant city manager, or equivalent experience are required. Master’s degree and ten years of experience preferred.

Comprehensive benefits. Initial annual salary range $150,000 - $170,000 DOQE. Relocation assistance subject to negotiation.

Filing deadline is December 10, 2018. Contact Andrew Gorgey.

“All about fit�

Congratulations to our Recent Placements!

Bret Black, Fire Chief, City of Piedmont, CA Jack Bajorek, City Attorney, City of Brighton, CO Robert Lawton, City Manager, City of Turlock, CA Misty Higby, Police Chief, Town of Severance, CO Shane Hale, Town Manager, Town of Windsor, CO Rachael Fuller, City Manager, City of Hood River, OR Adam Raymond, City Manager, City of Glendora, CA Gabriel Perez, City Planner, City of San Clemente, CA Glenn Ferdman, Library Director, City of Beaverton, OR Jennifer Ott, Deputy City Manager, City of Hayward, CA Keith Riesberg, Town Manager, Town of Winter Park, CO Kari Svanstrom, Planning Director, City of Sebastopol, CA Chris Anaradian, Assistant City Manager, City of Glendale, AZ

Ana Ruiz, General Manager, Midpeninsula Regional Open Space District, CA

Upcoming Opportunities Assistant City Manager, City of Brentwood, CA Human Resources Director, Oregon Metro, Portland, OR Deputy Director of Public Works, City of Rancho Palos Verdes, CA Human Resources Director, Cosumnes Community Services District, CA

To apply, please visit our website at:

Peckham & McKenney

www.peckhamandmckenney.com

Resumes acknowledged within two business days.

Call (866) 912-1919 for more information.

Finance Advisory Committees: Tips and Traps, continued from page 27

Taking the Long View

Appoint a city council and/or staff liaison. This individual can report back to the city council and/or executive staff, answer questions for the committee and help keep the committee focused on its mission.

help a city understand the community’s values and priorities and foster leadership development.

“In general, it’s good to have more community participation in local government through advisory committees and other means,” says Rod Gould, retired city manager of Santa Monica. “However, problems arise when the committees aren’t provided the necessary training, clarity of direction, support and oversight to complete their mission or goals.”

Clearly delineate the level of committee staff support to be provided. Make certain that adequate staff support will be provided for the advisory committee and be specific about the limits of such support.

Cities also employ other means of engaging residents on fiscal matters. The Institute for Local Government offers a number of resources to help local governments successfully involve their communities in budgeting and finance issues and plan productive public meetings. See “Tools to Engage Your Community in the Budgeting Process” on page 9 for tips and approaches to that engagement. ■

When carefully executed and properly functioning, finance advisory committees can build trust in local government,

Have a sunset provision or regularly review the committee’s purpose and mission. If the committee has a narrow scope of duties, it may be appropriate to limit how long the committee exists. Periodically reviewing the purpose or mission of a standing committee is also advisable.

Has its charge been accomplished? Is its purpose still relevant or does it need to be re-examined?

More Information Online For additional information and links to related resources, read the online version of this article at www.westerncity.com.

P

R

O

F

E

S

S

I

O

N

A

L

S

E

R V

I

C

William Avery & Associates, Inc. Labor Relations / Executive Search / Human Resources Consulting 31/2 N. Santa Cruz Ave., Suite A Los Gatos, CA 95030 408.399.4424 Fax: 408.399.4423 email: jobs@averyassoc.net www.averyassoc.net

30

League of California Cities

E

S

D

I

R

E

C

T O

R Y

Bobbi C. Peckham • Phil McKenney

Peckham&McKenney www.peckhamandmckenney.com

Roseville, CA

866.912.1919

www.cacities.org

P

R

O

F

E

S

S

I

O

N

A

L

S

E

R V

I

C

E

S

D

I

R

E

C

T O

R Y

HELPING LOCAL GOVERNMENT LEADERS

managementpartners.com Budget Strategies ∙ Service Sharing Organization Analysis ∙ Performance Management Process Improvement ∙ Strategic Planning Executive Recruitment ∙ Facilitation/Team Building

E XPERIENCE , T ALENT , COMMITMENT TO PUBLIC SERVICE San Jose ∙ Orange County ∙ Cincinnati ∙ 408-437-5400

WRITTEN TESTS

Elevate Your ExpectaƟons

Sales and Use Tax Property Tax SoŌware SoluƟons Cannabis Compliance Business Tax AdministraƟon TOT and Short Term Rental Compliance

888.861.0220 I www.hdlcompanies.com 888.861.0220 I hdlcompanies.com

www.westerncity.com

Over 70 stock tests available for jobs in public agencies.

Toll Free (877) 22-EXAMS exams@donnoe.com www.donnoe.com

Western City, November 2018

31

P

R

O

F

E

S

S

I

O

N

A

L

S

E

R V

I

C

E

S

D

I

R

E

C

T O

R Y

Contact: Allan Crecelius or Sandra Comrie

12707 High Bluff Dr., Ste 200 San Diego, CA 92130 Tel 858.259.3800 fax 858.792.7465 acrecelius@rewardstrategy.com

Exceeding clients’ expectations since 1987.

Classification | Compensation Special Surveys | Performance Management

matrix consulting group

Reach New Clients For advertising information, call (800) 262-1801.

Over 130 Public Agencies across California put their TRUST in us, because we check all the boxes when it comes to managing their investments.

201 SAN ANTONIO Circle, Suite 148 MOUNTAIN VIEW, CA 94040 650.858.0507 • www.matrixcg.net

Offices in SF Bay Area (Headquarters), Boston, Dallas, St. Louis, Portland, Charlotte, Salt Lake City

Management and operations studies Feasibility studies User fees and cost allocation Police • Fire • Public Works • Utilities Parks & Recreation • Administration Planning & Building

CALTRUST.ORG (888) 225-8787

Sponsored by the League of California Cities

SPECIALISTS IN CLASSIFICATION, JOB EVALUATION AND COMPENSATION

5663 Balboa Ave., #399, San Diego, CA 92111-2705 915 L Street, #C-102, Sacramento, CA 95814 Brentwood Village, 149 S. Barrington Ave., #726, Los Angeles, CA 90049-2950 1-888-522-7772 • www.compensationconsulting.com Offices in various major cities

32

League of California Cities

www.cacities.org

What are your city’s top two fiscal issues?

Read more “On the Record” at www.westerncity.com.

Jesus Andrade Council Member Stockton

Glenn Sylvester Council Member Daly City

Denise Athas Council Member Novato

www.westerncity.com

Making sure the proceeds from our Measure M are spent properly on the facilities and recreation centers that the money is intended for — and sticking to our longrange financial plan.

We are in a structural deficit and trying to find ways to make cuts to services — libraries or police?

How to meet our pension obligations and how to retain enough personnel.

Malia Vella Vice Mayor Alameda

Cecilia Hupp Council Member Brea

Barbara Nicolls Council Member Grover Beach

How to pay for deferred infrastructure and general maintenance — and pension and OPEB liabilities.

Pensions and reduced sales tax revenues due to online sales.

We passed a bond four years ago to rehab our streets and that work is underway, and we are licensing cannabis businesses.

Western City, November 2018

33