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Anaheim City Council Special and Regular Meeting of June 4, 2019

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Anaheim City Council Special and Regular Meeting of June 4, 2019 ANAHEIM CITY COUNCIL SPECIAL AND REGULAR MEETING OF JUNE 4, 2019 TELECONFERENCE NOTICE Pursuant to Government Code Section 54953, Subdivision (b), this special and regular meeting will include teleconference participation by Council Member Jose F. Moreno from: University of Vermont, 590 Main Street, Burlington, VT 05405 with the room location posted in the main lobby of the building. This Notice and Agenda was posted at the teleconference location. Public comment on the agenda from this address was allowed pursuant to Government Code Section 54954.3. The special of June 4, 2019 was called to order at 2:04 P.M. in the chamber of Anaheim City Hall, located at 200 S. Anaheim Boulevard. The meeting notice, agenda and related materials were duly posted on May 30, 2019. PRESENT: Mayor Harry Sidhu and Council Members Lucille Kring, Denise Barnes, Jordan Brandman, Stephen Faessel, and Trevor O’Neil. ABSENT: Council Member Jose Moreno (did not participate in the meeting via teleconference) STAFF PRESENT: City Manager Chris Zapata, City Attorney Robert Fabela, and City Clerk Theresa Bass ADDITIONS\DELETIONS TO CLOSED SESSION: City Attorney Robert Fabela reported Closed Session Item No. 1 related to threats of litigation arising out of the city’s regulation of short-term rentals (STRs), further noting that he recused himself from this item and would not participate in its discussion. PUBLIC COMMENTS ON CLOSED SESSION ITEMS: None CLOSED SESSION: At 2:06 P.M., Mayor Sidhu recessed to closed session for consideration of the following items: 1. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Significant exposure to litigation pursuant to paragraph (2) of subdivision (d) of the California Government Code Section 54956.9: One potential case 2. CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION (Subdivision (d)(1) of Section 54956.9 of the California Government Code) Name of Case: City of Anaheim v. Accumax Holdings, Inc. (dba Ritter’s Steam Kettle Cooking/The Oyster Bar), et al., Case No. 30-2019-01056579-CU-UD-CJC 3. CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION (Subdivision (d)(1) of Section 54956.9 of the California Government Code) Name of Case: Teresa Perkins, et al. v. City of Anaheim, et al., USDC Case No. 8:19-cv- 00315-JLS-JDE City Council Minutes of June 4, 2019 Page 2 of 42 4. CONFERENCE WITH LABOR NEGOTIATORS (Subdivision (a) of Section 54957.6 of the California Government Code) Agency Designated Representative: Linda Andal, Human Resources Director and Angel Ho, Employee Relations Manager Name of Employee Organizations: Anaheim Firefighters Association, International Brotherhood of Electrical Workers Management, Anaheim Municipal Employees Association - General and Clerical, and Anaheim Police Association. At 3:19 P.M., the City Council reconvened and adjourned the special meeting of the Anaheim City Council. At 3:19 P.M., Mayor Sidhu called to order the regular meeting of the Anaheim City Council. WORKSHOP: Proposed Fiscal Year 2019/20 budget (Citywide Overview, Administrative Departments, Police, Fire & Rescue, and Community Services). City Manager Chris Zapata advised this workshop was the third in the budget series and would cover the Police, Fire and Rescue, and Community Services Departments. He reported the final workshop would be held on June 18, 2019, with the remaining operating departments being presented. Mr. Zapata reported that $215 million in the Capital Improvement Program (CIP) would be invested in community infrastructure and noted Anaheim would be one of a few California cities that will be able to balance its budget without cutting services or raising taxes. Citywide Overview/Administrative Departments Finance Director/City Treasurer Debbie Moreno introduced the budget team and presented a citywide overview of the budget and budget information for the administrative departments. She reported the U.S. economy was in its tenth year of expansion and no recession was expected in the near future. She advised the Orange County economy remained remarkably strong over the last five years and would continue to see healthy gains, especially with the opening of Galaxy’s Edge at Disneyland. Ms. Moreno reported the FY 2019/20 Proposed Budget is $2 billion and the General Fund comprised 23% of the budget. She advised the General Fund would be the focus of the presentation as this was where a majority of the discretionary funds were located and was used to fund Anaheim’s core services. Lastly, she advised the remaining budget funds were restricted for specific purposes, such as the Enterprise Funds. Ms. Moreno briefly recapped the proposed CIP and advised there were very few changes after it was originally presented in March 2019. She noted that funds often come from various restricted sources which include grants, gas taxes, development impact fees, and bond proceeds. The proposed CIP is $215 million and divided between transportation improvements, electric systems, water systems, wastewater, downtown projects, municipal facilities, commercial entertainment venues, and recreation, parks and libraries. City Council Minutes of June 4, 2019 Page 3 of 42 Ms. Moreno advised the General Fund represents 23% of the total Proposed Budget at $446 million and is home to many of the discretionary funds for core services. She advised the largest revenues are Transient Occupancy Tax (TOT), Sales and Use Taxes, and Property Taxes which make up nearly 80% of the General Fund sources. She reported Transient Occupancy Tax was the largest source, at almost 40% of the total. Ms. Moreno advised that TOT is the largest revenue source in the General Fund and tourism remained strong within Orange County and Anaheim. The proposed TOT budget is $174.2 million, a 6% increase over the current year, and seven new hotels are included in the projection, all expected to open by 2021. She reported that Anaheim hotel occupancy averages for Tier 1 hotels around 85%, approximately 20% over the national average, and that the Average Daily Rate (ADR) is expected to grow 5% per year for the next several years. Ms. Moreno presented Sales and Use Tax projections and noted a slight decrease due to decreases in new and used auto sales and a weakening in construction but growth was expected for next year. The proposed budget for Sales and Use Tax is $89 million, an increase of nearly 7% of current year projection. She also reported the opening of Galaxy’s Edge at Disneyland will increase sales tax revenues. Ms. Moreno presented Property Taxes and noted a 6% increase from the current year projection, growing to $81.8 million in the proposed budget, and reflected increases in Anaheim’s assessed valuation due to increase construction and changes in ownership. She highlighted the projected increases in all three tax sources, with the largest increases in TOT. Additionally, this budget is projecting new revenue of $25 million. Ms. Moreno advised the current growth in revenue may be subject to Lease Payment Measurement Revenues (LPMR) and presented the breakdown of LPMR calculations for a total of $71.7 million. She noted that in January 2019, City Council authorized the refunding of the Resort’s callable bonds which were estimated to generate $20 million in net present value savings. However, the savings were currently estimated at $40 million and, with conservative growth of 3% annually, the bonds could be paid off as early as 2027 or 2028. Ms. Moreno presented the Resort Financial Impact and advised that $163 million of TOT is generated by the Resort hotels, $20 million of Sales Tax comes from businesses within the Resort area, and approximately 17% of Property Tax is generated by the Resort. These tax revenues, along with what Disney pays directly for Police and Fire services, amounts to $209 million in revenue. She noted that Resort and Convention Center debt service of $86 million, public service costs of $24 million, economic development and promotions of $1 million, and general government support of $3 million comprise the expenditures of $114 million. She summarized that the Resort provides a positive financial impact to Anaheim with a surplus of $95 million, which is 27% of the General Fung ongoing expenditure budget to provide core services. Ms. Moreno reported that financial uses of the General Fund include services, economic development, debt service, and capital outlay with the largest portion going towards services, nearly 80%. She reported that services include labor, personnel costs and all other operating expenses. She compared the total operating sources to the total operating uses and noted there is an operating surplus of $2.4 million along with ending reserves of $43.3 million. City Council Minutes of June 4, 2019 Page 4 of 42 Ms. Moreno presented the breakdown by functions of the General Fund and the proposed five- year forecast of a structurally balanced budget. She noted the forecast included a new fire station in the Platinum Triangle and staffing for the station, but did not include any salary increases beyond what is in the current MOUs. She noted the ending reserves for this year were estimated at 12% of ongoing expenditures, with the forecast keeping within the adopted policy of 7-10% in reserves. She reviewed the proposed budget for the Administrative Departments which consist of the City Council, City Administration, City Attorney, City Clerk, Finance, and Human Resources Departments and makes up 25% of the General Fund uses. The net impact to the General Fund is reduced by charges to Enterprise Funds. Mayor Sidhu thanked Ms. Moreno for presenting a balanced budget. In response to Mayor Sidhu’s inquiry, Ms. Moreno advised that Anaheim would see approximately $85 and $105 million of revenue annually for General Fund use, available after the bond repayment is completed. Mayor Sidhu questioned the upcoming labor negotiations and what impact increased salaries could have, to which Ms. Moreno responded such increases were not included in the budget.
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