i'll call together the may nd meeting of the santa barbara city finance committee meeting and we have two items on the agenda the first item is the general fund major revenues and multi year forecast mister samara thank you mister chair members of the committee so this is the first in a series of presentations we'll make to the finance committee in connection with the recent filing of the two year financial plan for two thousand and eighteen and nineteen and we usually start in the first presentation covering our assumptions related to our revenues the journal fund revenues and these are the non non departmental revenues essentially taxes and the like and then i will follow that up with this nevis presentation with a look on how those numbers play out over a longer period of time so the two year plan of covered of course covers two years and i've got a multi year forecast that goes out of the way to two thousand and twenty one to see how that shapes up you know in terms of how their lines are going between revenues and expenditures over a five year period so with that i'll turn it over to  manager and i will be presenting the general fund major revenues for fiscal year two thousand and eighteen and two thousand and nineteen i'll be going over several different areas first i'll be covering a summary of the non departmental revenues after that i'll be going into some details on the separate revenue categories first of all going into sales tax and property taxes transit occupancy taxes utility users tax franchise fees business license and finally property transfer  first chart is a summary of the non departmental revenues in the first column the yellow is the fiscal year two thousand and sixteen actual results in the orange is the fiscal year two thousand and seventeen current year we have the adopted budget the blue is the fy nineteen proposed budget and the growth assumption you'll see in for fy total revenues actual revenues were eighty three million in orange the adopted budget originally was eighty six million however with based on current results to date and some other data that we have we did a revised projection and we believe that the refor cast will come out to about eighty five million this results in a variance to adopted budget of about one five million and that's the number i highlighted or i circled there about one five million negative the variance between adopted and the revised projection for fy eighteen we are proposing a budget of about eighty eight million the growth rate is three seven million i did want to also point out the we have a growth rate of twenty five point eight percent for franchise fees i wanted to point that out because it's a large growth rate i'll be going into detail later in the presentation about that but that really is due to the one percent sce franchise fee that we put back into the budget this year we took it out in fy seventeen due to the litigation and we put it back into the budget but i'll go into a little more detail later for fy eighteen we are assuming a growth rate overall for all of the revenues of three seven percent that's down at the bottom of the green column in total the proposed budget is about eighty seven point nine million as i mentioned for fy nineteen we're proposing a growth rate of three two percent overall and that does equate to about ninety point seven now go into detail for each of these revenue categories for sales taxes for fy seventeen we do have a lower base in fy seventeen and that's due to reduced returns and the final quarters of fy sixteen sales taxes are received quarterly and we get them one quarter in arrears so when we did adopt a budget for fy seventeen we only had two quarters at the time so we received two final quarters sixteen and we also received we have received two quarters to date so we have a lower base going into fy seventeen and then we also have received two quarters for fy seventeen that were lower than we anticipated so we have reduced our growth rate that was originally adopted at three percent down to two percent for the remaining two quarters the two quarters so far for fy seventeen came in at two percent and a negative one three percent as opposed to the three percent we had adopted the growth rate we'd adopted this results in a projected revenue decrease of about six hundred twenty six thousand dollars for fy seventeen our assumptions for fy eighteen we are proposing a growth rate of one five percent that is a lower growth rate than what we adopted in fy seventeen and we revised three percent down to two percent and that's due to the lower quarterly returns we've seen for the last four quarters also we are including an impact of recent store closures for example macy's was one of the stores that has recently closed this results in a net growth rate of one percent for fy eighteen also for fy nineteen we are proposing the growth rate slightly higher than one  five percent to two percent we think that there's the potential for new businesses because of some of these closures there could be new businesses that come back online also we are seeing inflation slightly higher we're seeing it reach close to two percent it could go even higher than that so we think there is the potential for sales tax to increase in fy nineteen and the outter years so how does this look looking at all the years for sales tax this chart gives you a good idea of sixteen all the way through nineteen so fy sixteen we had a total of about twenty one million in sales tax those are actuals for fy seventeen we did adopt a budget of about twenty two three million the shaded results in a net growth rate for fy seventeen of about one percent for fy eighteen adopt that one five percent growth rate but with the impact of additional of the store closures it results in a net growth rate for fy eighteen of one percent an fy nineteen the two percent growth rate results in a proposed budget of about twenty two point three million fy eighteen twenty one point nine million in total sales tax revenues this next chart is a historical look at sales taxes from two thousand and eleven through two thousand and nineteen in two thousand and eleven we received the city received about eleven i'm sorry seventeen point six million in sales taxes in two thousand and sixteen which was about a zero percent growth just slightly down a negative one point negative one point one percent growth rate in two thousand and sixteen the city received twenty one point five million in sales taxes and the green bars represent our forecast so in two thousand and nineteen we are forecasting to receive twenty two point four million in sales taxes that results between two thousand and eleven to two thousand and nineteen  difference between seventeen point six million and twenty two point four million is an increase of four point eight million over nine years the growth rates vary between a slightly negative zero point one percent to eight point eight percent over those nine years and between two thousand and eleven and two thousand and fifteen the average growth rate was about five point two percent so what you'll notice is in the last couple of years the growth rate really has dropped off and this is what we're seeing is this really is mirroring what we're seeing in the economy we're seeing less retail sales more internet sales we're seeing that move away from goods to more service industries so we really are gonna probably in the and mister tomorrow is going to go into the multi year forecast but we really are not seeing those large increases percentage growth in sales tax like we saw many years ago moving on to property taxes for fiscal year seventeen this is the one this is probably our strongest revenue right now the over the last couple years property taxes have really performed better than anticipated for fy seventeen the city we did adopt a growth rate of five percent and we actually received the county evaluation reports with assessed values of five five percent so it's performing better than we anticipated and we are projecting revenue a revenue increase of about one hundred and twenty one thousand for the current year for fiscal year eighteen and nineteen we're proposing growth rates of five five percent for eighteen and five percent for fiscal year nineteen in those figures we are assuming about two to three percent in annual growth from ownership transfers from sales we are seeing net both nationally and locally strong housing both turnover and pricing we're seeing a lower inventory and quick turnover we also confirm that with our property tax and consultant we had a one year contract with the property tax consultant and she saw the same turnover the the good housing economy the low inventory stronger housing price in pricing quick turnover i also wanted to point out that we continue to see proposition eight recapture this is when properties were reduced by the assessor's office several years ago with the housing crisis and the assessor continues to be able to recapture that value we have about a little over a thousand properties that still have value that  recapture and we believe it could end in fiscal year nineteen or twenty and we're not sure yet but it's over three hundred million in value that is still available for recapture so we have estimated between a half a percent and a percent each year and recapture that is built into those rates customers right thank you for that what's what's the total value in all assessed values yes believe it's got one too many zero or we would be able to ride rely just on property tax thank you this chart is representative our property taxes packed property tax revenues it's very similar to the prior chart that i presented for sales tax revenues as i mentioned property tax revenues are a strongest revenue source right now in fiscal year sixteen the city received over twenty nine million in property tax revenues  seventeen we adopted the city adopted a growth rate of five percent however it came in at five point five percent resulting in a variance adopted of over one hundred twenty thousand for fiscal year eighteen we are we are  proposing a growth rate of five point five percent which is the same growth rate we have received in fiscal year seventeen which results in over a thirty two million in property tax revenues for fiscal year nineteen we are proposing a growth rate of five percent just slightly below  year eighteen this also the slightly reduced growth rate also takes into account maybe a reduction in the prop eight recapture and this results in total revenues of over thirty four million historical look at property taxes from two thousand and eleven through two thousand and nineteen this shows just after the housing crisis in two thousand and eleven that was the last year of the reduction in property taxes the negative one one in two thousand and eleven we received over twenty two million twenty two eight million in property taxes in two thousand and eleven in two thousand and sixteen the city received twenty seven five in property taxes once again the green are the forecasted numbers and we are projecting in two thousand and nineteen to receive thirty two million in property taxes between two thousand and eleven in two thousand and fifteen the average growth was only two five percent however in the the forecasted between two thousand and seventeen to two thousand and nineteen it's over five percent so as you can see the property tax growth rates have really picked up in the last couple of years the next revenue i will be covering is transient occupancy taxes for fiscal year seventeen similar to sales taxes we do have a lower base in seventeen due to lower returns in the final months of fiscal year sixteen the last three months of the year were all negative negative five percent negative three six percent and negative zero one percent that does result in a lower base for fiscal year seventeen as we adopted the budget prior to those months coming in this revised projection also is based on through february two thousand and seventeen some other assumptions that we took into play when we built the revised projection for fiscal year seventeen is that we increase the impact from short term rental enforcement originally we had built into the fiscal year seventeen adopted budget an impact of about two hundred and sixty two thousand we originally believed it would be it would take longer for the impact of the short term rental enforcement resulting in law only about two hundred sixty thousand and fy seventeen however we realized after adopting a budget that all revenues from january on would be lost from short term rental enforcement resulting in about five hundred and thirty thousand loss from january on in fiscal year seventeen also in a fiscal y seventeen it includes a full year of santa barbara in and so all of these changes in fy seventeen result in a revenue decrease of about eight hundred eight thousand from adopted budget year eighteen we are proposing a growth rate of three percent for existing hotels and motels we are also proposing a loss of all revenue from short term vacation rentals since part of that was already  taken into consideration in fiscal year seventeen about five hundred and sixty thousand the remaining seven hundred thousand will be taken out in fiscal year eighteen about one two million total also we did include launch auto for the entire  year for fiscal year nineteen we want to continue the three percent proposed growth rate for existing hotels and motels and we also include a separate additional growth rate for la entrada so we do a conservative growth rate for believe that they'll pick up additional growth in the second year sorry this is a little bit small but it's a lot of data to present this is the transient occupancy tax table for fiscal year sixteen through fiscal year nineteen in fiscal year sixteen total revenues are about eighteen point five million for fiscal year seventeen once again the actuals are in white and the blue are the forecasted results based on all of the data i covered in the prior two slides  original proposed hotel growth rate was four percent and we had some adjustments for a short term vacation rental and santa barbara in being on line for all of fy seventeen the net growth rate revised growth rate is about two percent for fiscal year seventeen all that does result in a variance to adopt it of about eight hundred thousand dollars for fy eighteen we are proposing a three percent growth rate for the existing hotels and motels however we are fy nineteen we have a three percent we are recommending a three percent growth rate for existing hotels and motels plus an additional growth for la entrada that nets a three percent growth rate for fy nineteen for torille net revenues of about about twenty million for fy nineteen and the total revenues for fy eighteen are about nineteen point three million sorry that's so small a historical look at t ot revenues from two thousand and eleven through two thousand and nineteen as you might recall prior to two thousand and sixteen tio two revenues were one of our strongest revenues they were growth was often in the double digits as you can see in two thousand and fourteen to two thousand and fifteen double digit growth for both  we had no growth in two thousand and sixteen it was actually flat we are forecasting in two thousand and nineteen to have total revenues of twenty million between two thousand and eleven and two thousand and fifteen the average growth was over ten percent so we had an average growth in the double digits however in the last couple years the growth is only around two percent so in terms of the reasons for this we're not exactly sure we're not sure if it's due to the strong dollar  we're not sure if two thousand and sixteen there were some environmental issues that caused that zero percent growth so there could be also you get to a point where you could be reaching close to full occupancy there could be a lot of different reasons so we're you know but we do think that the days of potentially double occupancy are double digit growth it may not be possible her utility user tax for fy the revised fy seventeen projection is based on actual results through february seventeen the overall growth rate has been reduced from two two percent to a negative one two percent and there's a few reasons for that there's several individual rates built into the uut and all those growth rates do vary we are seeing the largest declines in cellular and electric we continue to see a decline in cellular as consumers move away from the traditional cellular and go towards prepaid cellular we have started to receive prepaid cellular uut we started to see that in fy sixteen however it doesn't replace all the loss in the traditional cellular as for electric we saw some one time credits in the current year that really had a significant impact on our electric uut we believe this is a one time adjustment in the current year and we don't anticipate to see that next year but we won't know for sure in terms of gas and water those both had the most significant growth and we revised our projections for both gas and water we revised gas and water to a six percent growth and water to a twelve percent growth in terms of  electric we revised cellular down to a negative fourteen percent and electric to a negative ten percent all of these changes and assumptions resulted in a decrease of one hundred and sixty six thousand compared to adopted budget for fiscal year eighteen we are proposing an overall growth rate of one nine percent this does assume a continued decline in cellular and telephone similar to cellular we do see consumers moving away from traditional telephone in favor of prepaid cellular we also see consumers moving away from cable in favor of online services and we don't receive you utf for online services we also are assuming growth in all the other categories with the largest growth rates and electric and water as i mentioned we believe the one time credits on electric are just one time and we are aware of a six percent increase to sce in fiscal year eighteen and we did budget for that and water we are projecting a seven percent increase to a six percent sorry a seven percent increase to water and fiscal year eighteen for fiscal year nineteen we're proposing an overall growth rate of zero one percent once again a table similar to the other ones for fiscal year sixteen through nineteen as i mentioned telephone we do subtotal telephone which is cellular voip telephone and prepaid cellular as i mentioned cellular we just started to result risks receive prepaid cellular in fiscal year sixteen and seventeen was the first year we got a whole year of it as i mentioned it also doesn't completely replace what we've been losing in traditional cellular we continue to see the subtotal of all telephone categories go down and in fiscal year seventeen it is we revised it from a positive increase to a negative growth rate overall we revised our growth to a negative one point two percent resulting in a variance of a hundred and sixty five thousand compared to budget for fiscal year eighteen we are showing a growth rate of one  percent this is largely due to the growth in electric and water as i mentioned earlier which is partially offset by the cellular and the telephone cellular telephone and the cable negative growth rates overall we are projecting a proposed budget for fy eighteen of about seven million dollars and fy eighteen it's basically a flat growth rate so the proposed budget is also seven million dollars eighteen as i mentioned on the very first slide is about twenty six percent in the in fiscal year seventeen we actually took out that one percent sce franchise fee due to litigation we felt it was best to remove it from the budget we had been collecting it but putting it in a liability account and in fy eighteen due to the litigation being just about resolved we felt it was safe to put it back into the budget and so we have put it back in fy eighteen and it's also an for a business license in fy seventeen we have done a revised projection based on results throughout february two thousand and seventeen and originally we had adopted zero percent that was largely due to the vacation rental enforcement we felt that that would impact our business license and we did not feel that we would project any kind of increase however we are seeing an increase in business license just due to normal a licensing activity so we are projecting a revenue increase of about one hundred and sixty six thousand for fy seventeen and based on this increase in licensing activity we do feel that we should propose a growth rate of one percent both in fy eighteen and nineteen and lastly is property transfer tax and this is a dollar ten for every one thousand dollars of assessed value it is very difficult to estimate because it's based on sales activity one very large purchase can have a significant impact in july two thousand fifteen we had over a hundred percent increase from one purchase so we do always budget a three percent growth and we usually come in very close to that a little bit above or below so we recommend no change in seventeen eighteen or nineteen just because it's so difficult to predict this is just a summary of those last three revenues franchise fees business license and property transfer tax in total even though they they really don't have anything to do with each other but in total they are only within thirteen thousand dollars of adopted budget the revised forecast really looking at them individually makes more sense so for franchise fees as i mentioned they're about a hundred and fifty two thousand below budget and that's largely due to electric the business license is coming in above budget because we had projected we had adopted a zero percent growth and we're actually seeing additional business license activity and property transfer taxes within one thousand dollars for fy eighteen for franchise fees as i mentioned we added that one percent sce franchise feed back in that's the big growth there and for fy nineteen we have a zero percent for franchise fees for business license or property transfer tax one percent for business license and three percent both for property transfer tax for fy eighteen and nineteen they're within about thirty zero total revenues for all three of these for both years i thought it might be helpful just to return back to the original revenue summary i didn't do this last time but there's so much detail we went through i thought it might be helpful just to go back and look at all the revenues and see where we started and where we're ending up after reviewing all that so for fy sixteen we ended up at eighty two point eight million for all of these revenues for fy seventeen originally adopted budget was eighty six point three however with the re forecast we're ending up at eighty four point eight for fy eighteen we're proposing eighty seven nine with a growth rate of three point seven percent and for fy nineteen we're proposing ninety point seven million with a growth rate of three point two percent and i'm happy to answer any questions that you have at this time thank you miss nice that was a very comprehensive detailed fine grain report about revenues i mean it shows a lot of work goes into these revenue estimates and they are not just arbitrary repeat on my colleague this is a great report lots of detail thank you for bringing this to us the question i have is related to property tax and i guess going up one level in terms of our ability to forecast more long term and looking at longer term cycles it seems like we're really looking at the past couple years and order term cycle but i'm just curious when our when the property taxes or our property values dropped in the last recession recession was there a lag do we know like how long the lag would be if things were to flatten out in terms of our property values or does that keep going because there's a lag in reassessing the properties from the county's point of view know i'm not sure have the answer that question so prior to the recession of two thousand and eight and nine where we saw somewhere around a forty percent decrease in property values we didn't see a real decline in our decrease in one year but then it wouldn't started climbing again so in that was within a couple years so it all happened pretty quickly but we never saw the just because the the way the real estate market works we never saw he declined corresponding to the decline assessed values and largely because it depends it depends on how quickly the county is going to reassess values downward and i'm sure they this took some time in doing that but it was a big when they did it it was they were big numbers whereas today they're recapturing much more incrementally so i don't know that there's any sort of way to know what the lag is it just depends on large part what the county decides to do in reassessing the values applications for reassessments that are sent in the degree of the you know drop so i'm not sure that helps but i'm not sure i can really give you a definitive answer well it's helpful to know that there wasn't a big dip and i think part of that is people are buying new properties so they're getting reassessed upward quite a bit even if in the last couple years the average price has dropped in a community someone buys a house that's been owned for fifty years under prop thirteen it's it's dramatically under valued so that's true i think that's the only question i have thank you c you yeah that was kind of where i was headed on that question about how many was it fourteen billion is that what we ended up with alright and then the notion that comes to my mind is how much of that i i know the know i think the county keeps track of the total appraised value if i can use that term over they there watch the current market value of stuff as as one of their tracking numbers and then they have of course their prop thirteen column as well and i'm imagining there's there's the difference between those two is at least gives us some sense of you know that that fourteen billion is it actually worth twenty eight billion or whatever so that that extra fourteen is the prop thirteen damper that unwinds at its pace and we can so that's there's probably something in there that would help us understand better obviously it protected us during the crash  because we had that huge inventory on going of longer term properties i remember seeing something interest in the conversations that we've had over the years about i was at newport  or somewhere like that where it's such a new city that they don't have that that legacy that we do of a very old properties i've forgotten what it was a community like that in any case where it was like well it's all been built since you know nineteen eighty five or ninety and so maybe it was her but it might have been her way it was one of those like that we were trying to get a sense of and that we that that latent value is not is i guess that prompts me to ask the question about sales tax revenue in the last recession how much did that drop yeah during the great recession i'm gonna throw a lot a number i think in one year we saw somewhere around a twelve percent decrease the sales taxes and another was more like four or five percent but it was pretty dramatic it was pretty dramatic between sales taxes and our bed taxes those two numbers alone  caused this somewhere around a five to seven million dollar shortfall it was a big hit in again in one year and you may recall back then or some of you may recall that we mean we were dealing with a ten million dollar deficit cause overall by the impacts of the recession so property tax again didn't go down and that was in the recession during you know the early recession property taxes weren't impacted at all they were still growing at seven percent during you know the impact of and all that where a sales tax and bed tax sort of dropped eleven percent which was two two million and and normally thing man that would have gone we were looking at a three percent rise or whatever our sort of calculated budgeted number going up was yep three plus right so yeah just add that in and that's a fourteen percent delta from what we were yeah more than that because we you know we've never really recovered from when you lower the base to that degree and you're then you start going three four percent again you're you're never going to get there you know you need eight nine percent for many years to get back to where you would have been had you had normal growth in the recession and just just to chime in one more is that over a three year period it  seventeen percent well as i said you could you know you could make a lot of different assumptions going forward about the economic condition of the state and the local economy in the nation and the world and i think you've done a really good job of finding that balance between being cautiously optimistic but sober it by saying that the goal of the multi or forecast is not to see how accurate we're going to be with our projections because we don't know the further we get out what we're trying to establish is are we is there a structural deficit built in do or the w revenues are growing relative to or expenditures that we need to kind of pay attention to or at least observe and you only can really see that if you start looking more long term and more importantly the only way you can see that is if you kind of hold everything constant if you assume the same types of growth rate on your revenues and the same types of growth rates on your expenditures are the lines going further apart are they staying together or they you know overlapping so that's the goal of this is to show you how those lines are moving over a five year period which includes seventeen projected numbers and the two year financial plan and in two more years beyond that so as miss nemeth went through her assumptions i'm gonna go quickly through the assumptions that i made particularly in the two out years because that's where you know all of this occurs so for eighteen to nineteen i went exactly with what the two year financial plan everything that miss nima's just described for two thousand and twenty and twenty one i added a million dollars in property taxes starting in two thousand and twenty and this is because you may recall that with the dissolute dissolution of the rda we could continue to get revenues from those property taxes the tax increment to pay off the debt that is still outstanding on those there's two bonds that were issued in two thousand and one and two thousand and three and those will be fully retired by two thousand and nineteen and that's about eight million dollars a year and just like all the rda money of twenty some million dollars was sort of allocated to the jurisdictions the school districts the county and the city we get about thirteen percent of that we will get thirteen percent of that eight million dollars that will no longer be needed for debt service and that's about a million dollars so that's nice little boon we'll get in two thousand and twenty and that'll be on going with whatever growth rate occurs all the other taxes however i assumed to be the same so for example if we assume sales taxes to be two percent per year in the next couple years i assume two percent in a year's departmental revenue growth that's the fees and charges that didn't like planning and building in those folks charge historically have tried to raise the rates to the fees themselves to generate somewhere between zero and two percent and just depends the target is closer to two percent just to keep up with the cost of services that we provide i've assumed that for the most part they're go be in the two percent range some we can't control there are some departmental revenues like mutual aid revenues we just can't control so those are probably kept more flat and then you may recall that in the second year the two year financial plan that we increased our anticipated  variance that comes from savings from turnover and staff we it's traditionally been about two million dollars we bumped it this year in seventeen by three hundred zero as part of our higher and slowdown approach for seventeen because we had a larger gap i'm sorry for nineteen because we had a larger gap we put up two to seven point seven million dollars and i thought it would i don't and again holding things constant at that i was fair to just assume that same number for nine for twenty and twenty one otherwise you're gonna see why did it  analysis were trying to accomplish and then of course i don't assume any economic downturn you know we we are probably in in the top five if not the top three longest expansion period we've seen since world war two so at some point we are going to be seeing another recession hopefully it's longer but you know we're probably some around eur eight or nine which is it's a long time as you know the two your financial plan assumed salary increases of one percent it doesn't mean that our labor costs are going up or it by one percent because it's impacted by benefit costs and which includes a large part of that is the retirement and you know that's going up we've talked about more than the one percent so the pirs retirement numbers that i've used are based on what pers has provided us back in november as i mentioned before and i mentioned in the past they now give us many years of their projections of what we the city of santa barbara can expect in terms of rate increases based on their assumptions today and you know they're not always exactly right they're never exactly right just like with anything but there's demand historically at least in the ballpark so we were using those for our in our to your financial planning in the multi or forecast and then they provided a circular to us back in february or january or february that gave us a range of what we could expect to see in terms of impacts to  retirement cost from pers decision to lower the discount rate over a three year period each one of those changes being spread over five years the impact over five years so it's really a lorene from seven and a half percent to seven percent that's gonna be effectively sped  years from two thousand and nineteen through two thousand and twenty five and they gave us ranges of what that's impact is going to be i just picked the middle number for us and that's what in two thousand and nineteen for us the ritz really in the middle of that average statewide average it would mean an additional seven hundred fifty thousand dollars in cost on top of what what's already been sort of provided for in terms of rate increases over the next five years because of changes that pers made previously in two thousand and twenty that would double and then when the in the third year when on top of everything else that pers is planning one point five and then two point five in two thousand and twenty one and i provided two versions of my full time multi year forecast which include this last impact just to see what the what the impact of this these numbers are in terms of the kind of the  so the these numbers here are primarily the amount of money that they're going to be asking us to pay on and add it to the unfunded liability portion of our overall rate our rate is two parts the normal cost which is if we had no unfunded liability this is what it costs to kind of keep up to develop with a funding plan and then the unfunded liability today is in the order of fourteen million dollars we expect by nineteen to be fifty million dollars so we can expect that fifteen million seven hundred and fifty in two thousand and nine in two thousand and nineteen so this is version one which does not include the impacts i just went over the lowering of the discount rate so this version actually doesn't look too bad you know one of the things that's helped us in two thousand and twenty was adding the million dollars in property taxes that i described and so you could see it's really summary information there's a lot more detail behind this schedule but i just show one line item one row for total revenues and one rail for total expenditures the difference being of course the the net gain  loss below that is in and that's really i break out the capital programs just to see how we do on an operating basis because you know for me you know how we how we balance operationally is important before we decide how we fund our capital program which is more discretionary and then below that is the netting impact after capital and then you'll see the in column seventeen there is a number in that column only that's called the allocation of surplus to capital you may recall that a couple years ago we were not sure we were gonna be able to maintain our policy reserves based on our projections and so council at that point directed staff to depart for a couple years from our policy which says allocate any surplus evenly between capital and policy reserves to capital the balance would fall to our policy reserves in eighteen office lea we in nineteen we are proposing a balanced budget in two thousand and twenty we start to see the how these these growth rates start to play out in terms of whether apart and or or stay close together in two thousand and twenty even after cutting covering capital we are only left with a small deficit of two hundred thousand dollars which is in my opinion in your balance because there many variables to that you know it's it's just kind of noise but what's what's a little concerning is in two thousand and twenty one is that the number gets bigger its one three or one four million dollars so it just means that you know and we're talking one percent here that the lines are slowly you know going apart if you hold all the all these assumptions constant one percent increases salaries the known rate increases their purses again it has given us or less timet solis and what the revenue growth would be when you factor in however the impact of the discount rate then the numbers become a little more dramatic so in twenty two thousand and twenty i'm sorry two thousand and nineteen where the first impact is you could see that the number that i show as the negative numbers is and fifty that i assumed there were an expectancy an additional cost and then really what we're doing is just adding those numbers are presented to the previous version so the numbers are just more dramatic in terms of how the lines separate so clearly you know we almost keeping up in terms of our revenue growth with our cost in the previous version but our revenue growth is not going to be sufficient based on what we as we are assuming today what we know today through two thousand and twenty one to me to keep up with the cost when you start factoring in the impact and and really that was it that was the whole point just to kind of marry the current year assumptions or next to your assumptions with what that looks like long term calendar inga's so what would the sales tax projection be for nineteen twenty and twenty one is that three percent or two percent we're maintaining it at two percent two percent all time so if this were to be the set of circumstances that occurred we would need another revenue source in order to pay those extra pension costs we would need to do something to balance i'm not sure we can generate a new revenue source but it would likely mean halves finding a way to control cost to balance any other questions thank you very much for that additional information thank you and i think with that we'll turn over to the second item and i guess before we finish is there anybody that wanted to speak on this item ok thank you next item is discussion about the self insurance fund considering revising the procedure for processing as stipulations with a request for award  to do is provide some background information before we get into the discussion of what what is the current process and what we could consider going forward so and by way of background let's try to understand what we're talking about here california labor code identifies a no fault system to pay benefits to an employee who sustains an injury during the course and scope of their employment the factor in two types of benefits into the workers compensation system one is medical treatment that's to relieve and cure the effects of the injury either on an acute basis immediately after the injury and in some minor circumstance or not minor but in a small amount of circumstances on a more chronic basis for those things that need more long term care they also envisioned what they call disability payments to cover wage replacement while the employee is recovering from their injury when they cannot work because of the injury and that's called a temporary disability benefit and that's a short term amount the second piece is a permanent disability which is in a small fraction of the injuries reported by employees statewide and even here at the city of santa barbara the permanent disability is a concept of compensation for when the impairment is more long term and it's based on the except of a whole person impairment or wpi is you know in in the workers comp system there are a number of acronyms and you'll see some of them come up in the presentation this is the first one at wpi our whole person impairment which is described in a national publication from the american medical association on the guides to evaluation of permanent impairment so it's something that's done by the medical community as a whole on a national basis the labor code and its citation therefore then establishes a formula equating that document multiple pages into a dollar value and that dollar value is described both in detail in the code and it's it's a function of the code where it combines the doctors description of the whole person impairment with this rating formula that encompasses both the injury type the job classification the age of the employee and several other factors it's used by the the department of industrial relations disability evaluation unit or the deu they actually take this information put it into a formula and come up with what they call a rating which is expressed as a percentage and that percentage is then in the labor code identified by numbers of weeks of disability and a dollar value payment that the employer is obligated to pay overtime and so what we're talking about is once the it the physician has determined that an injury has occurred that is covered by the workers comp system and has resulted in a whole person impairment and the disability evaluation unit has decided that there is a ratable injury here and has come up with a rating how do we then agree to make those payments to the employee over an extended period of time because many of these might take multiple years to pay out so the workers compensation system through the department of insurance has come up with this form and you see up there the dwc ca form one zero to one for a and that's a form that is universally used to identify three specific types of benefits the temporary disability paid while a person was unable to work during the recovery period if any the permanent disability value that comes out of that deu rating percentage and whether the injury requires ongoing medical care for that chronic face if any and this system uses that form to then describe all those things so the employer and the employee have some finality to that now this stipulation with  is not a settlement in the true form of the term defined as society defines it now rather it's a presentation of the findings that in the no fault system we have met our legal mandated obligations at this point the parties both the employer and the employee have resolved any disputes about the claim we've already all agreed that they're eligible to receive the benefits the deu the disability evaluation unit has issued a permanent disability rating it is presumed correct and now the parties are simply seeking confirmation from the workers compensation appeals board about the eligibility to pay these benefits and that the employer has paid all of the legally required benefits to that point so that's the background information and now we're going to come to what are we doing currently so the current procedure requires staff to seek your approval as counsel before submitting a stipulation with a request to award to the workers compensation appeals board when the permanent disability value in that rating exceeds thirty five thousand dollars now that's been the procedure since two thousand and five the previous city attorney gave us direction saying that he felt that any resolution before the issuance of an order from the court would be considered a settlement at that point we changed our procedures to the current one that you are familiar with in discussions with re oakland he and i both agree that that decision was correct at the time but maybe not the best use of the the thinking about mandated benefits we don't believe it's truly a settlement this is more of an ability for counsel to review it but there's no requirement that you have any oversight to that because you've already established a worker's compensation self insurance program so staff is here thinking that there's a possibility here that we can create some efficiencies to eliminate some delays in providing benefits to our injured workers and just make it a better system one thing i want to point out is that by adding this added step of counsel oversight here we know that at minimum there's going to be a delay of approximately three weeks for us to get it scheduled for a council meeting and on the agenda to meet with our brown act requirements we know from practice that the delay is closer to two to three months in getting those benefits out to the employee so things to consider options here's four options that we've identified as staff that you might want to consider the first is no change the second is altering the threshold for your  review from the current level of thirty five thousand dollars or greater to a different amount there's several options that i can walk you through with that no review by council for these items at all many public agencies don't ask their their governing boards to review these types of resolutions or the fourth one is no threshold value but instruct staff us to come back to you on a regular basis to give you information about the workers compensation program as a whole and the aggregate of these resolved claims during that last review period these are our options that you might want to consider and we're just here to seek your advice as to how you would like us to proceed with these things thank you mister howard i think you framed the issues in question as well i guess the just anecdotally the amounts that we're talking about are much higher than thirty five thousand dollars so adjusting that threshold to accommodate inflation since it was last considered more than ten years ago even if it was at fifty thousand dollars is not going to appreciable difference in the frequency that counsel would be looking at these claims right chairman you are correct if we're to you if you're asking us for recommendation by raising the threshold to a different number i would encourage the council to consider raising the threshold to anything up to seventy percent permanent disability at seventy percent permanent disability the workers compensation laws allow for an added benefit to an injured employee that's called a life pension that can often equate to six figures in additional benefits to the employee and that might be a different threshold where you'd want to look at and rather than use a dollar value use a the percentage of disability because that's not going to change as time progresses with inflation whereas a dollar value could chairman in a committee member why my recommendation if you were to ask me would be the fourth option up here just to remove the threshold level and ask us to come back to you maybe on an annual basis and give you an update as to what was what's transpired in that last period of time that allows two things to happen we have executive management oversight of the program to make sure that we're doing things appropriately and within your specified guidelines and two it gives you the opportunity to see what's happened periodically and watch the trends and review as to when you really need to see these things so you know over the that my tenure here at the city we've done it both ways both ways work its whether what do what works for you as our our elected officials and you're saying both ways being having the specific amount of money and then as we do meeting in closed session to discuss to go forward or not or the thresh the no threshold and having a regular report correct we've done you've done them you've done both of those yes okay all right so i like number four except i would change it so that the council did get direct review of maybe the top two or three cases per year so that would strike a balance of not having too much reporting going on and not delaying cases and then census where we didn't need to so what would be an amount that would maybe looking at the last five years of cases capture the top is it eighty thousand is it one hundred and twenty zero is it that seventy percent  it would probably be closer to looking at that seventy percent threshold because even as time progresses there's going to be changes to the the value of the permanent disability so we can establish threshold today and have to come back to you a couple years from now and seek more guidance but if you're if i just pin port pin point down to the two most expensive they were in the mid six figures mit one  twenty area so i would say maybe a hybrid number for that has a threshold value of a hundred thousand so that would include some at the seventy percent some not it would include things that kind of don't revolve around that for example i mean god forbid a death on the job would be kind of outside of that seventy percent permanent disability so i think just having a round number like that i like the idea of having the annual report i don't know would that be would it be the city attorney would it be you or all three that would do the annual report so the annual report that i would envision would be done by myself and my staff in closed session with some oversight from the city attorney to make sure that we're doing the brown act provisions accurately and correctly but it would be mostly a staff report i suggest in the number four with a hundred thousand dollar threshold you want to make that a motion yes any discussion to the officer i guess first is there a second to the motion second it i i'm just looking for the combination of staff being comfortable with with where we're going forward as well as the comments that i'm perhaps more colleagues more experience in this arena than me on on this issue is there any public comment on this item okay seeing none i think it's back to the committee and i'm comfortable with this option and has changed and would support the motion so all those in favor say aye aye post and abstain none i think that concludes our business today thank you very much thank you very much