New budget process, new budget committee and new investment advisors for pension fund

Recap of the Oct. 17 City Council Meeting

All council members were present at the Oct. 17 Sebastopol City Council meeting, including Mayor Neysa Hinton, Vice Mayor Diana Rich, Councilmember Sandra Maurer, Councilmember Jill McLewis, and Councilmember Stephen Zollman.

Money, money, money was the theme of the Oct. 17 city council meeting. The council chose a new firm to invest their pension funds, explored ways to raise more revenue for city government, and altered how the budget process would be handled in the future. 

Consent Calendar

(Note: The consent calendar consists of items that are routine in nature or don’t require additional discussion, often because they’ve been discussed extensively at a previous council meeting.)

In addition to approving the minutes of past meetings, the council unanimously approved the following items on the consent calendar:

• Approval of a funding agreement with the county of Sonoma for the Sunset Avenue/Taft Street Pedestrian Crossing Enhancements Project. The county awarded the city of Sebastopol $200,000 this spring for pedestrian safety improvements around the high school, including flashing warning lights at Taft Street/Sunset Avenue; traffic calming striping on Sunset Avenue/Johnson Street from Taft Street to Eddie Lane; and new crosswalks and solar streetlights at Sunset Avenue/Johnson Street, and Johnson Street/Eddie Lane (West County Trail). This is the agreement that seals the deal.

• Adoption of resolution accepting the Caltrans’ Sustainable Transportation Planning grant of $230,178 and authorizing a budget amendment for the local match of $29,822.

• The council received notification of upcoming vacancies on various boards and committees, as of Dec. 31 of this year. These included three vacancies on the Design Review Board; nine vacancies on the Climate Action Committee; and two vacancies on the Planning Commission. Want to give back to your community and dip your toe into city politics? This is the place to begin.

Regular Agenda

City invests some pension funds in a 115 Trust

The city council heard a presentation by the Shuster Advisory Group, arguing that the city should move its $2.8 million in pension assets to a 115 trust, where it could get higher yields. Administrative Services Director Ana Kwong said she chose Shuster Advisory Group because it had the lowest fees and also provided customizable investment plans.

Some on the council seemed willing to make the leap, but councilmembers Maurer and McLewis were feeling cautious, in part because once you transfer funds into a 115 trust, you can’t get them back out again.

Maurer suggested a compromise – that the city split its pension funds into two different accounts: $1.8 million into a 115 Trust and the remaining $1 million into a higher yielding fund than the one it’s currently in. That suggestion met with the support of the full council, and they voted unanimously to make it so.

Revenue enhancement options

With the city facing a $2.8 million budget shortfall this year, the city council’s budget committee came up with a detailed list of potential revenue enhancements.

“We recognized after the last budget was approved by the council that our work was not done,” Councilmember Zollman said, introducing this item.

The list looked at 20 different financial scenarios, utilizing different types of taxes and fees, including increases in the sales tax, transient occupancy tax (TOT), Utility User Tax (UTT) and parcel tax. All of these tax increases would require a ballot measure to make them a reality.

See the full list of scenarios in the staff report on this item here.

The budget committee’s review also included a list of non-tax methods of generating revenue, but since these are speculative, they didn’t use them in any of the financial scenarios.

The 20 scenarios were split between those that included the long-awaited Sebastopol Hotel (due to break ground this spring) and those that did not. Given that the hotel has been about to break ground for seven years now, several council members expressed a preference for the scenarios that didn’t depend on its existence.

Councilmember Rich, who is a member of the budget committee, pointed out that only three of the non-hotel scenarios seem capable of staunching the flow of red ink.  These are as follows:

Council members had plenty to say about these scenarios and other ideas for bringing more money into the city.

Councilmember Maurer said she didn’t like the half-percent sales tax for the March ballot, particularly because she didn’t want to compete with the county fire sales tax proposal. She was in favor of a $275 parcel tax for fire services, noting that all the surrounding districts had parcel taxes to support their fire departments. She also expressed an interest in a vacancy tax, getting the hotel going, and paid advertising on the city website.

Mayor Hinton agreed on a parcel tax to support the fire department, but also supported the half cent sales tax.

“I think we have to go and ask our citizens to support something,” she said, noting that a sales tax captures funds from those that don’t live in town, but use Sebastopol as their shopping hub.

 Jill McLewis said the council needed to define what these taxes will be used for before going to the voters.  In addition, she said she was interested in hearing ideas to bring more shoppers into town to help with sales volume (and therefore sales taxes), and also expressed a desire to see more events in the town square as a way of doing that. In addition, she said she wasn’t into facilitating more tiny homes or Airbnbs as means of economic development. She also said the city needed be very clear about its infrastructure needs and should think “infrastructure first” when considering budget priorities.

Councilmembers Rich and Zollman came out strongly for putting a half cent sales tax on the ballot as soon as possible. “And sooner rather than later,” Zollman said “because the numbers don’t lie.”

There was no action taken on this item, but Councilmember Rich thanked everyone for their thoughtful comments.

Rethinking the budget process and appointing new members to the budget committee

Creating a city budget is a time-consuming and onerous process. For the past several years, this has been done by the budget committee of the city council in consultation with the city manager, the assistant city manager, and the administrative services director.  This year the budget committee had 18 meetings.

This agenda item suggested a change in this process, wherein the city manager would take a first cut at the budget (interviewing all the department heads), then pass the first draft of the budget to the budget committee, and then to the city council. This was called the streamlined budget process.

Council members Maurer and McLewis both suggested that the first draft of the budget be brought directly to the council, but when it was clear they would be outvoted, they acquiesced.

The city council voted unanimously for the new streamlined process. They also voted unanimously for Stephen Zollman and Sandra Maurer (who got a hearty endorsement from McLewis) to be the new budget committee members.

City council and staff reports

Because of the lateness of the hour, there were no staff or council reports

Watch the full meeting here. The next regular city council will be on Tuesday, Nov. 7, at 6 pm at the Sebastopol Youth Annex, 425 Morris St., Sebastopol.