City Council - Regular Meeting

This is a special city council meeting. This is a budget work session. I'd like call this meeting to order. And if I can call upon council members or menu to please do I

can't believe this. Stand.

Ready to begin. I pledge allegiance

to the flag of United States Of America and to the republic for which it stands, one nation under God, give the peace of all, and the rest of the nation justice for all. Thank you.

Thank you. Next, Madam City Clerk,

you may please take hold.

Good morning. Mayor, Council Member Andrews. Present. Council Member Munia Junior.

Present.

Council Member Goldstein.

Present.

Council Member Roche. Present. Council Member Sire.

Present.

I I believe this will probably be the one public comment that we have of the afternoon. So if if you have a public comment, I do have one card. This is from Teresa Resendez. I guess you can walk up here.

Hi. Good morning, everyone.

Hi, Teresa.

You can

Thank you.

Okay. So So glad to see all these people here today. So with the slide deck of the last budget meeting, there is a projected budget deficit in twenty twenty seven of thirty two point five million dollars. And with the funding of measure c, if we take all of that projected funding, that's about $20,000,000. That still leaves us with a $12,500,000 shortfall in 2027, anticipating that all of the budgeted income comes in as projected.

And what has happened in 2026 is the anticipated budgeted income has fallen short. So with that in mind, consider, you know, consider other ways to make up that 12 minimum $12,500,000 shortfall that may be I'm just throwing ideas out there. More cuts, furloughs, temporary salary cuts with the idea of adjustments being made. And I know these are not popular ideas, but I know property tax increases is not a popular idea, especially with Hayward Unified School District putting up a bond referendum to raise money that will affect homeowners. So thank you for your time.

Thank you. Our next speaker is TJ from Hayward Concerned Citizens Online. Go ahead, TJ.

Hi. This is TJ of Hayward Concern. On behalf of myself this morning because it's important to me that at this desperate time, you keep the needs of our Hayward business at the center of everything that's on the table. How will you earn back trust? You weren't being transparent about your budget situation the last three years yet, yet you got us to pass K1 and now you're banking on the magic fix of the quadruple business license tax to help sustain our city.

While over at HUSD, as Theresa mentioned, they're looking at a parcel tax measure on the upcoming ballot to help them out of their debt. And now you want to cut back on the very meetings that give the greatest opportunities for sharing information, increasing civic engagement from the public and gaining that trust back. How many ways are you going to burden our Hayward taxpayers to help fix what your governing body has neglected? And yet at the same time, you strive to be attentive to the request for more bike lanes and a redress fund, which Hayward should have no financial responsibility for whatsoever. Maybe our counsel seriously needs to look at their 67% raises and redirect them towards the redress fund.

No more funds spent on excess consultants. No more borrowing to close your budget. Those measure c funds that all the hopes and dreams were built on, they were never gonna get replenished. That's the sad reality. I'd like to see a list of city staff positions and services that have already been cut so we have a realistic understanding of what to expect on various, departmental response times going forward.

And finally, I see you propose eliminating jail operations. I seem to remember from the 11/14/2023 meeting that our Chief said if the jail was downgraded or eliminated, officers would have to transfer arrestees to Santa Rita Jail and it would have significant impact on HPD's ability to staff the streets because they'd have to down a unit. So please consider that before making this decision. And those are my comments for now. Thank you.

Thank you. That is it that I have for public comment online and I don't have any more cards. I'd like to close public comment and then return to the room. And and before I kick it off to the city manager to open up the work session, I wanted just to open up the the morning by saying thank you to to staff. You know, I can only imagine the difficulties it is to put together was it an 87 slide deck?

I am not holding to the five seven slide rule today. But, you know, I know that, you know, it is this moment in time. It is really moving us in this position to really think about our core services and think about how to continue to provide the high quality service that we are really responsible for and that we have to do as a city. But I also I also want to be, you know, I also want to be careful on how we frame some, you know, of our conversation today. You know, it is no secret that we are in this budget situation.

We're here and we're moving through this. And and, you know, based on my reading of the of the of the the slide deck, I think we're on a path to recovery. It's going to take some time, but we're we're going to get there. But I also want to be careful and not frame this as while we are in this position, that we are going to be compromising high quality service, services that we are responsible to deliver every day to people in the city of Hebrew. We can do two things.

We can be in this situation, work to get out of it, and simultaneously, we can continue to deserve to deliver high quality service. There might be some changes, there'd be some tweaks, and I mean, in that's you know, that

is part of what we're trying

to do here. But I don't want what I don't want is to project a message from the council and particularly for me, you 'll never hear me project this message, that because we are in this situation, that we are that the entire city is is is compromising service and quality. And so and so I just want to sort of say that because over the last, you know, several months, there has been this sort of tone and tenor that, you know, that I wanted to that's been out there that I wanted to sort of respond to. One thing that I have to I also want to add is that today, I have full faith in our executive team. I have full faith in the council.

I think the executive team and the council, we have been transparent. We have been open. We have been honest. And and and we have been, you know, available. You know, we have all you have to do is look at past council meetings when we addressed this issue.

We addressed it quickly. We addressed it openly and honestly. And so to say anything otherwise, I think, is just not paying attention to what our council meetings have been. This council, I think, has been accountable, responsible, and we have been addressing this openly every day in the public. And so with that, I wanted to turn this over to our city manager, Jan Odd, but I did not want to start the meeting without saying thank you to our city manager, to our director of finance and her staff that have been really over the last, you know, few months, that have really been able to sort of make a pivot and turn this city in a in a place where we can have this conversation.

And also, of course, the the work of Mary Thomas over the last several months to, you know, really sort of usher us to get to this point. And so with that, it's gonna be a long day today. I see there's a lot of snacks outside. There's a lot of coffee, and I saw gummy bears. And just for the record, close this up, Chuck Finney and I sent each other an email to make sure we wore the same shirt today. So this is our this is our good luck shirt. And so with that, madam city manager, take a look.

Now you're gonna have to wear that at every budget. Good luck budget shirt. Thank you, mayor, council, Jennifer Ott, city manager. And I just would like to take a moment before we get into the details, which is kind of where my mind is, but I do want to take a second to follow-up on your comments, Mayor, about just thanking the staff. This is you're right.

This was a lot of work, and a lot of that occurred in our finance department and Mary Thomas but also all the executive team engaged and got involved and so this is a real the result and culmination of a lot of teamwork. I just want to thank all of them, especially Deanna and her staff. So thank you. And we try to set this up where we'll be able to, you know, this and I guess even in line with some of the comments that we just heard, you're not approving anything tonight. This is just because of where we are financially and how big the issues are that we're facing over the next several years.

Before we

get into the budget, like true budget where we're actually talking about very specific budget work sessions in May like we would normally do, we felt like we needed to get you know, we're really gonna need to get ahead of it and start to put some numbers and ideas and thoughts out there. We do have some recommendations for you, but none of this is set in stone. This is a chance for you to tell us, course correct us or give us your ideas so we're not not improving anything. More direction you give, obviously, the closer we can get the budget when we get to the budget work session. But there are still items that we're researching, but we we're we're kinda honing in on them, but we might need some more time.

And so I just wanna acknowledge this is also kind of a working effort. So these numbers, we think order of magnitude are correct, but they might, you know, shift here and there a little bit as we start to really hone in on things. So I just kinda wanna acknowledge that this is the first step towards balancing the budget for next fiscal year but also looking beyond and really start to think about what we need to do to get us back on track over time. So I won't say much more but you can see we've got a packed agenda so we'll keep moving here but the first part is really to set the stage. We got a financial forecast.

We have our consultant here on business license type modernization. We do have some proposals and a recommendation there to start heading in certain direction. We want to get your feedback on that. Other revenue options, cost savings, efficiency measures. And then I do we we will show you a recommended approach to the fiscal year twenty twenty seven budget beyond. I wanna get some feedback from you, and then we'll take lunch. We do have since you all have your laptops or iPads, that's great. We will be sending out the recommended approach. You'll see we'll call call them a spreadsheet for you that has a bunch of toggles and ways. So at lunch, if you wanna work on that a

little bit and work on

the you know, while we're at lunch to kinda look

at different scenarios and come

back and give you plenty of time to give us additional feedback and thoughts. So and then last is accountability, the next step, which really delves into some policies, draft policies the finance director put out there. If for whatever reason we don't have time, we could always bring that part back to a council work session or, you know, so if we if, mayor, if you feel like we're in good discussions and we don't have time, we can always take that one off and bring it back to another time. So it just gives us a little wiggle room at the end. Alright. I'm going to jump in. Setting the stage. Then next slide. We thought we would start oh, you want to go? Yeah.

We just won't work. Yeah. Starts which is what caused Hayward's fiscal challenge. We get this question a lot. We get it from the labor partners, employees, like just really mean, again, the interest of trying to be transparent. There's a lot of information here. We've tried to go the extra mile to be as transparent as possible. And so I just wanted to acknowledge what our team, you know, what we believe caused our challenges. There were increased staffing and programs that were dependent on one time ARPA and grant funding that got built into our operating budget without kind of a long term plan for how to fund those. Then we've entered into labor contracts that weren't aligned with our market and fiscal realities.

We faced and this is happening everywhere not just here in here, but we faced slowing and declining real estate and market related revenues. There's very little real estate developments occurring anywhere in the Bay Area right now across all kind of types of development and where cities are dependent primarily on property related tax revenue. The fact that even though our property taxes don't go down, they slow down, they do slow and if they slow that means our expenses are going up faster. There's there is this kind of misalignment. So it was kind of a perfect storm in terms of some of these other changes that we made at the same time that revenues were were declining or slowing down.

And then, you know, to be really honest and transparent, we don't think we adhere to financial best practices. So we didn't maintain realistic financial projections. We weren't budgeting accurately for overtime, contract increases, lead payouts. We were using salary savings, especially in the police department as kind of a crutch, and that is that is typical across all cities is that, oh, we have that money in police. We're just gonna that'll just work itself out at the end of the budget.

Right? Like, it'll all kinda work out. We'll have enough savings both usually in police department, but across other departments too, and that'll kinda there'll be enough there to balance whatever. And, obviously, that didn't work out for us. So what you know, we need to make sure we're budgeting salary savings, yes, but also all of the things that we were using to kind of likely pay out some other things. And now we're trying to budget those things. And then we did purchase a risky real estate asset budgeted as a nonliquid reserve. So some things that we wouldn't we are not recommending doing moving forward, and we'll have policies, in fact, put in place to try to avoid that for future. And then, again, no. It's just that there was also leadership transitions, which just inevitably is makes it hard in an organization.

When you have those transitions, sometimes there is a dilution of authority and responsibility and not sure who's doing what. And when you have that at the same time, have these other things. And I don't need to say this, but, you know, we all know what happened where we did end the fiscal year '25 with overspending $30,000,000 in our reserves. So everything we have balanced that more, and director is gonna talk about that. But I did wanna start out with just acknowledging the problem.

Next slide. And to the mayor's comment, we absolutely this team worked super hard and our staff worked super hard and we are continuing to provide a high level of service, but we do wanna acknowledge that there are some impacts that we've had to have based on services. So also trying to level set some expectations that we're gonna try to do more with less, but they're also you hit a point where you can't do more with less. And there may be technology or other things we can do to try to continue to provide a high level of service, but there have been some impacts and just wanting I think the council had asked for some of that, so I just wanted to be explicit about what some of those are that we think so happen. We reduced library hours and programs, eliminated some community grants.

We have a reduction of two fire companies right now. We do have some longer response time for illegal dumping removal and then some longer response time for permit review and inspections. So these are all things we're we're watching, and you'll hear later some technology things we're trying to do to kind of mitigate for some of this. But also we wanted to acknowledge that we know there have been some impacts. I'm going turn this over to Mary, and who's going to I think the council had asked for kind of just a larger reset of what are our core services, what are our priorities, so as you go into this conversation you're keeping these higher level priorities in mind when you're giving us direction of how to move forward. I'll turn it over to Mary.

Yeah. And so just just to I'll be very, very high level. This we did last April was the last time that you saw

the strategic road map.

We did go through a a voting exercise, the ranking efforts at time. And I'll show on the next slide some of the higher ranked projects. But just, Douglas, keeping in mind these priorities, right now, we have limited in terms of special projects or special initiatives funded out of the general fund, we've more or reduced almost all of those. However, for grant funded projects, we have some of those going on, so I will move to the next slide on that. So we do still, you know, have these are some of the highest ranked these are the highest ranked projects that council had last year, and many of most, these are all ones that are continuing. So for example, the bike distribution is grant funded, so that is continuing. And then some

of them are just part

of our normal work. Like, you guys have seen the zoning amendments to remove barriers to businesses. So that work is continuing. That's been unabsorbed in the DSD workload. So just wanting to say that even though we have had reductions to core services, some of these these projects that we're

all pay rate were were

focused on. And we will be coming in the next budget session this this spring. There'll be an opportunity for department heads to speak more specifically about service impacts from cuts, talk about their core services, and for us to return to the the highly ranked projects that you guys had from last year and make sure that we're being clear about which ones are continuing or which ones have had to pause so we can enter that in the budget document. I'm happy to answer any questions about that at the end of this section. And then in addition, just wanted to return back. Miriam, is there a can we move that that

thing to put us is there a way to just get it off the

screen entirely or move it

to the bottom and just move it off that again?

So we wanted to remind you about the resident satisfaction survey. I believe council asked for this that happened about a year ago, last March and April. In general, overall, satisfaction with quality of life was the highest point in more than a decade, so that was good news. So overall, services have been going really well. We have had some impacts.

We'll continue to monitor that. The greatest concern is just to remind everyone where cost of housing, because these are similar to regional homelessness, crime, traffic congestion, street maintenance, and litter and graffiti. So those are the ones that came up. And then the service priorities are actually very match our core services very well. So emergency response, safe neighborhoods, streets and sidewalks, supporting local businesses, and then a clean and maintained city, and preparation for disasters. Those were out of the the long list. Those were the top ranked ones from the community. So just as you're reviewing today, I just wanted to ground us in in that. And I will now hand it up back to Jen.

Yeah.

Great. I think so we did put here I'm not gonna go through all these. These are very detailed in the council's comments where we there was a request for some lessons learned. So we, as an executive team, you know, put some of these together. Some of them are very specific.

We're using these to really drive our policies and make sure that our policies kind of address these. And I'm not gonna go into all of them, but just broadly, one is, you know, maybe adhere to financial best practices, so making sure that we're doing that, and the finance director looking at our policies, making sure we're incorporating those, improve transparency and accountability, so making sure we are being transparent. That's where a lot of the trust comes with employees, with you, with the council and executive leadership is making sure we're being transparent and accountable to the things that we say. There's a whole set of some ideas and lessons learned there. Practice strong leadership at all levels, so you know, not just at the executive team but throughout the city and at the council too, like all of us being prepared to make difficult decisions, raising and vocalizing issues if we see them and questioning.

And and so and then lastly, financially constrained labor negotiations and contracts. A number of suggestions that I did at theirs, lessons learned from where we think we've got here. So I'm not gonna go to all of them, but they these were fully attached in even more detail to the staff report, so folks are welcome to look at this in more detail. We're wanting to acknowledge that we we are learning our lessons, so I'm sure that's the beginning here. Now I'm gonna turn it over to Deanna who's gonna tell you how we close the gaps. Good news. Close the gap. I think everyone knows that, but just walk through a little bit what we did, and then we'll we'll get into the need of moving forward.

I would like to thank mayor and manager. I wanted to also acknowledge the work of staff and the budget team, and and they are here. You'll be hearing from both of them today. So Fran and Nick and and Michael, who's stepped up. He's our revenue manager and stepped up in some other areas as well.

So for example, in closing the gap, it's not just figuring out what things we're doing, which we'll talk about a little bit. But exactly which of the hundreds of line items in the budget has to be adjusted. So the recommendation is x, and where does that for example, a vacancy change, where does that actually happen in our many lines of budget? So that's that detailed work that the team has taken a lot of time to do in order for us to come from what we plan in November to a fully balanced budget in our financial system so that then the department heads can manage to that. And of course, all of their work as well.

So of course, we did workforce reductions. And it's not just the visa and the layoffs and the terminations, but also management of the vacancies and understanding where the salary savings is being used so that we don't that we still account for that cost. So salary savings is being used to cover another cost. We don't want to reduce that officially in the budget. We'll be working on that for next year so that we're we have more transparency and ability to see that.

We did use some fund balances that includes funds from our OPEB trust, our other post employment benefit trust, set aside for primarily retiring MedPoll. So that is available. It's meant to be used further in the future as that liability continues to grow, but it is available to us. And so we took that action. And then we sub measure C funds.

And then we did do some concessions and for non representative members, some changes. So fire department made some changes to minimum staffing. There were some changes in the police department and furloughs and pay reductions for council and unrepresented groups. So we wanted to acknowledge those changes and those staff that have accepted that. We did take some other cost saving measures, limiting travel, looking at CIP for unspent balances, reducing and canceling nonessential contracts, reducing all departments went in and looked for opportunities to reduce service and supplies.

We're in the midst of a business license tax audit to bring in some additional revenue, and we are working with hard to reduce our event spending. And again, this was a partnership of all departments really looking deep into the budget for some opportunities for savings. And again, employees directly as well. So with that, we'll bring it back to mayor Salinas.

Okay. Councilmember Roach.

Thank you. Yeah. And thank you to everyone for everything you've done to

do this.

It was great coming through the staff report and the and the slide presentation. I I wanted to ask one thing about the OPEB trust. Can you explain a little bit more about how we can reduce that payment and still meet the obligations out of the trust? Yes. So basically, we

take a set of money every year and transfer it into the trust. But in the operating budget is where we're actually making the payments out. So there's about a 1,500,000.0 transfer into the trust, but still within the operating budget, we're spending $3,000,000. So what we're able to do, we we have about a $40,000,000 balance in that trust. So we're able to take the amount back from the trust to reimburse ourselves for payments we've made to employees during this fiscal year. We can't go back any prior years, so we can't use that to help build the reserves back. But we can do that for this year, and, of course, we'll be looking at it in future years.

And is the balance enough that we we're not playing like, this isn't a risky situation to be doing it?

It's not a risky situation, but, again, in the future, as that liability grows, you have more people retired and and anticipating that benefit, you'll you'll have some potential risk of needing to use more operating funds to cover it. Okay. But but we think in the near term as a one time use. Mhmm. And you'll see it into the out years of the forecast. So again, this year, we we'd already put money in, so we can't undo that. But in the future years, you'll see both us not recommending not to put money in and also drawing money out. Okay. And then

on the one and maybe I guess we'll talk about this in the future, but just, you know, the what our strategy is going forward for one time funds. You know, that maybe the bar car situation, maybe other funds, but where that goes so that we don't rely on it for new positions, which is, I think, a practice that we did in the past, and then those positions just got transferred back to the Gen three Fund, right, without funding. So what is our So within

the budget policy, that would those one time funds would be sourced towards one time projects, one time needs, or building reserves. Okay. I think it'll take us some time to get all the way to there. But, you know, in the future as we see, for example, if we were fortunate to have something again like that Barkhorn situation Mhmm. You would see us looking for those projects that maybe have been deferred and to bring those forward Okay. Versus, a long term salary change that has the ongoing impact both in the salary itself, but in personal liabilities and that type of thing.

Okay. We'll restore in our reserves. Restoring our reserves

first, but once your reserves are at your status that you need, you'd look at some of those other projects. Yeah.

When we into the recommended budget, I'm happy to share a little more about my thinking about why I'm recommending using continue to use some one time funding as because I know there's a desire to try to get structurally balanced as possible, which we have too. But Mhmm. So I'll I'll talk a little bit more about kind of my thinking about why I'm not recommending that for next fiscal year and then kind of doing it over time as opposed to all at once. Okay. And then

I just. The other thing is around salary savings. So, like, it sounds like there's a lot of back of the napkin, helping an intuition that the salary savings were gonna cover all sorts of things. Like, it seemed like they were potentially, you know, maybe double counted at times and stuff. So how how are we calculating now each position so every department knows exactly what their budget is? Then if we're gonna borrow from that budget for something else in the city, how, like, how is that now being tracked?

So what was happening in the past, there was a vacancy, then 25 of all those vacancies were set in another account as like a negative. Mhmm. So you had $10,000,000 in vacancies, and we would take a 2,500,000.0 out. So had 7,500,000.0. And but then that money would get there's some use of that. So for the PD, for example, the vacancies change a lot. There's some reasonable use of that for overtime costs, because they have more vacancies. But it was also costs that we would know better. We would know, for example, leave payouts. There's an ongoing cost of people separate or retire, there's a payout amount, or some other special pays, education pays.

So what we're going do differently is actually budget those items. And so maybe we'll bring up the salary savings number higher because we actually are budgeting those items, but we'll be looking at the actuals and then also expected. So if we expected an extra high number of retirements, we might bump that number up of of lead panels a little bit higher. So we'll be looking at more transactional. So that's getting into the the weeds a bit, but that's how we will be looking at it. No. I think

the right. I think the weeds

I'm glad you're working on the

weeds because, you know, I think that's what didn't happen before, that's what we need. And then and speaking of that, the other thing is I I wanna thank you for the lessons learned because I think we owe it to our workforce and to the community to understand that we are looking hard at what went wrong and what the lessons learned are. And and one thing I did wanna see because we were asking for it so when this started to reel itself that we wanted sort of a quarterly actuals update. And, I mean and I know maybe I know rugged comes in at different times, so it's not always easy to do that, to see what that looks like. But I think for all of us to be doing that, you know, maybe I would like to see that, you know, at least for the next couple of years, right, so that we all are aware of where we have to pivot really quickly. And I know you'll be doing it internally now. Like, I think that that's going on, but I would like to see that so we don't get to the mid year or the final year and be like, oh, whoops. You know, here we are. We did send

the monthly out recently after the CVFC meeting, Council Budget and Finance Committee meeting. So I believe that got sent out to

the rest of council. And instead of the plan going forward that we get monthly actuals?

You'll get monthly. At some point, we may draw them back if we're more stable. But for now, we're fine with the monthly. Again, understanding some things change.

Like monthly taxes. Yeah.

I think that the one we sent will get improved on over time. We're still in the kind of early phases, but it will change a lot just in general.

Just a reminder on that one in particular is that we all all out of the changes for this fiscal year were kind of implemented at the January. So February, I think it'll be really interesting to see how we're doing after February because that'll be the first full month of, like, all of these changes. So I think just be aware too. There's a lot on the cost side that we adjusted in January, so it is a moving it's gonna be where there is kind a narrative associated with it, and it's not Yeah. As long as you kinda

give the caveat with these reports, guess

that maybe that would be helpful. Yeah. So as as there were separations due to layoffs or or voluntary separation, January had a higher salary cost than what than expected, and you should see that go down. You.

And if we don't see it go down February, well, then now now that's a little yellow. Yeah. Yeah. Those are the things we'll

be looking at.

Right. Councilwoman Bodie.

Thank you, mayor. And thank

you guys so much for pulling this together. I can't imagine how much work it's been to prepare for today. But just a couple of quick questions. So when we talked about, you know, kind of core services upfront and examples of impact to core services, I know that we're also working really hard to make sure that we're maintaining core services and we're finding a way to be much more, I would say, purposeful in how we delineate core services from discretionary services. So I do wanna maybe see a future double plug of what core services are to the city because I don't think that they were clearly defined here today.

So, and then maybe even prioritizing those core services so that as we look, you know, based off of the data that you have here, you know, the resident satisfaction survey, the strategic priorities of council, but those driving what will then become our list of core services that we can then align to, and then that can start to be our north star for how we start to look at making decisions around reducing services or whatever it is. Right? So just wanted to kinda throw that out there.

Yes. Yeah. And we it was mostly just a matter of staff capacity to get on that. But that's the goal for the next budget work session that you guys would see. And so in the budget document, historically, we just

we haven't spent time on this in

the past because we haven't you know, this hasn't come up. Each department has a list at the beginning of their description for the department of their programs. Those could probably those could be used to be updated. I think this year is a great year to do it. So these are our core programs, and there's usually some metrics that are associated with each of those. So I think that is probably slightly what you're asking for is for each department when they're talking about their budget. What are their core programs? What are some metrics they know that they're And maybe

highlight what's discretionary because I can see someone saying everything is core services, and it's like, well, here are the guidelines for how we're going into this activity, and here's where your line is. Right? Like, you can't have more than 30% of whatever it is. I don't wanna be arbitrary with that, but, you know, just being really disciplined in how we define that you think it's gonna be a good activity.

Just as a I do think, though, I mean, and I'm not trying to take an easy

way out. I I do

think that we believe as a team that we have reduced anything that wasn't I mean, I do think we feel like we're probably down to what the core services are and that most things that we thought were kinda discretionary have been eliminated. And that might not be entirely true. We'll look at it more. I'm not trying to say that. But I do think we feel like we're down to our core services right now. And I do think some of what we're recommending, you'll see, is to not cut certain things or other things. And so part of what I'd love to hear today is, like, did we thread that needle correctly? Do you want

you know, like, I think I'd love

to have some of that conversation today when we're

gonna recommend

budget. We're we, you know, we're not to jump, you know, but, like, you know, not eliminating the entire nav center, for instance, but trying to keep it. And some of those things, we've made some judgment calls here, and so it would be good to have some of those conversations today.

Yeah. That yeah. Because, you know, and then I think that would be especially as we think about kind because if we're thinking about kind of core services and this resident satisfaction survey, where does homelessness sit in terms of core services that we need to provide and where does that rank up compared to other services? Because don't I think today's the conversation to say this one's more important than this one, but I do think that at some point, if we're gonna really talk about, you know, austerity and a budget perhaps, we're gonna have to get to that point. Right?

And we're gonna have some of those conversations later. Right? Like, if we are you'll see when we get to the end is, like, how do we fill that final gap? And it's either, you know, through concession bargaining or it's going to be additional cuts. And then we're gonna have to I think in order if we have to do a 2% cut, it's gonna be it's gonna gonna be a lot harder, and there are gonna be some of those harder conversations.

And it sounds like it would be useful. I mean, this organization already went through a 5% supply and services cut during COVID and then additional to to understand historically what of the discretionary discretionary have already been cut.

And I would say discretionary services, not spend. And I don't wanna, like, you know, I mean, there's, I think, some controversial things that we can debate. Are they discretionary or not? And I'm not talking about spend, though. They get the spend. I'm talking about services. Like, what services does the city provide that aren't legally contractually or regulatorily obligated for us to have to provide that we might say because we don't have, you know, a budget to support it, we're not gonna be able to even though it may not be popular like we heard from the callers this morning, we might have to get to a point of saying we just can't afford it. And is it the library? Is it the animal services? Right?

And Or the jail.

Or the jail. Right? And of those three, are any of those considered core depending on you know? So, anyways, I mean, I know that those are the tougher discussions, but I think we're gonna have to eventually move there. And then when we think about the core services, like the library that we saw cut, you know, library hours, community grants, the fire department. The question that I then have is, what are we doing to create partnerships or to create brand opportunities so that we don't see such big service impacts? Because and I'm sure that the money is not just freely out there. Right? But where can we go and find money to keep our library open through grants? Because I'm sure there's grants out there that would be very supportive of library, you know, Or even the fire companies.

Right? Like, is there money that so is there also short term investment that we can be making now to help us kind of create more long term health and stability with our budget just as a consideration of protecting our core services within the context, I guess, within the the duality of we're faced with some budget issues. We have to maintain core services. As the mayor said, how do we do both at the same time? Right?

Yep. And you'll hear a lot. So yes. And you'll hear we'll talk about some grants specifically for the head of them that we're looking at actively for some items that you mentioned. And so we can talk more when we get into other revenue options. And then on the technology side, there are some things that could help us. So we're we are looking at some of those things. We are open to other suggestions.

Excellent. That's it. Thank you so much. Okay. And

just a couple of points. Impacted services to date, let's be careful with the longer response time for permit review and inspections just because it will harm academic, economic load. So be careful with that, please. And as far as priorities, and the survey, our residents feel that the high cost of housing is is their major concern, but we can't do anything about that. So let's concentrate on the other priorities and leave the high cost of living through the fact that we live in the Bay Area.

It's the most expensive area in The United States. And if their other priority is crime, if we were to eventually talk about a getting rid of our jail, that's going to harm the crime aspect of it. So that's something that we should not be considering at the moment. Kate, a very good job. Thank you. Chancellor Riberg.

I want to thank staff for the presentation, and I want to personally thank Jennifer Ott, Mary Thomas, Deanna Hillbrands, Todd Goldman, Nick Goldman, Chief Henry, Chief Matthews, Michael Boston, and Mary Lynn's, if I miss anyone, apologies. Exactly. I know specifically a lot of those folks worked on getting us here today, so I just wanted to acknowledge that. I also want to thank the residents and labor partners and businesses who called in and reached out. And I think the presentation is showing the cold hard truth of where we're at.

And I know folks are demanding transparency. The slide is saying it right there. It is showing where how we got here. And I think we've also said that in multiple presentations. We've communicated that directly to folks.

And I I think we are looking at a new team as well. And I think that is part of the accountability that we have. And I just wanna make sure that team that's working on this now to let them know that I'm finally getting to a level of comfort as we are trying to work through the situation of seeing the the slideshow exactly what we needed to see in order to make more informed decision making. I want to also reiterate the need for ten year projections. I know we're not there yet, but I do think that is something that's one of those practices that we've gotten away from that we need to return back to sooner rather than later.

And I appreciate the expenditure tracking and real time tracking of what's happening with payroll and overtime. And I do appreciate our workers in understanding that there is a balance of needing to have the core services, yes, but there I don't want overtime to be demonized. There are times where you we may need overtime, but we also have to keep the city's budget in mind when we're we're thinking about that. So I wanna thank the the staff because I know that's an that's a huge adjustment for for folks. I I also agree with the mayor that some of the items that were listed as our priorities, those those are what we were responding to.

And, we used the parkour dollars to respond to those community needs, those community requests. And I will say the community includes more than people who call in every week, but it also includes more than people who are reacting to the latest incident that is happening on the news. There is other folks who we were responding to into those community needs, and I feel like the ARPA dollars was an opportunity to respond to issues that were bubbling up in our community. And we were responding to it. And I do think that the adjustments that needed to be made, we're making now, and it's happening now.

So I will say that a lot of the programs, I do agree with council member Bonilla that we need to have these core services looked at, but we also still need to be innovative. We still need to be creative. And I don't want to just look at cutting programs. I want to look at us being innovative and making sure we're being efficient and looking at the tools that we have that are are out there in the in the latest technology that can help support staff in doing their their work more efficiently. I also want to call out how we got here really is also on the backs of workers.

We relied on salary savings, but also on the backs of workers. And I understand that the workers saw the market changing, and we weren't keeping pace with that. And it it and and this was us doing these catch ups. And I think that staff and and we're trying to respond to to that need as well. So I just want to just acknowledge that as well. The question I have is and you touched on it a little bit, and I think we're going

to go over it a

little bit today is that we took on a risky investment with the center in place, but we also have a lot of risky investments that have sat on the books as assets for a very long time and just wanted to know more about what our approach to that is in the future. So if

you wanna respond to that part of it now or can respond later. We do have a slide, and our real property manager, Tracy Irvin, is gonna join, and we could talk have a more you know? But we are we are looking at that. We're prioritizing properties, and we are trying to sell at least one or two this year, and and but we'll get into more of that if you're

okay waiting till that slide. Okay.

We're actively working on that. And I and just to get to your point, it's not just just money that we can sell a property for that helps us restore our reserves, but we're actually spending our maintenance services folks are going out there, maintaining all those properties. So there's actually costs. And then some of them present risk where if right now they're like performing okay, but if, you know, they don't, there's so many changes, then we might be on the hook, have to pay more. Right? So there's the risk factor too that we just we shouldn't be support. We can't afford to support right now. So you'll you'll hear more later about that too. Great.

And, yeah, I'll have more questions later. Thank you.

Thank

you. Just two final things. Going to what council member Andrews was saying, it would also be useful just to have guidelines going forward for how we make informed purchasing decisions. Right? Not just how do we do these, you know, sell and do divestitures. But because, you know, now it's saying, you know, we purchased a risky real estate asset, which I agree. You know? But at the time, I didn't really see it as that risky, and maybe I just didn't see it that way. So but is there, like, guidelines that we should be or a set of questions we should be asking ourselves before we make the and I'm sure we should have asked this that question before we did this. But just saying going forward, if something like this comes up, what should we be asking ourselves to make more informed decisions?

And then as it relates to the lessons learned, I really do like those. But the other thing I was wondering is can can we just kind of also make sure that all of those are tied to some sort of concrete action that we're taking? Because some of them seem like, you know, pretty locked, like, you know, attain retract retain what attract, retain, and train qualified staff. You know? I'm like, okay. Like, that's great. But, like, what does that actually mean, and who's gonna do that? Sometimes they see, like, these after actions or lessons learned almost like it's a hot wash. Right? Like, here's all the things we learned. Here's the person who's gonna take the action. Here's when it's gonna be close. Here's how we're gonna make sure we're not gonna repeat. I know we're not doing that here. But if there's things that are actually tied to actions, so we know that these things aren't gonna be repetitive.

Even when we talk about training for counsel, like, is that gonna be coming up soon? You know, is that just gonna be for new like, what is this actually mean, and how do we operationalize that I think would be useful? But I definitely think this is incredible. So thank you again for pulling this together. Okay.

Thank you. And, yeah, I just wanted to just one last little comment. Councilor Andrew's mentioned sort of the external forces that sort of, you know, lessons learned. And a lot of what you have here are internal dynamics and internal decisions. But, you know, we were also, know, not only, you know, 2020, 2021, '22, but we were also responding to external forces.

And, you know, and what I had said, you know, some time ago at a council meeting, I think to the council's credit, we never said no to us. And so and I mean, to programs and services that we had to get off the ground to respond to community needs. But, anyway, that that was one of the things I caught last night that a lot of the lessons learned were internal internal lessons that were coming from internal forces, not necessarily external.

Do you mind? Because I don't doesn't necessarily mean it was I I in fact think it was the right thing to play. Like, I mean, I was here when we made the decision to the Nav Center and that was a reaction to the fact that homeless were there a huge problem. And I remember the staff board said, this is we're using one time money to stand up a program. So even though we disclosed the decision was probably the right decision to try to get people off the street. And now we're having to adjust what can we afford longer term. So it's not I just want to be clear, we're not saying it was a bad Oh, yeah. You know, I I think it was the right those are probably the right decisions. It's just now we have to kind of reckon with how much of that one those one time things can we really afford to continue, right, long term.

Yeah. Absolutely. Alright. Okay. Should we keep going? Let's keep this

I was getting now this is like getting into the details.

Well, with a great lead in from councilor Bonilla, one of the things that is important is in terms of retaining and attracting staff and training them is giving them opportunities to present and share with you their knowledge and what they've done to bring us to here. So with that, Nick Mullins will be presenting our five year baseline forecast. And again, when you do a forecast, you're looking at large items. We're looking at the revenue items and salary benefits. There's a lot of work still to do in the margins and the details. But Nick's done a fantastic job of bringing us to this point. A lot of back and forth, try this, move that, add these. I want to acknowledge that and turn it over to the heads.

And a five year forecast is the best that is the best practice. So here we are operationally.

We don't have 10 just yet.

Every time I saw mister Mullins walk around the halls, you know, he was very intent. He he he Very quiet. Very focused. Yeah.

What you guys see in a few slides is what your forecast looks like. I'll go over some of the assumptions that we have for revenues and expenditures in that forecast. For the revenue piece, which we kinda touched on a little bit, is that and we are making sure for what we do have assumed. It's something that we already have or that we've seen. There are things that as city manager Otis mentioned that are in the works such as our business license types that we're working to get, hopefully passed.

But, right now, we can't that's not something that we can count on. So you'll see that in the assumptions that anything that we don't have is not included. Our big three, revenue generators are property tax, sales tax, and, UUT, utility unit stocks. We receive projections from our consultants for those, and that's how we project out. The finance team meets with the consultant the consultants for both of those quarterly.

So as we receive updates, we update we can update the forecast based on that information. Again, the people that we work with, that's not something that we make up internally to update those numbers. As for our other revenues, we feel there's a very large list of them that we kinda have bunched up in the projection that you'll see, but we base, those numbers on our actuals and what we receive each fiscal year. So, again, not counting anything that we haven't received and also not bumping up any revenues that we think may come in or anything like that. We wanna base it on the actuals that we get each fiscal year.

We do have some escalators in there knowing that the price of services and goods go up, so we do want to adjust our revenues, a bit for that. Most of them are jumped up conservatively between 13%, listed out for all our different revenue types. And then lastly, what you'll see in the baseline forecast is we don't have any of the one time transfers that council has previously approved, during budget adoption last June. Council approved a few, transfers from other funds along with the November 18 meeting. We don't have any of those included that would require getting council approval to move forward with those. So when you see the revenues, none of those are

included in there. Next slide.

Expense assumptions, we we have all the code that's kind of built out for all the different party groups for what we know, are coming in for any of the out years that that will show, that don't have an approved contract. We conservatively budget a 2% increase. That is generally industry standard you'll see across other cities. COLAs for bargaining groups that currently aren't under contract in their out years, you'll see about a two to 3% increase. Historically, we have budgeted for a 2% increase in those out years, which is what we've, continued for for this for this forecast.

The only exception is for is that 4% for local nineteen o nine in 2028. And then lastly, for ex expensing assumptions, we have included the, the reductions based on the approved local 19 o nine and HBO side, HBO side letters, which we reduced out for this fiscal year. Those are only in effect for six months of the fiscal year. So you will see that included in the baseline forecast. The vacancy savings also included is rolled up.

I believe there's a a separate line that you'll see in the forecast as well that shows what that amount is. And that also includes the voluntary integration program and layoffs, which is combined. As Dion mentioned earlier, we are trying to accurately budget for other items that we haven't. So we have included lean payouts, cash outs for other incentive pays, And similar to what we did this year, we are accurately calculating what our overtime is expected based on our actuals with the COLAs applied as well. Uh-huh.

So we have that kind of taken to account to hopefully get a true realized savings for our vacancy savings. Our Calc our CalcERS retirement costs will go into about two slides, I believe, but we receive an actuarial report each fiscal year, and CalPERS tells us what we need to pay them. So you'll see the jump there, we don't really have a choice in that. Similarly, for our workers' compensation fund, to maintain an 80% confidence level, we receive an actuarial report that will tell us the amount that we need to spend each fiscal year to maintain that level. So in the baseline forecast, you'll see an increase an increase to that that portion as well to maintain that 80% confidence level.

And then the last three listed for maintenance and utilities, supplies and services, and capital projects, we have assumed, small increases or conservative increases year over year. Again, based on our actual spend,

We

set those amounts based on our baseline for this fiscal year, which was adjusted to, incorporate what departments were actually spending. Mary mentioned earlier that we've had some fairly significant cuts to some of those areas. Since 2020, we've dropped supplies and services about 17 and a half percent. You know, departments each year were going over that amount. So we what we what we took to all of you in November was to say, hey. Here is what we're actually spending in these areas. We know departments aren't necessarily gonna take those cuts. Let's start at a realistic number and then work our way back. And you'll see that in the in the five year model that we pull up again. This is where we're at. If we don't make any changes, with all of these assumptions that we'll be working back back from to bring you

guys back. Looks funny. Thanks, buddy.

And with that, here's here's where we're at, that 32 and a half million dollar deficit that was mentioned earlier for next year. Again, that number is based on those on those assumptions as well as the out years. Director Hillbrands will get into more detail about, again, why we're seeing that that increase.

And I did send or can you we sent this morning to all of you an email that has a spreadsheet that goes over this and then the year year over year comparisons, and you can follow along.

So let me pull

up the spreadsheet. Or you can do my.

I'll go over, and we can bring up a spreadsheet. So why does there know, we did all these things this year. We've got 26 and a half million dollars out of the budget, we still have $30,000,000 deficit. Again, part of balancing this year was some onetime money at 1.8 or almost $90,000,000. There's still some productive reductions in sales tax and property transfer tax. So it's still gonna define a little bit more. There's an increase in BOLAs. Mentioned the increase in coffers and workers compensation costs. There's an increase in utility costs. Some of that is just, again, things not budgeted accurately, especially looking at our internal service funds.

So we're working in those areas. So that's some of that increase. And then, again, we've added some line items for new payouts and special pay just to better that. We've got that all up in a spreadsheet to see things kind of connect to each other.

So do you wanna walk through this or should

can you walk through it?

I can I could do that from here? So, again, property tax, we will see an increase, which is typical 2% as the permitted increase, and then you'll get some other increase due to transfers. So as a property is transferred, it's reassessed. Sales tax to community come down just a little bit. And do want to acknowledge that when our consultants do a report in the section, there's portions that are confidential.

But you'll see the actual math they're doing. They're saying, hey, this business is leaving or and so there's a reduction of their sales tax, or this one's gonna be coming up and there'll be an increase, you know, an incremental increase. We we do see that level of increase. Yes. So in real property transfer tax, have increased it a little bit extra this year because we had the sale to Southland Mall. So we're gonna back down to reflect kind of what we've been seeing in the market. And our charges for services, again, had had some increases based on bringing over some deposits and we have realigned that to be based

on expected.

So, we took out these one time items, so Measure C, OPEB and transfers in where we were just bringing money from other funds where they

had available fund balance. Sorry. It'd be increased by I don't

know if

I'm okay.

I don't when are

any Yeah. Salaries and benefits went up 7%. That's based on what Nick was saying. Yeah. Worker's comp contribution. And

so the way that you're getting, like, from year to year,

it looks like expenses went up 17,000,000 and revenues went down 15,000,000.

So that gets you to the 32. So here you go.

If you wanna follow.

You can go. So again, this has been shared with you and we have some toggles and some and then, you know, later in the day, we'll be looking at, you know, what those opportunities are to close the gap, again, at a high level. I wanted to help you understand how we got to here. That will be a big question. Wow. We did all these things and it's still the same. Has this been shared

with the labor partners?

We did do a similar presentation for labor partners with the forecast and and and they have seen and they've got their own spreadsheet. Okay. So,

Mary, the bottom line in that spreadsheet you said was cost went up 17,000,000.

Between the two years. And that's partly here. Let me go back to you just so you can If

you summarize it, it's it's I was looking at revenues.

So it's because so expenditures

The revenue side is to take it away of the one time. That's that's really the bulk of it. There's some small small other items, but the bulk of it is is taking out all of those things that were one time.

So revenue decreased. Yeah. Because you can see here revenue decreased because we didn't have the transfers in from these these transfers. Yeah. Yeah. And then the expenses go up. One of the big ones here is the CalPERS retirement cost is $6,400,000 increase, and one of them is the workers' compensation contribution of that 3,600,000.0. And that's partly because we didn't have employee costs go up the previous years so that this is kind of later. And that helped and then with the

COLAs, that helped you get to

a $17,000,000 increase. But you can go line by line. And,

again, we're bumping up internal service charges. That's where we just had things not budgeted actively in the past. And so that's another big area. You've got internal service and liability insurance as well.

Okay. Real quick, Barry.

Will you sort of maybe just summarize what's being done to sort of curb overtime? And like council member Andrew said, like, I I don't wanna demonize demonize overtime. Clearly, in public safety, there is a need for overtime, so I I get it. But once we've done it, sort of, control it now, are we are we gonna be appropriately budgeting it in the future so that we don't end up with this big sort of, you know, unmentioned, you know, that wasn't what wasn't there. So can you can submit to what? Is overtime gonna be taking more time? Yeah. Like, how how are we controlling it now? Over

time. Okay.

Overtime. Yeah. So Let me try.

We have the two MOU items. One was a shift change in the police department that is expected to save a million dollars in overtime, and in the fire department, a change in the minimum staffing if they're save. And this is over six months. So a million and six months and two million and six months for the fire department. And then I think unrelated to that over time, the chiefs are closely monitoring the other over time that occurs just to be sure that it is, you know, based on meeting needs. There's optionality there. There's room for that. So those were two big tranches, again, through our labor groups. But there's other, again, in the weeds and the margins that the chiefs are also looking at more closely as well. So hopefully, even for some additional savings beyond the the 3,000,000 in the side. And are these long term legacy

or I guess the shift change thing is not long term. Both of those are Both are. Short term. Yeah. Okay.

We're hoping to to get the labor partners to consider extending but they're currently short term.

And then meanwhile, are we projecting out, like, in

that five year budget that if those are short term, where we go back to and what a reasonable overtime number is? Yes. We projected that those to lose that savings. Okay. So you'll see that in the longer projections. You know, I we went up another $10,000,000 into the next, the 2728. So that's part of it amongst other things. But putting that $6,000,000 in savings back in as a cost is a chunk of that. Okay.

And then the other thing about projections, think Vicki said that you use the consultant to come up with the projections for our revenue. And when we do that, are we using, I know that we've seen some of these projections out, are we using, like, a conservative or a middle road approach or optimistic? Because I know in the past, those sort of numbers were kinda tweaked and adjusted willy nilly, it seems like, in order to get to a balanced budget. So what what how are we accepting that consultants is what

it For the big three, which is what we use our consultants for, property, utility, and sales, we use most likely for our our our projections. You'll see on their sheet, they'll have conservative, most likely, and optimistic. This year, we are transitioning to maintaining a most likely approach for our revenue projections. Okay. For our other revenues, again, those are based on the actuals that we receive. We can look year over year and understand what we're bringing in and what may change in the economy to adjust that. But for the big three, we use the most likely projection as we as they come in.

Alright. Thanks. And my my last question is about the CalPERS. Right? It seems like we were were we unaware of that number coming through? Was that not projected or cuffed it out with labor contracts that we agreed to at that point? Because it seems like that number has popped in and Just wondering. And then, yeah, what we do about that sort of projecting that into the future and what will that go up? I mean, I guess you are projecting that to go up again the next three

or so. So CalPERS gives us a report annually, and it projects it out, I think, for the ten years. But that's based on what were our salaries today. And so that's typically what we program in. So I think, you know, as we do future increases, we'll likely want to figure out what does a 4% do to that number. It's always off. There's also the way health care projects their interest, and that shows up in the unfunded actuarial liability that you may yell that you hear about. So so we will never get it spot on, and so they'll tell us a number that they programmed in for the next five years, and then we'll get a new dollar next year, it'll be up another 2,000,000. I mean, we can't get it quite right. CalPERS is doing much better in terms of investments, but that's because the world is doing better.

Mhmm. So, you know, it's it's always something that can't be performed exactly. But we there's things we can do to kind of better address that if we do labor negotiations in terms of just at least some kind of factor. Say, throw another 2% into the CalPERS member if we do this labor change.

Because, I mean, you know, I know I've heard this and I just wanna sort of ask that. Does did we not properly project out the full cost of the contracts that we agreed to, listen? Yeah.

I mean, I wasn't here when well, I wasn't sure what was shown to counsel. I don't I don't know. And I don't know if you've gone back and done. Yeah.

We've been really focused forward. Yeah. And, you know, it's it's hard for me to understand to how they were projected in that way when there was so much one time revenue happening. So if I had to guess without doing all the homework, it would be that we weren't really treating the

one time revenue as one time,

and maybe even saying, oh, this one time thing will grow, or something like So there 's definitely some odd budget practices we've had that we'll break out of. I just asked because it's

a lesson learned, right? Like, so we need to remember, like, ask about the culprits, is that being protected to all the other things so that we know that when we make significant increases to agree to, that they were in those increases plus four that wasn't actually being, you know

Yeah. Overtime itself is not reversible. So so having higher overtime isn't affecting pensions, but salary increases too.

Think usually usually, when you do projections for contract, they shouldn't be the fully loaded, right, total compensation, which would include a CalPERS contribution associated with those salary increases. So we we should be using a total comp Harrison, but those will be things we'll make sure

after the future.

And I just wanna thank Nick. He's been such a constant finance department, so thanks for being here.

Councilor Sarkar, thank you. Similar to councilor Andrew's and councilor Roche's point, so it seems like with the increase in a COLA cost, we're also seeing an increase in initial overtime costs as well as an increase in what was the other item we're just talking about? CalPERS costs. And then, I mean, the other thing I just wanna make sure that get gets cost in. We talked about any kinds of future contracts is compaction costs as well.

There's these cascading costs that we're unaware of that start to scale out and we're unaware of, you know, how much it's gonna cost us total at Citi. I am curious. So, I mean, when we look at a $30,000,000 deficit, we're seeing 10,000,000 of that coming from CalHERS and workers' comp combined, what is the amount that we're seeing from overtime as well? Can we just get a rough number on that too? I just wanna understand what the biggest buckets are. These deficits, we understand what exactly is that we're targeting or trying to drive down.

Well, one thing so in November, and correct me if I Yeah.

We we we adjusted our

the overtime to match what felt what was realistic. Yeah. And there's and it's tracking on budget.

Yeah. We are tracking on budget. Francesca Hatfield, another analyst in the finance department Yeah. Runs our our payroll monthly to see where we're trending. Great. So one, trending on target. And two Yeah. Should something come up in finance where we're over budget in those areas, departments are expected to speak on it and Yeah. Address, like, how they can rectify it. So Yeah. They're keeping track of that and, hopefully, maintaining on

budget for this month.

It's about $16,000,000. 16,000,000. So 15,700,000.0 in this fiscal year. We're projecting a slight increase about so it's about 16,000,000 index.

Got it. So even if we're budgeting for the number is still quite large, it's it's a chunk of our overall budget. I I know we're starting to try to practice stronger overtime controls. Just wanted to point that out. Like, while it is a necessary part of our city, we shouldn't budgeting for overtime. Is 16,000,000 the number that makes the most sense? Or strategically, is there a a better number to help us drive that overall cost spending in the general fund too?

And if we'll know more after a couple more months of this fiscal year once with the with these different changes and things were going on and even through the end of this fiscal year. So I think our experience over the next couple months will help us inform and fine tune these numbers for next fiscal year. Like, we're on track and maybe, yeah, let's confirm. Yes. Those are good numbers to use for next year. If we're not and we're not able to stay within that, then maybe we'll have to adjust it more.

Yeah.

Partly, we need to see with the new changes. Maybe a couple more months to see what the new changes that we're doing.

Understood. Yeah. So this idea of total compensation, we're having these conversations in the future. I just wanna make sure we don't miss out on action as a part of that. I think something again, I agree with my colleagues. This presentation is very comprehensive. Just hoping that we can factor also our compensation philosophy in future discussions as well. But I understand that 10% is the kind of industry standard for compact controls. Is that something in times of emergency that we need to adjust as a matter of policy as we have future discussions? I know those are uncomfortable conversations to have, but

you have

to put everything on the table for trying to protect as many jobs as possible. And, yeah, I just also want to echo my gratitude to the Budget team. Thank you so much. Thank you, Fran, as well. This is not an easy undertaking. And I think that this presentation, as we'll see today, takes, you know, six months of feedback and really condenses it into some actionable steps of framework everybody involved.

Yeah. Still have

Thank you. Okay.

I'll I'll be brief too here. Okay. So going to overtime and to kind of council member Andrew's point earlier, it would be good just to level set on what is a best practice around overtime. Because when I'm hearing $16,000,000 of overtime on a $200,000,000 budget, that's like 6% was what we're budgeting for overtime. Like, that doesn't seem unrealistic to me. Right? I can see double digit overtime being unrealistic, but when you're talking 16,000,000 on a $180,000,000 budget, that's you know, I don't I guess I just wanna understand from a benchmarking perspective. Are we on the benchmark? Are we beating the benchmark? Or are we lagging?

Because it seems like we've tightened up overtime in a very strong way, and I think I do want, you know, us and the public to acknowledge that. Because, like, even when I was meeting with the POA, like, they've shared directly how overtime has been much more tightened up than it's ever been in the past. Right? So I do think that that narrative around the discipline and the rigor that we're putting into our operations and how that's resulting in true financial, you know, results is is a narrative that we need to start leading because there's a lot of hard work that's being done in the city that I think we need to make sure that the narrative is aligned with that.

I think that's great. We can look into benchmarking. Yep. And over time, I just wanna say this is something you I mean, you you need to I mean, it's not a bad thing to have some level over time. Right? And that's what I was thinking. That flexibility with people are sick or they're hurt, especially in our, you know, public safety or in police when you have a when you're recruiting and it takes a long time to recruit, you've got a number of retirements. Like, you're gonna need to have some flexibility to to be able to cover that. Right? We should also have you know, if there's fewer people hired, then you should have some salary savings. And if, you know, we're trying to budget all this, but I can tell you, especially police, it's very complicated because it changes the staffing changes. Frequently. So we're really trying to drill in and get a calculator and think about that. But Yeah.

Because I mean, I know just in our hospital system, you know, if we were to ever if we were able to drive, you know, 6% OT budget, that would be great, but it's just very hard to do when you're running a twenty four seven operation. But I think that context is helpful so that we're not looking at $6,000,000 as us I mean, 16,000,000 is this being unreasonable and hemorrhaging, but this is really how, like, you know, to council member Andrew's point, we're an organization that requires overtime as a part of how we do things. And if this is meeting the benchmark, then maybe we need to stop harping on overtime and look at the remarks that we need to be going after.

It's a great idea to benchmark. Thank you. We haven't done that since, you know, we can do the I haven't. Thank you. Least guess that's fine.

Okay. Of course. Got it. Thank you. But just that one point is that we were we were budgeting $92,000 for overtime, and certainly, it was very unrealistic, and that's what led us to all this hassle. My one quick question is, do we still have any frozen positions and if so, can they be taken off the books?

Well, let me let me start and then, yeah, I can we absolutely do. In fact, we have in the model that we were showing, we're assuming vacancy savings of about $10,000,000 for this. So and those are because of the vacancy management. And then we'll get to this later, but then we also have another 8,000,000, 8,200,000.0. So almost $18,000,000 of vacancy savings that we're projecting for for approximately for this fiscal year and next fiscal year.

To get to your point, this kind of came up last Tuesday that's why that staff report a little bit on the state law was to try to reduce vacancies and that was part of the confusion because we're actually trying to maintain our vacancies to save money so what part of the budget exercise will be, and we're not ready to show you tonight, but is work with all departments to kind of figure out what is your new normal and to start to decide which positions do we eliminate permanently. Are there some that we just want to keep on the books? Let's keep vacant. You know, there might be some strategic reasons since we are going to have departments are individually looking at this and we're having meetings after this today, know, the next couple weeks to really look at this. What is the new normal for the department?

That will mean eliminating some positions permanently. It may we may wanna hold on to some too just to give us a little more a couple more years to figure out what the right structure of a department is. So we're we're in that exercise right now, and we're not ready tonight to or today to tell you all that. But what I've told them is that we need to stay cost neutral. So, like, if you wanna for at least for the next couple years and and so we can get more stable. So you wanna move positions around to be strategic. That's fine. But stay within the departmental budget that they have. Does that make sense?

Okay.

We'll talk more about that. Should we go Yeah. Measure

So looking at measure C,

I know there's a lot

of conversation there. We've been making transfers to the general fund, so 9,700,000.0 this year and 10,000,000 over the next year is proposed. We our five year progress does plan on a reduced dependence on measure C, recognize there are operating expenses and debt service on measure C, so there is ongoing expenses within forecasted revenue general in the $20,000,000 range. So if we're able to reduce the general fund dependence on Measure C while maintaining the same operating operations in Measure C that we have today, you will see $70,000,000 available in the future that you could set aside for future capital projects. And that's in the 2031 timeline, which is about the time that measure k one comes into play.

So we'll still be looking at those longer term projects in the future. This hasn't eliminated, you know, any plans for measure K1. You know, this longer term forecast does have

a plan to get on track for the K1. We will be talking about the recommendation to use measures. So if if you're okay as part of the recommended budget just to keep it moving in, it's okay if we talk about that as part of the recommended approach.

Yeah. Okay.

But we just wanted you to have this baseline team.

So again, we're working to balance the budget, but we still have no reserve funds. And so we wanted to just talk to you about the recommended approach. So again, until we can reach a 16% reserve, ideally, we're going to get to 20%. But in the meantime, want to hold the available fund balance and measure fee that we've left there. So overall, there's some cash available in the general fund. So it's about $18,000,000 that percentage.

All proceeds were recommended.

All proceeds from property sales or basis go into the reserve, into the general fund reserve again to restabilize it, build it back up. If we get higher than budgeted revenue or one time revenue, we we want to place that into reserves. I You think our budget is really tight. We wanted to recognize, you know, we don't want to come out with a bunch of excess revenue while we've had to ask the labor partners for so much. So it's a very tight budget, you know, optimistic. We talked about it earlier. But this is, you know, we will need at some point to continue to focus on the reserves.

Before I, hold on, cancel my interest. Yeah, I know we're going talk about this later, but I think, you know, building up the reserves, I get I you know, it gives us a little bit of stability, but it also you know, I think it's the north star too. I I think it also gives us a goal to sort of achieve and and hit. That way, you know, little wins little wins. Yep.

I wanted to know if if there was any kind of support to look at our reserve as a range versus a target percentage.

We could talk about that within the budget policy.

Okay.

So the budget policy recommends just and just like the city manager said earlier, this is this is us recommending to you and and taking in your feedback. So I think in the budget policy, recommended 20, but certainly, we can we can look at that as a range of

And that's the last portion of today is the budget. Okay.

That's where we're in funding.

Thank you. So if we can just go back one quick slide. So would our reserve policy hold to this too? Because the way that I'm thinking about this, and you can correct me if I'm thinking about this wrong, is the starting balance, I kinda think of that as sort of what's in the reserve of measure c if you wanna call it that. Right? So would we have something that says we don't wanna deplete that minus 15%? Because when you start looking at outer years, it's like, wow. Our spending keeps going up. Our, you know, our revenue our expenses are going up. Our revenue is very modestly going up.

So every year, we're needing to dip into that measure c reserve, and then you see you get to 23 I mean, 31, and you go from a $21,000,000 reserve to a $3,000,000 reserve. So would we say I mean, I know that maybe I shouldn't call it a reserve. But

I think what's missing is those two or that line of available for future capital. So that's until we, oops, sorry, apply that to capital, 3,000,007 and 10. I I had the same kind of first response to this, but but if you look at f y 29

Oh, it's an

allocated Yeah. That's unallocated. Like,

let's say

I I missed that one.

Right? Yeah. It's really

I guess the goal here is that during this time period, we're building back the general fund reserves. So we're reducing our reliance on the measure c reserve because there's no we don't have to

hold the fund balance in

measure c and we have a general fund reserve. Right now, we're using it as our general fund.

So we we essentially start to realize that reduction in '29 at, like, at at 3,000,000, and then it goes to 7, and then the full 10 comes back. Yeah. Yeah. I see how that's right.

I missed that when

maybe you're doing some planning, some stability studies for future capital projects, or you may just hold it knowing, hey. I have this big project I wanna kick it off

in '32. Yeah. Yeah.

But it's not it's a

not really budgeted. So that's for you guys as policy makers to sit. Yeah.

And, ideally, you are spending this money. Right?

Yeah.

So that you can do do that. You can do the capital project, but I think we've been saying don't do that yet right now. We don't have any general fund reserves. So I think the hope we're trying to show there's a relationship between building up your reserves and then being able to spend the measure c on the on the capital.

Just an

added thing is that in those years where we're starting which makes this even more complicated. I'm hoping to but when we start weaning ourselves off of measure c, we still have deficits that are projected in those years in the general fund. So our you know what I mean? Our work isn't done in those future years. So this is what we're trying we're shooting more aspirationally is to start to, like, free ourselves from the measure c, but it still means we got we have decisions we've gotta make and structural balancing it through the general fund. And you'll see that a little more when we get into some of the. So this is just kinda we're just kinda wanting to I think it helps you understand that relationship, but it's all very complicated and.

It makes more sense now than

Yeah, I know. Had the same idea I did. Yeah,

just over on this slide,

just so everyone understands, can

you tell us, so this is operating expenses just out of the measure C account. So what are the operating expenses out of measure Yeah,

we have and we always have since the first passenger measure C, we've always had police officers funded out of this maintenance services workers because that was one of the priorities of measure c was streets and public safety.

Okay.

And then there is some minimal, like, supplies and services for those operations.

Okay. And that was my question that, like, those service those expenses are still within the line of the original mission.

Yes. That was that's been there since the very beginning.

No change.

Right. No change. Right. Yeah. And then and then the debt services, that's to pay off the

debt of the all the infrastructure building that we've already built. Yeah. That's the one we've already completed. And then in in theory, that's the the idea here is you could start, you know, spending this actually spend $3,000,000 on a project in twenty ninth, or you could put that towards future debt service if you wanna take out a loan for a large project like Great. And I and

I appreciate the direction because, yeah, mean, seems like it is our only, like, actual reserve right now for the city, but, you know, doing what we can to sort of as quickly as possibly ourselves off in order to get to, right, the Sun City measure c at the beginning of k one and that we're actually sort of, building toys of buildings that we need in the future. Yeah, as soon as we can do that. Okay. Another

question I just I had that I just want make sure, the forecasted revenues are also from our consultant. Okay. On

the sales tax.

Okay. Yeah.

Yeah. And then because and and I would also like to put in the place, you know, if we end up realizing higher revenues than obviously projected that those numbers continue to to channel Right. Yeah.

So that we're, like, leaning ourselves off. It's a good idea.

As as, like, maybe as a first, you know,

to your winning yourselves off things. I would like to see

that so we can get back to the projection, you know, the picture. I'll look for potentially new policy. Thank you.

That's great. Yeah. That's why I you know, that's why

I've heard it here before. I don't know where I've heard it, but that's why

it's important to shop Hayward.

It is.

I just had a

question about the measure c projects and services were identified. Were they prioritized or ranked in the original measure c? And is that something that we wanna do in the future? I mean, I know that it I know the highest project was is gonna be the most expensive, but just to have an idea of why did we choose certain projects in that original tranche of measure c and how should we go moving forward?

I I don't think I don't and maybe maybe we can definitely do a work session on this because there probably are people back here who have some of historic knowledge of why we did what we did for the first for the first section of Majesty. But for k one moving forward, think definitely do a Reiki and doing some sort of action.

I think that would be

helpful for the public because I think they're thinking, well, we voted for this for this reason. That was part of that. Well, that wasn't the most prioritized for them when they voted for it. So I'm just curious to see if we can do that for k one.

Agree with that. I just think we should have a conversation on the priorities for that funding rather than just assuming right off the bat.

Yeah. Not wait till '29 when

we Yeah. Can't wait to do

it now. Yeah. I think also to the extent we'll we'll go into debt finance, the the pace that at which we're able to restore our reserves and reduce this reliance is going to affect our bond rating and our interest rates.

And be able to afford these payments if we are to do certain building, but also I'm I'm just also looking at at the buildings that we did build where we're tracking on budget for those buildings and that that eat up more measure c funding and but that's our but that was a priority. So then the other then we have to go back and reprioritize.

We have Tracy Urban, our property manager. I don't know, Miriam. If could just speak, you wanna mute him. Or Tracy, are you able to

Yes.

Hi. Can you guys hear me?

Can you just talk a little louder, Tracy?

Yeah. Not a problem.

Good morning. Less

loud. Less loud.

Less loud. All right. Good morning.

So here on this first slide, I know you guys have seen my presentation, and I've talked about this at different points of time. But just real quick summary of those presentations. This is our these are our top three priorities. And part of the reason these are our top three parties, kind of what Jen already talked about earlier in, is the the money, the revenue that these can draw for the city, also some of the risk and financial potential risk down the road. So City Center, CN Maine, those are and the cinema place.

They're all attractive properties where they're located and how they're set up financially structured in the city. We can probably get some of our boast, most revenue to replenish the reserves and help us out. These are the action steps that we've talked about where where we're at. Moving forward, as I evaluate and come back and bring you the options and make the recommendations, whether it is to sell, to hold, or maybe a ground lease to create a long term kind of revenue source. You know, we're gonna get those appraisals, do some more market analysis, talking to brokers, getting a feel for the market to really help us make those right decision.

And some of these sales, you know, as not just at one time revenue, you know, there's gonna be those ongoing revenue sources through, like, sales tax, property, tax, and all those type of things. So those are the things to think about as we properties. And these are just three. I got a long list. You know, there's all the two thirty eight former Caltrans properties, which we talked about. Those are carrying costs, heavy carry costs for us in that regard. So we're looking at getting those off the books or looking at opportunities to lease them out to other folks to help carry those costs. Other properties, facility maintenance has brought a lot of properties. I've worked with them that are help hurting, you know, their budgets. They're carrying a lot of weight where they're spending a lot of money and time.

So we're looking at evaluating those and getting those off our books as fast as possible to help ease the pressure on the rest of the budget. And we can move to the next slide. And this is this is a summary of what is currently happening, where I've been, what I've been doing, and what I will be doing as we move forward. So right now, we we've taken an evaluation, found some identified some key properties because we also just don't wanna put everything up on the market. That that's not a good approach either.

So we've identified these three properties and some others. We're gonna move we're moving them through the surplus lands act, which is a a process where required. It's not that simple where we could go out, put it on the market, and sell it. We have to go through these steps, and it was created by the state. And we're moving very quickly through all these things. The goal is by June to be bringing stuff back to you with those decisions on whether we sell it, or do we look at a ground lease, or is it a holding pattern kind of situation? And below is some rough timelines based on the Surplus Lands Act in that process as we move through each of these properties.

Can I just add one thing? I I would say my instinct is going to be my my I'm leaning towards I would like us to sell these properties. I just wanna be transparent about that because that's how we'll be able to restore the reserves. I think we're keeping other options on the table. So let's say we get a proposal and it comes in really low and it would just it doesn't make sense to sell now because of the market where it is, then we might look at holding. But I just want I think my first reaction will be to try to sell so that we can start reserve storing the reserves. So I just wanted to be clear about that. I mean, Tracy's doing a great job.

Yeah. 100%. 100%. Like, the only reason on my instinct, you know, I've been doing this for over twenty years, is we probably need to sell these. That's the best approach. It it would only be these outside factors that we can't control or offers are just coming in so low where and a ground lease, you know, through the appraisal process. At least, you know, I wanna do something, not just leave it open and vacant land like it has been, you know, for for that time period, figure out ways to create revenue. So that would be that's the emergency boat if we can't sell it. The goal is to sell these properties and to help create that long term replenish the reserve.

Thank you, Tracy. You've done a great job on all this. Any questions for Tracy before we

Yeah. I was just not to be overly technical, but I don't have that last slide in my slide deck here.

Oh. Oh, it was updated. Yes. We can we can hear that. It's on it's on Legislature, but, yes, we made that change.

That's fine. Okay. I have a

short follow-up. Okay. Yes. I'm I'm really happy to see us collapsing around a real estate strategy together as as a city. I I just wanna give us a little bit of grace around projects like the movie theater.

You know, if there's opinions whether it was a good idea or a bad idea. Like council member Bonilla said, at the time when we had made the purchase, we had a different understanding of what our reserves actually were. When we look at what the service provisions that our residents expect out of us as a city from our own our own resident satisfaction survey, one of the items up there in the top five is, you know, protecting local here at businesses. And we as a city made a bold decision to make sure we didn't have a big gaping vacant hole at the mouth of our downtown, whether that was but rent bills or all the businesses in the theater across from it. And so that decision wasn't one of trying to buy the biggest, flashiest thing we could find downtown.

It was really trying respond to the resident satisfaction survey. Said, we want you to protect local businesses in in Hayward. And we were able to when we bought that building, there were empty vacant lots, and now every single unit in that theater building is leased up. Buffalo Bills is active across the street from it. So I just you know, whether or we move forward with selling it, you know, I I understand we're in a difficult fiscal position, and I'm open to the idea of it.

But I just don't wanna harp on the council so much for making that decision because I think that was us being very bold, very responsive, and it has had positive results for the downtown corridor for the last two years or a year and a half. If we have to sell it, you know, that that so be it. But I just wanted to give us a little bit of grace there because it wasn't sometimes I feel like it gets framed as a, like a kind of knee jerk or haphazard decision, but I think it was very deliberate. And if we were in a better fiscal position, I would be very opposed to selling it because I think that, you know, with the funding we get from owning that property or the ability to leverage it for financing, there are very interesting economic development plays we can make with a property that size in our back in our back pocket. And I and I'm a little bit sad that if we do end up selling it, we'll we'll be unable to get that creative with that real estate asset.

So anyways, I just wanted to share those thoughts because I think there's a lot of mixed opinions around it, but I do think it's an example of bold leadership creative thinking. Yeah.

Just wanted to agree with what councilor Syrup said because if that building had been sold and had been empty, we would be having a very different conversation about how blighted downtown would have been. Secondly, we would have also been having a very different conversation because there would have been key buildings in downtown empty. Buffalo Bills would have been empty. Arthur Mack empty. You know, there would have been no enhancements or improvements to that building.

And, you know, so, you know, we, you know, we did what we did because, one, we had, you know, we had the money, but two, we were responding specifically to what people, to what not only the neighborhood was asking for, but what a lot of folks were asking for that was making Hayward a destination, Downtown Hayward a destination. And and so, you know, I you know, we had this conversation at Funcheon Finance where, you know, we said, listen, you know, there's gonna if we need to sell it, yes, we'll sell it. But, you know, I, you know, I don't want the original intent, what our original intent was, and that was, that is the largest economic development site in the downtown. And if that would have been empty, I can only imagine the conversation we would have been having. And, you know, and at least we were we've been able to sort of define the trajectory of that building in the next, you know, in the and, you know, we filled it up.

Right now, it's nearly all you know, I know we had that one coffee shop that's gonna fill it that

that

that's waiting to get in, but or it's just almost open. However, it's 100% occupied right now. When and when we bought it, it wasn't, you know. And so we still see people coming to downtown, the the restaurant upstairs, they went through enhancements. Our economic development team has been supporting that. And so, anyway, I I'm I appreciate you saying that because, you know, we we didn't just go out and

spend money on That was another danger, and the other one was that The church could have taken it over.

Sure. I mean, yeah, absolutely. That was a and we have seen that happen, right? Yeah. In the

theater, so we I we did the right room.

Did you want

oh, no. I was gonna I was gonna type check on the next step. Yeah.

You have

to come? Oh, that's okay.

Oh, we'll be back.

Right? Okay. Well, here's so we and this and I've been doing this for a long time, and I always get the times wrong, so I apologize. But try you try to anticipate how everything's gonna go. We are about thirty six minutes kind of off, so we could take a ten minute break now. We do have our because the next part is to have our consultant go business license tax modernization. We could take a five minute break and then come back and really dig into business license that we do, we have a

we have almost what

is we an hour and ten minutes at the end that was your discussion feedback, so we're maybe using it as we go which is totally fine and I'm trying to set it to the

point Yeah, was going to ask, should we go ahead, during break, let's talk about it. But let's take a break. What'd you say? Five minute break? So we have five minutes break.

I'm gonna get back on. We are obsessed. We're good. Okay. One of the ideas that actually came through our labor partners and others in the community was to look at our business license and tax modernization.

We're super grateful because when we do look at it, it is very outdated, and there's a lot of potential for us to put something on the ballot if that's the council's direction. And but so we wanna we've hired a consultant. Matt Newman is here from Blue Sky Consulting, he'll tell you a little more about himself and who we you know, all all the different cities he's helped do this. So we've got great experts helping us, holding our hand. Next slide.

The next slide is really just to show you all of our different revenues and how they, you know, you can, you can always just helps you get a sense of all the relative importance of different revenues and how much and then our business plans that little blue line up there at the top and looking to see if we can expand that to help us this would be a structural change at the general tax, so it would allow us to really offset some of our structural deficit on an ongoing basis. Next slide, I

think is Eden? Oh, great.

So Eden oh, is it there? Eden Perez, the City Manager's Office is kind of our project lead on this. So she's going to start and then she's been working with Matt, and so Matt will get into some of the details. But go ahead, Anita.

Can you guys hear me okay? Yes. Okay. Good. Good morning, Mayor and Council.

I'm going be providing you with a brief overview of what our current business license tax structure looks like. Our Citi's tax structure has remained the same for decades, if we want to be exact, since 1978. And in fiscal year twenty twenty five, it generated approximately $3,300,000 in revenue and applied to nearly 10,000 fee payers. The current system is primarily based on a mix of flat annual fees, employee counts and limited gross receipts categories. And within most categories, businesses are taxed using the same rate structure regardless of their size, which raises important questions about whether that tax structure reflects today's business environment and why now may be the appropriate time to revisit it.

Next slide, please. So why modernize now? Not only does it provide an opportunity to improve revenue, but it also helps us update the structure thoughtfully without unneeded complexity by adding more categories or rate tiers. So in other words, we're looking at a way to modernize it and also keep it simple. Council has also expressed interest in exploring what a more progressive rate structure should look like. To do that, the city has engaged with Blue Sky Consulting Group, who has extensive experience assisting cities with business license tax modernization. With that, I do want to introduce Matt Newman with Blue Sky, and he is going to be walking you through the comparative analysis and the proposal that we are bringing forward to council this morning.

Okay. Thank you. So I'm Matt Newman. I met you all on Zoom a month or so ago, right, I think, the first day I had started on this work. But we've had some some natural analysis and work with your staff to put together some number.

And as Jeff said, we felt the city well with their 2022 change of business license tax and also worked with city of LA, New San Francisco, others on business license taxes and other taxes. So what this slide shows is how Hayward compares on a on a per thousand dollar taxable sales basis to other cities in the region. You can also look at it on a per capita basis. This one sort of controls for the size of the economy center, but the story is the same. Hayward's not collecting as much revenue as virtually any of its neighbors.

And there's sort of maybe three tiers or three ways to think about it. There are cities that really just don't collect very much revenue from business license taxes and that's kind of the category that pay we're in. There's sort of the middle tier, which includes, you know, Union City, San Leandro, Alameda, Pleasanton, Livermore that are in that kind of bill group with, you know, two to three dollars per thousand dollar tax taxable sales. And then there's there's the four cities on the right here, Richmond, Emeryville, Berkeley, and Oakland. They really collect a lot of money in in business license taxes.

I think Oakland collects about as much in business license taxes as it does in sales taxes, just sort of by way of comparison. So it's it's a lot of money for those cities. So that's sort of some context setting. On the next slide, What we've done is we put together the staff and I a proposal for, you know, one thing that we think would make sense. This is sort of called matching the neighbors.

It would move Hayward from that lower tier to the kind of middle tier close to what your neighbors are and kind of $3 per thousand dollar taxable sales range. So about three times more revenue than what you're collecting now. And the proposal has a more progressive structure so that the larger businesses would pay higher rates than the smaller businesses do. One thing we tried to do in putting the proposal together is to keep the the rates for the smallest businesses the same, but put in place higher or suggest putting in place higher rates for the larger businesses. This is the structure that Richmond and Oakland have adopted.

It's worth pointing out that progressive structure for gross receipts taxes, is just per dollar total revenue for a business, isn't connected to profitability. So unlike a progressive income tax where richer people pay a higher tax rate or that's the idea behind the system, with the gross receipts taxes, just bigger businesses paying a higher rate, they may or may not be more profitable per dollar. So I do think it's important not to get sort of too out of whack of trying to charge the the bigger businesses too much more because then you can encourage those more sophisticated larger businesses to move because they have the wherewithal to do that or to expand to in a different location. But I think some progressivity is in line with what others are doing, if it makes sense. So anyway, we'll show you in a minute the scenario that I think we're proposing, the staff and I, and then also a scenario that would raise about seven times as much revenue.

That's Richmond collects about seven times as much revenue per dollar taxable sales as Hayward does, so that was sort of the genesis for the seven x proposal by just by comparing. So the next slide shows this is for some example categories. This is an entry grade category. Yeah.

I just wanna say we have handouts for you because we know this is small and maybe hard to see. For those online that this is in presentation that's online and uploaded, so you can look at it and zoom in on your laptop, but we did also put handouts.

Thank you. Yeah. So so lots of members here, and please, at any point, stop and then ask me questions. The whole point of this is to get you guys understanding what what we've done and look forward to to hear it.

Maybe through your presentation, you can thanks for this,

by the way. But can

you also maybe just share what the positive or adverse impacts of Richmond are raising there seven times? Because, I mean, in a lot of ways, they're sort of a comparable city to us when you look at kind of Oakland, you know, just in terms of population size and other things. So, I mean, is that working for them? Is that not because I know the recommendation is don't do that because it's gonna have some adverse impact. But what's your perspective?

We we haven't done any studies of the economic impact of leverage. We've done we met with the city finance department there and asked them. They haven't done any studies either. They didn't report any mass exodus of businesses, but they also haven't studied it. So we don't know what would have happened otherwise or even really what has happened since it has been studied.

I will say these things do take some time to happen. So a city will pay the tack or at least probably pay a higher tax for a while, but and it's when the opportunity to expand comes along, when the opportunity to move to a neighboring jurisdiction comes along, when a lease or whatever. So you you you may see these changes take place somewhat slowly, so you might not see something immediately even if there was gonna be a big impact. But that said, the city of Richmond, person we spoke with didn't know of any specific differences that had left. There wasn't any dire consequence that they were either.

So it's and a little uncertain, I guess, it's not how I would say of the Richmond's men. Oakland also raised their business license tax not by it it collects a lot of money more than Richmond. They had a big increase in 2022, but they already collected a lot of money from business license tax. And I don't think of Oakland's study to tie it but the story there is the same. They're not a mass exodus, but they're but we don't know for sure.

Then can I just add a also, you know, it's hard to measure who's not coming to the city because of this? Right? Like, there are decision a lot of decisions that a business makes in terms of where they locate, and it's hard to track whether or they're not going somewhere because of this. So just another thing that makes it hard to pinpoint.

And then I know that one says seven times. Is the matching neighbors, is that, like, roughly two or three times? It's about three and a half 3.4

times as much revenue as what you're collecting now is what we would collect or what we anticipate you to collect under the the green line here is the matching the first scenario.

Can you just go back one side? It's about $8,800,000 of additional revenue.

That's 3.4. Thank

you. So I won't go through all of these. Again, this isn't even this is not every rate category or every type of business, but it's it's an example of some of the businesses that I think are of interest. And so you can see that the yellow line is is what is being collected on these example businesses today. So for example, the first column is a large retailer with about 200 employees and 400,000,000 in revenue.

So think about like a Costco or something like that. They're currently paying about a $107,000. Under the proposal, they would go the the match neighbors proposal, they go up to almost $200,000 and then under the seven x proposal to over $900,000. And then you can see how that compares to the comparable city. So that if you did seven x proposal, for example, it would still be lower than Richmond, roughly similar to Oakland, then less than everyone else is sort of how to read this table.

The next two small restaurant or and read and sorry, small retail and restaurant, those are your smaller businesses. You can see right now, small retailer would is paying about $400 per year. Would go up a little bit to $4.50. So so a small change or 1,500 if you adopted the seven x proposal. One category to, I think, take a look at is if you go all the way over to the third from the right is the residential landlords.

So right now, a 50 unit building would pay about $566 per year under the proposal that would go up to about 3,400. Still a lot less, you can see at the bottom, than what Berkeley, Oakland, Richmond are charging. A couple of the principles that the staff and I discussed and are embedded in this proposal. One, to try to keep the rates on the smaller businesses low or the same. And two, to try to raise rates on the sectors that are less mobile.

So landlords is a good example. No one wants housing to be more expensive, but the landlords also can't pick up their apartment buildings and move them to a neighboring jurisdiction. And that's why a lot of other cities charge much higher rates even than what's embedded in the proposed of landlords, commercial and residential, because those are the kinds of businesses that that can't be. That same applies to things like retail, actually. Retailers want to be near their customers, and so a restaurant in downtown here isn't just gonna move to another city if its customers are here, and no one wants to hurt any business, especially not in small retail, but it is one of the sectors that business mobile.

So again, this proposal envisions a higher rate for certain retail for larger businesses, relatively modest increase for small. So maybe I should just stop there. Are there questions about how to read this or what the proposal would involve or any of the specific rates?

There's a lot more detail on each each of the two. So it's up to you. You wanna ask a question now

or What's up to question section? Because I have nothing

to I think yeah. We're on. There's only a few

more slides to the question. So why

don't you want us to get through the

next couple slides? For you.

No. I just wanted to know on the manufacturing and other dealership. I mean, large contractor and manufacturer, can you kinda just quickly explain your rationale there? Because those look like pretty significant jumps too. Is that sort of the same thing? Like, they're stationary. They're not gonna move their customers around.

Yes and no. So on the contractors and a good question. The contractors' revenue is a function of the economic climate in the city. Right? They they they go where the business is. And even if you're an out of pay work contractor, you're doing a project in Hayward, you pay business license tax. So if there's demand for services of contractors, they're gonna pay. They can't they can't leave or avoid the tax just by moving their, you know, headquarters operation to another city. So that's a relatively, you know, I'll say, good place to to raise a little extra revenue because they're not as big. Manufacturing is a bit different.

Manufacturing competes typically globally or statewide in a region outside favor. Right? They're selling their products beyond city limits. So you do wanna be careful about raising the taxes on manufacturers too much. However, the rate for manufacturers was so low, a $133 a year on a $30,000,000 business in this example.

So, I mean, really, sort of a trivial amount. So even going up to what we're proposing here, I guess, $700, still a relatively modest amount of tax. In my opinion, not enough to encourage business with 30,000,000 in revenue to try to relocate. And even if they did, there's not a place nearby to go to save a lot of money. So the proposal involves some increase there because we're trying to get more money and then everyone has to pay a little bit, but not a lot more. And I don't think enough to really distort a location decision. Again, the percent increase looks big. The dollar increase isn't very big. I guess it's how to think about it.

Can we keep telling you? Yeah. That's good.

Goodness. So the next slide is the the this is the specifics of the rate categories, and you can see the way this works is that it shows the the dollars per thousand of revenue. So the first row is retail sales and if you go over to tax rates by bracket, it says if you're a business being between 0 and $5,000,000 a year, you pay $0.30 per dollar of revenue. And then as you get bigger, if you had 25,000,000 more revenue, you pay 50¢ per thousand dollars of revenue on all your revenue over $25,000,000. So this is just a different way of presenting the information on the previous slide.

This is a list of rate categories, but every business wouldn't fit into one and when when the ordinance is written, right and such that every business would be one of these categories. The other details here to quickly look at are the minimum tax amount of $60. So every business would pay at least $60, which is an increase from some of the categories that were smaller, maybe 15 or $20, but still dollar amounts that are relatively small. And then there's a payroll tax alternative. So if you're a company with no revenue, you're the back office function of another business, you don't have any revenue, we still want you to pay your fair share, and so you pay based on your payroll even if you don't have sales in New York.

So again, I'm happy to come back to this. The next slide shows the same table, but for the 7x revenues, you can see on all the rates that are embedded here are with raised $6,000,000, so about seven times more than being collected right now. This proposal, I think, particularly for the the large businesses with highest increases, does result in a higher risk of some of these businesses reconsidering their choice to be in Hayward, at least more so than the than the initial proposal that match your neighbor's movement.

Excellent. This is just for me. You know, we talked a lot about this. This isn't just my recommendation, but listening to our consultants and our finance and economic development folks and and looked at this carefully as think we're staffs recommending the match, the neighborhood scenario. Of course, there's some questions we wanna hear from you about, but I think there is we believe there is risk that if we go too high and we get closer to that seven times that we, like, felt we would have a hard time attracting new businesses or jeopardize kinda longer term with when a business's leases up.

They might start looking outside of it where then we could see some distortional kind of impacts. And I know that a big part of what we want is long term economic development and business robust business sector. So I think our recommendation is to to move forward with something similar to the match neighborhood scenario, not risk kind of undermining the the economic sector. But we have some specific oh, wait. We're gonna do polling and then specific question. Is that okay? Or do you wanna

No. I'll wait for this. Wait for that. Okay.

So so just hold that. We can come back to the recommendation, and then Chuck's wants we do wanna poll. So you wanna talk a little bit more, and then we'll have We have a question.

So while we've been working with Blue Sky on the modernization of the measure, we've been working with our public our public opinion research for FM three to help us prepare to survey a representative sample of likely voters in November to see how they would feel about this modernization measure. And what we'll be doing in that poll is testing this ballot question. See, we're still gotta fill in the numbers about the low range and the high range, how much the tax would bring in each year. But that's that's the point of the survey to see where the see where voters land on that. The way the poll is structured, we will test that question four different times.

At the beginning, right at the top, we'll test it and and see where voters are. Then we'll provide the the interviewers are doing the survey will provide a brief explanation of what a business license tax is and how it's changing. Just get a little

bit more informed opinion of what

we're doing. We'll ask the question again and see how it comes back. And then the last two times we'll test the question is after a battery of arguments that might be presented if there were campaigns run-in favor of and or against the measure. So we'll test it after they hear a battery of positive messages and then test it again after a battery of opposing messages and see where we land. And so that's sort of the the nature of it.

We we expect to be able to be done with this in March before the March, be back back to you well before the March results. So, you know, that that's the story here. I, you know, I have some information on how we've done on on pass back. I think it's the last since 2014, we've had five of them. Our median median yes vote on those five measures has been 71%.

So as you think about this decision, you know, you're in a community where voters have strongly supported their their city government when it comes to budgetary finance measures. True. The last thing I'll say about the poll, you'll see that, you know, we were thinking about a 400 or 600 size sample. One of the things that the 600 sample would allow us to do more readily would be if we wanted to test two different ballot measures with, say, the the 3.4 x version and the seven times measure. We would do that by doing a split sample.

We would ask 300 of the folks surveyed the first question and then the other 300, and then you'd be be able to test test the.

That's what I have on that. Thank you for any questions.

Do you have any questions at the end, Mayor? Or

No. No. No. It is or or is there another slide to We have

to choose Slide one, I just saw the timeline. Okay.

This is yeah. I I saw it. Yeah. Go ahead and do the two last slides.

Okay. Depending on the feedback, obviously, from today, we our hope would be to conduct the poll starting next week so we can get some polling results as quickly as possible. And then hold additional we've already talked to the chamber on a pretty I think there were how many people? Like 40? Yeah. There's about

three people there, but we've two more. Yeah. Yeah.

We had about 40 businesses that attended an initial discussion about this. We showed them some of the graphs. We didn't have all the proposals yet because we weren't ready, but we showed the graph of where we stand, where it went into other cities. So we would do some additional outreach in March with business label partners, and then targeting in a April 7 council work session to come back with the polling, come back with the results of that additional outreach and come back to you hopefully getting more concrete direction to come back with a you know, I think our our we we are recommending that we try to put this on a unless the polling goes back terrible, which we don't anticipate, but unless that changes something dramatically, I think we would recommend coming back to you, pull the work session, finalize the rates, and then we if end the ordinance, the draft ordinance in the late April, early May come to you to put something out. One of the reasons we were doing it, you could wait all the way until June to do this, but given where we are with our labor partners, I think really wanting to be proactive about showing that we're taking good action to make structural changes to the budget that aren't just on the cost side, and and so we're really focusing on the roads, trying to bring it back as soon as we can for our council recommendations or direction to put it on the ballot in November.

And then the last slide is really just some questions. Did you agree with our recommendation? Are there specific sectors that should pay higher or lower tax rates? The question of residential landlords, should we continue to right now, this the numbers that are in here assume that we do tax all landlords, including those that have one to three units. So that would be a change from our current mortgage, which exempts them. So should we continue to exempt them? We have the numbers here. Well, how much that is? I think it's about 300,000 or 350,000. 326,000 for the matched neighbor scenario.

And then any feedback any other feedback you have on the polling, the polling language, but we'd like to get some direction on the polling. And then any other information you have about where what you're thinking so that we can start taking those next steps.

When you talked to the chamber, there were there small, medium, large businesses in that meeting? Yeah.

It was mostly I would say that leaning towards smaller Okay. In restaurants. But there were a couple of larger, like, I'm just a little big group there. There were a couple of larger, and I think there are different considerations to both those.

Can can you explain just in very an elevator speech? The difference between the the difference between match neighbors and seven times?

Seven times just in its higher tax rates and raises more than? No.

It's not can you just is it plus progressive or is it

The seven x proposal is is more progressive in that. It has higher rates on the larger businesses, but it also has higher rates on the smaller businesses. So it's not dramatically more progressive. It's mostly just the rates. Yeah.

Even though they might structure it with the higher rates on those higher businesses, it's still gonna be a lot more than what they're paying now or what we're proposing what what we're proposing in the match neighbors.

The reason why I asked is because, you know, there's, you know, nationally or even here state state level, there's another conversation that's sort of ongoing that's happening right now. And that's, you know, you know, tax billionaires conversation. And and I guess the, you know, when I saw this, you know, it'll be interesting to see how those two things are gonna, you know, how they might sort of conflate with each other. You know, are it will this be considered sort of Hayward's tax, you know, taxing the rich, you know, measure. And and and so, you know, I just and depending on how that plays out in the media, you know, I mean, that's what people are gonna see.

And I was just I was just curious if we Yeah. Can speak to that. I mean,

we we have an opportunity to simply, you know, to to kinda execute just a public a public information campaign, not a political campaign, not something that's intended to argue in favor of one or the other to explain what the business tech business license tax does today and and why we wanna modernize it. Because another way to look at it today is right now, we're not asking businesses to pay their share of the cost of city government through this through this, you know, mode of of taxing because it's it's really, really low. And so we're we are trying to address

that in either of the measures.

So just to kinda respond to this, you know, does council agree staff or committee on me? I would, you know, I think that the match neighbors is is is appropriate. You know, are there specific sectors that should be higher than lowers? You know, I my my my gut right now tells me, you know, I just wanna be as as equal as possible when it comes to this. You know, I

know I understand this can

be some, you know, some deviation and some but it's, you know, I did just like what was said earlier, I mean, I'd like to see everybody feel something and and that we can,

you know,

and that everyone feels that they're contributing to this. But, you know, I don't wanna target certain, you know, certain company or certain certain businesses, larger businesses and really spike them. I just you know, as long as it's just, you know, I'm not even gonna say equitable because that's not what equity means. But I I as long as it's, you know, you know, as equal as possible to get to what we need to to achieve. That's that's what my gut tells me right now. You know, should landlords with one to three units continue to be exempt? Yeah. I think so. I mean, there there's still small small units. You know, I think some of the bigger units perhaps should, you know well, maybe that's just answers my other question.

Right? I guess we are sort of targeting them. But but, you know, when it comes to residential landlords, you know, I think one to three should be, you know, an exam. But, you know, in terms of polling language, as long as the polling language is clear, you know, I looked at the language here. I mean, it just sounds really wonky ish.

Yeah. I mean, I do have to But

Part part of what we're

dealing with in the state of California is there's

Yeah.

So I

has to go in there. Yeah. I know. And, you know

What is the part that you think is wonky? Just so

Well, you know Long clause in the beginning,

Yeah. Shall measure update his business license tax to create a progressive structure that imposes the highest rates on the highest grossing bid. I mean, it's Yes. Don't worry. Yeah.

It just I mean, it just as long as it's clear and, you know, and and we know what we're doing. And then, yeah, the the the tax rate, you know, I think the the, you know, certainly don't wanna drive away businesses. And we, you know, we sit and we certainly, you know, we just passed a, you know, a a Hayward friendly, you know, business friendly, you know, plan. And so, you know, I just wanna match this as closely to that. So it looks like we're supporting them.

Right? And and the other the other thing too just and, you know, I'll just sort of say this out loud. You know, as we did do this, you know, we should have a very serious conversation here as a council and a staff as to what are we you know, what is it that businesses are gonna benefit by raising taxes? Right? And and, you know, we should take a very hard look at practices and processes right now and how can we, you know, either promise them or change processes and functions now so that we can, you know, have something very concrete as to providing value for them.

You know, I mean, I get it. We haven't changed it since 1978, you know, for the record, you know, eight years old the last time. But, you know, I think right now, you know, people wanna see value and, you know, and and that's something that I've heard. I, know, I think the council's heard that over the years when we talk about, you know, turning the business for any anything. Right? What are we, you know, what are we gonna get in return? So he was I I just want us to be mindful of that. And, you know, this isn't just taxing to tax to to raise money. We wanna provide value, and and what is it that we're delivering?

Yeah. Councilwaresaker. Thank you. Thank you for the work that's gone into this. I'm really excited that we're discussing this topic, I am sure our labor partners are grateful that the city's been moving on this as quickly as it has been, so I wanna keep that momentum going. Can we let's see. Can we go to the match neighbor scenario on the slides? Thanks. Okay. Great. Forward.

One fourth.

You. Okay. So just some of so I I like the overall framework of this. I'm I'm more so leaning towards the match neighbor scenario. But I wanna push us to make this juice really work the squeeze. And that doesn't necessarily mean backing up the rates as high as they can go. But what I mean by that is right now I'm seeing three brackets, zero to five, five to twenty five, 25 plus. Do we want an additional bracket for fifteen to twenty five in the middle and something above a 100,000,000, for example, that would exist, or would that be ill advised? Right. Find a way to get more revenue.

With the rates for businesses is just that you can end up with one big in B Mobile, although in some cases, it depends on what the business is starting, it might You not also can end up with a circumstance where you're very reliant on just a tiny handful of taxpayers. When we did the work for Open, they're they had very high rates on very large businesses, and we spent a lot of time just looking at what those actual businesses were and making sure that if, you know, if one business left, it wasn't a a 10% cut in the revenues. Yeah. The way this one's laid out, there there is no business line. I don't think that accounts for more than three or 4% of the revenue. So, you know, I wouldn't wanna go a lot past that, but I think that's the risk of very high rates on very large Okay.

So let's drop the 100,000,000 plus, but why not introduce 15 to 25,000,000 bracket here just to add an additional opportunity for us to drive a bit more revenue from this scenario?

Again, it's there's no reason you can't do that, and you could have, you know, a higher rates on, you know, above 15,000,000, I guess, is what you're suggesting. 15 to 15 and

25. Correct. Yeah. Okay. I mean, if there's if there's not an extreme risk it, to and it wouldn't affect too many businesses, I would be curious to see how that might change the numbers a bit there. You know, as we approach this scenario or we put it on the ballot, I am curious that, I guess, the direction I wanna give to Chuck specifically is I would wanna do a split poll because if we can take this to the voters for a seven x potential, but not necessarily levy that. The same way with the TOT, we did 14%, but we held it at 8% for a very long time. I wouldn't wanna limit our ability in a very dynamic budget situation and budget crisis to say, okay. Maybe we give ourselves the authority to go seven x because we have the wind behind our backs right now, and everybody wants to resolve this budget deficit. But we don't necessarily rush to implement seven x across everything, but that gives

us the city the tools to

be able to, like, start to tweak and say, you know, okay. We're finding that revenue is down in this sector or this discouraging business in this sector. So maybe we decrease here. We increase here. But I just wanna wanna go through all this effort just to limit ourselves and not generate a bunch of revenue that we I mean, we're talking about a difference between 8,000,000 to 21,000,000. And if really it's just a matter of how we ask the voters to do this that prevents us from realizing that gap between eight to 21, I just don't wanna limit ourselves if we're gonna go through all the effort to to do this. I I I guess it just I don't want us to be afraid of pursuing the seven x scenario. It doesn't mean we have to do the seven x scenario the same way we did with with the DOT. Does that does that make sense?

It does make sense. And I think I think the council would have to give us the direction

Yeah.

Data. Although I would say if you want to go that way, I think we should pull I did do think we need to do the split sample thing. Yeah. May you'd wanna know how you pulled it this seven times and whether or not that pulled differently. So I I if you think that's how the council might wanna go, then I would suggest doing a split sample. Yeah. So I guess

I encourage my council colleagues to think about if we wanna do a split sample because the yeah. I just we did so well with k one. I don't wanna limit our authority right off the bat. Like, if we're gonna do this, we're gonna update this for the first time in fifty years. Like, let's give ourselves the authority to really get creative with our budget.

So just some food for thought. And then on the ballot question itself, I agree with the mayor that there's a little bit of wonkiness around the way it's written. I'm wondering if we wanna use language like restore library services as something to help motivate folks as well as add a line that says for the first time since 1978, so voters also understand that this is like doesn't happen very often and get them to say it feels a little bit less like, oh, this is a last ditch desperation thing, but more so modernization. Like, we're modernizing, I think, really plays a strong role here. That's what we're trying to do is we left money on the table for, like, half a century, and we're trying to get up to speed here.

I mean, like, my parents hadn't even met yet, but when this thing was first passed. Right? Like, that that's that's how long ago it's been. So I I like, I think we just got a a framing is going to be important here. While I'm all for progressive taxation of large businesses, the way it reads is a little too lefty in my opinion, where I just think we're here to modernize it, we're here to restore services and improve emergency response times, it's the first time we're doing this in like fifty years. Like that to me is just like, oh, okay, pretty reasonable. So that's my feedback there. On the question of, you know, taxing smaller landlords. So when I look at that's the the bottom right here. Oh, yeah.

You know the questions. Next one. Yeah. So on the question of tax when I look at property records, there's a lot of smaller trusts that are created as a result. We're trying to get around the the the tax related to four plus units. Unless you're a big apartment owner, you can make smaller trust with family members to buy one to three properties and avoid the the taxation. And so when you do the math of, let's say, 300 and sorry. I'm gonna have you jump back to match neighbors real quick. Okay. So 326,000 divided by 4,858 comes out to about $67 per landlord.

It's really not that much to ask. And when we talk to our housing staff, what they tell us is that the small landlords actually require the most staff time because they're not experts at compliance. And I just think if we're trying to support our staff and we, you know, reinforce our city services, the inexperienced landlords that are the large I mean, look at how many there are. 4,850 compared to 515. The majority of landlords that our staff are dealing with are the small mom and pops. And I think they should be paying into helping us provide the services that is sustained with housing provisions.

So I I'm not I'm not

here to say, like, go after all the landlords today. I'm just saying, like, they should be paying their fair share like everybody else, and I don't want there to be an incentive to take advantage of a loophole to avoid paying your fair share for the resources we provide at the city. So I just wanna be really clear on that. To me, it's just like the cost of compliance. And then for commercial rental, I'm wondering, like, in the same way we have a distinction between residential one to three to residential four plus, can we distinguish between, like, commercial rental occupied versus commercial rental vacant?

Because I, like, I would love to have a higher minimum tax rate, for example, for someone that's leaving their unit empty or that for, like, one and a half years eighteen months plus, for example. So is that, like, a realistic thing we could bake into our rewritten or a modernized business license tax? It's like maybe a little bit of a stick for commercial vacancies?

I mean, I think I would be it's maybe that's a legal question, but it's a different tax. It's a vacancy tax. Yeah. That's bit

Good for gross receipts tax. Yeah.

If they get, you're not paying nice receipts. Yeah. You could perhaps think about a minimum amount. Although, I don't know if you do that across. Maybe there's a minimum amount per square foot even if you're not making any money. Oh, okay. I guess that's something we can we can discuss.

Okay. Yeah. I mean, this is an opportunity to to to activate these spaces in this tax. So it's not just they're paying this this simple tax of being commercial rental, but they're you know, you get what I'm saying. We're we're pushing them to to activate their

yeah. Yeah. There I will say, city of Los Angeles considered, but I did not adopt as far as I recall. They hints attacks Oakland and San Francisco both have them. And I think San Francisco might have had to try to pull back a little bit on there Okay. In the current, like, downtown post COVID Yeah. Changes. So I do think it's worth looking at carefully

Okay. Discussing it. Okay.

And we it was on one of the revenue ideas we're not recommending. Yeah. I understand from Oakland, at least the finance director or finance revenue manager at the time was that was extremely administratively burdensome.

Got it.

So we're not recommending. Yeah. Where we feel like if you're gonna put something on the ballot, we'd rather you put this on the ballot. Yeah. It doesn't mean you can't think about that in

the future,

but we'll look at this question of a minimum. Okay. Maybe there's a way we can address it that way.

Great. And my last note here is is just on behalf of the smaller landlords, like, I I don't think the rate that they're in this current match neighbor scenario is lower than the larger player. I would wanna see that reversed. I'd wanna see us charging more for the larger players than the smaller players. So right now, it's $2.11 $2.11 for one to three unit holders, and then it's $2.00 8 for the larger players. I I think, you know, where I would be open to seeing specific rates go up is for the larger presidential unit players. So, like, that $2.00 8 to me could be higher or closer to what we're looking at for the data center, which is, like, $2.50. When I'm looking at the revenue amounts that you're showing here, where was

it? Sorry.

One second. Yeah.

When I was looking at the first page here, this comparison of neighboring jurisdictions for residential rental units, if you're saying that they're paying $3,400 a year in business license tax. I just wanna put that into perspective. That's if they own 50 units, that's probably one, if not one and a half units worth of rent that's going to the tax. And then you multiply that by the 50 units they own for the rest of the year. It's really not asking that much. So I just don't wanna I don't I don't wanna see a break to dice that number of four plus units up a bit more or create a category for, you know, 10 plus units. I don't know. But I just want that in perspective. Does that make sense? Yes.

Okay. So just to really quickly summarize my comments here. Interested in seeing the creation of potentially a fourth rack between 15 to 25,000,000 just to see if we can attract some more value there. Interested in exploring the split polling so that we can see if we can get more authority to leverage higher taxes if needed. I think that saved us the DOT tax. Wanting to update the ballot question language just to be a bit more even keeled and communicate reasoning into better modernization, restoration of services, first time since second seventy eight. And then, yeah, I think you heard all my comments from landlords. So think that that's different. Yeah. Josh, certainly I think you heard all my comments on landlords. Oh, yeah.

But just to if there's one of the specific questions, he would say don't exempt the one to three any further.

I would say don't exempt them. So I think we spend a lot of money in the stage trying to help them buy for that. And I I like my review of property records, I see a lot of small trusts formed to not never exceed that three cap. And I wanna disincentivize that kind of behavior so we can do a better job tracking.

All now. Thanks.

You're welcome. Thanks. Council member.

Yeah. Thanks for all this analysis. It's so interesting to look at, like, learning how long it's been since we've dated this tax. And I know when we went into this one,

it became clear that we were gonna have

a major deficit. I was really determined not to

do this on Texas since we just passed K-one.

And K-one was a flat tax. That was not an increase in tax. And, yes, it passed. And, yes, our measures haven't passed before, but everyone's going into terrible headwinds. Everyone's looking at bond measures in the school districts, like neighboring cities, you know, regional transportation taxes. And there's

a lot that's gonna hit people.

And so I am nervous about going too high. I mean, it sounds like it doesn't hurt to do the split sort of polling, right, to at least find out, you know, to that's where Syrah's point. But my gut right now is to go with the recommendation, the staff recommendation on the match neighbors. So we we aren't tracking people. We aren't creating a narrative. Like, maybe Deb said, and now they're gonna do it on, you know, the back like, they're gonna go extremely high on the backs of of our neighbors, given that we just did q one. And even though I think we know it's flat tax, people know that they just approved another tax measure, whatever that looks like.

But I

do I do think we owe it to our labor force. Everything we can reason for you, and so I am on board with us going forward with this with business tax, you know, to see what to see what it smells like. And then and then at what point in the point are we getting the sort of likely to pass given the the segment that we're heading into regionally?

The the the part of it there is just the questions we ask Okay. To try and gauge. I mean, I one of the questions we will ask is just our usual tracking questions about how people are feeling about living in Hayward and how they're feeling about how we're doing.

Okay.

So if we see a change in that, we'll know. Okay. There's there's ways to gauge. And

then to the vowel vowel language, you know, comments, I I mean,

it sounds like very similar to k one. It feels like it's a of k one. I would like

to see it maybe specifically address the benefit of business life tax to the city coffers and what that does. I I don't know how you add a line like that, but it's like, we haven't updated since 1978. We think to get in line with what businesses, you know, what the services they get from the city, whether that's road maintenance, public safety, you know, code enforcement, all of it. Like, that there's some connection to businesses in this so that people understand that it's not just a money grab, that we're actually trying to come back in line with what services the city provides. This is why that why this license the text might be, you know, might be helpful. Mhmm.

I let let me go back to

the question if that was everything. Exception. Yeah.

I just want to.

Okay. Yeah. So I I'm actually okay with landlords adding that in. You know, again, I mean, I

think to the point, you know,

we know a lot a lot of the code enforcement is going to these one to three landlords, and that's a city burden. And so I I think that we definitely need to be looking at that. I mean, it especially if it's kept, like, I think to George's point, you know, that is lower than the larger unit one. I think that needs to maybe be. In fact, did what what was the justification for the rate being a little bit higher than the four plus units?

It's basically the same rate. I think just in the average amount per unit, it ended up being Oh, okay. I mean, it's just, you know, a penny higher. Part of it is that most landlords are in that kind of medium category. Like, even if you own multiple buildings, you're paying based on, you know, a 12 unit building or a 30 unit building or whatever. So, again, you can see the structure is the same for all of them. $2 Yeah. For that. Million, and then it's $2.25. Lot of it might have to do with the brackets. There's, you know, 5,000,000 ends up being our pretty large landlords, and we sort of write different price.