Council Budget and Finance Committee - Regular Meeting

Okay. Thank you. Welcome, everyone. This is City of Hayward council budget and finance committee. Today is Wednesday, 04/16/2025. Time is 05:32. I'd to call this meeting to order. And, miss Mello, if you can please take roll. Of course.

Mayor Salinas? Present. Council member Bonilla Junior? Present. Council member of Kyra?

Present. Thank you. Next is public comment. This is reserved for anyone online or in the room that would like to make a public comment on something on the agenda. Not on the agenda. Is there anybody in the room

that would like to make

a public comment on the agenda? Not on the agenda. Seeing none, is there anybody online? Seeing none, thank you very much. I will move on to approval of the minutes.

I will move the minutes, and thank you for updating the minutes to include questions and answers. Good.

Moved by council member, Syrah. You're still Syrah. Right? And seconded by council member, Omiya. And if there are no objections, they will unanimously pass. Thank you very much. I'll move on to reports of action items. Item number two, this fiscal year twenty twenty six proposed budget discussion. It'll be an oral report, and I believe our interim finance director, Sherif Hetman. Hetman. Hetman. Hetman. My apologies.

Etman, how do bring it up?

Good evening. Good morning. I am Sherif, your attorney with Franklin Finance, and I have a short presentation for you all. Council members, you've always heard of these different items and different capacities done this. On the PowerPoint slide, and it's very easy to find.

We are introducing our projections to develop or to their awareness as we start to build budget for next year. So quickly, we can talk about some of the finance basics and best practices, current financial situation, projected revenue, and real events. And this is a presentation that I presented to exec team and, obviously, to doctor Alvarez. And this is the same presentation I'm lending to public and to anyone. So I believe this year, driving next slide.

So some of the finance terms, wanted to make sure that we're on the same page because sometimes these get confused as we interchange words or terminology as we move forward. And so I just wanna make sure that we're on the same page. And to make it, you know, very simple, obviously, when you talk about having a surplus, when I first came in, I've been here about four or five weeks, I think. I don't know. I've been here.

Yes. Four or five weeks.

I have to fix it. It's not showing the slide part.

Yeah.

So the the first thing I was I'm concerned with this general. So I'm I'm this the purpose for tonight's discussion and for balance of budget, we look at general fund. Enterprise funds obviously have a a different analysis to that. And so when we talk and council members as you're walking down the street, we're at $231,000,000 general fund agency, over $400,000,000 with enterprise. That is on our expense side. And, obviously, when your revenue exceeds your your expenses year over year, you have a surplus on that year. If you have if your expenses exceed your revenue, you have a deficit. Right? And so your reserves are actually the money's set actual cash in the bank. So you could have a surplus, but that's not necessarily your reserves.

They're two different banks. And sometimes we use those interchangeable. So let's use our surplus. Let's use our reserve. Actually, different things. And so the reserves with actual money set aside that you and there's there's a a ton of different reserves that you have in the bank. There are spendable reserves. There's not spendable reserves. There's council restricted reserves, all those different pieces. What I my biggest concern when we look for my analysis is on the spendable reserves.

What you could use tonight, what you can use tomorrow as opposed to things that are council restricted. And so those are what we'll talk about for different pieces. You then have your fund balance. Your fund balance is the leftover general fund from year to year, so that's your surplus that turns into a fund balance. Ideally, and we'll talk about it in a couple other slides, you want to come back at midyear after you close out the year, and you want to assign your unassigned fund balance.

So let's say your revenue exceeded your expenses by $1,000,000, and, really, you would come back the next year and say, counsel, we have $1,000,000 left over on surplus that's unassigned, and now we're asking you to assign it to something. So council then assigns that $1,000,000 to the homeless fund to pave the streets, to put it back in your reserves. Right? So then it becomes assigned. Right?

At any given time, you can then unassign that because it's under council discretion. It's not anything else that there's no federal restrictions or state restrictions. And then we talk about the use of reserves. Next slide. And so we talked about this last night and another night said we have a 20% a 20% reserve policy in which we strive to set aside 20% of the operating expenses.

So for next year, if we're expecting or projecting a $231,000,000 expense budget, ideally, you want to have $46,000,000 in the bank set aside. That's your 20 percent. As you all know, Hayward has not quite reached 20%. It's been maybe a 15, sometimes at 18, but it has never really got to 20 in the last probably ten years or so. But it's definitely a good target.

It's definitely best practice to strive to hit that 20%. And as you know, if you're a $400,000,000 organization, $230,000,000 general fund organization, $46,000,000 is not a ton of money in the big picture. However, that's a that's a healthy amount that represents about three. Currently, as we stand, we have $31,600,000 in reserves. And in the past, there's been a cup there's been discussions of, well, sometimes we say we have 40 twos. Sometimes we say we have 32. And the reason for that is because you have an amount called the non spendable. And so last year when you purchased the theater or when you took out a loan, that becomes non spendable, so you can't use that. So tonight, you can't spend $46,000,000 instead of $36,000,000 because that $10,000,000 is saved or reserved because you need to pay yourself back. You mean 31,000,000?

The 31,000,000. Okay. So the 31,000,000 that you have in spendable reserves tonight today, that's that represents 14% of your expense of your expense budget. So you're not quite at 20% policy. And the more that you head into our deficit plan, the less that percentage will be. Right? So we're heading in the wrong direction. We wanna go script and get to where we're increasing that from 14 to 16 to 18 or 20 moving forward. That 31,600,000.0 also represents 1.6 months of expenses. And best practices, you wanna have at least three months of expenses.

So keep that in mind as you move. Next slide. And so as we talked about so right off the bat, when you talk about pure $230,000,000 expense, general fund expense organization, best practices is you wanna make sure right off the bat, build in for your CIP. So CIP expenses on general fund for the CDP, where every year runs about two or three million dollars, right, right off the bat. And then you also want to include or budget for reserves to maintain that 20% reserves.

Some cities actually take the 20% reserve right off the bat, even before budgeting. Right? And so some of the best practice states that from a $230,000,000 expense organization, I already wanna take 3% and save that for CIP. That's my running rate. And then I wanna take $2.03, $4,000,000 right off the bat for the 20% reserve and then start budgeting. So your 230,000,000 expense budget really starts at 225 as an example. Right? You don't start at $2.30 because if you budget at $2.30, you're not gonna have enough money for your CIP or for your 20% every year. A couple organizations that I've worked on past, they the council takes the twenty percent first before they even start the budget process. And there's pros and cons to that.

Right? Because then it restricts those funds as you move forward. Obviously, one of the biggest pieces we talk about is also having robust fiscal impacts throughout the year. Not just saying, you know, the fiscal impact is $50,000. Well, is it in the budget? Is it out of the budget? Is it coming from reserves? And you're gonna see a change in fiscal impacts from me in the council reports to state the true fiscal impact moving forward. Another example is for fiscal impacts. Right now, we're in April. Fiscal impact would might be $10,000. That's for three months. Right? The true fiscal impact is gonna be $40,000 next year, so I wouldn't state both of those. So accounts accounts can see the true impact.

You're as you make your decisions moving forward. You obviously wanna adjust your five year plan as as needed. A five year plan really needs be a living document, living model that gets tweaked every quarter, every six months as opposed to just once a year. And then finance best practices, obviously, to try to maintain proper fund balances. And so the fund balances that you have are not just your spendable reserve.

You have a workers' comp fund balance. You have a legal fund balance. You have all these different pieces. And in the past, you've used those to balance the budget, and you wanna make sure that you keep up with your times and replenish those as. And so on the revenue side, Christina and I, along with the analysts and all of the directors and staff, we did our projections for next fiscal year. And where we where we've landed is that $218,000,000 in projected revenue. So we went through property tax. We went through sales tax. We went through the bonus TOT increase. We went through UUT, all the different lines, and all the different revenues.

And what the $218,000,000 represents is actually an $88,000,000 less projected revenue than this current year. And that $88,500,000.0 less that we're projecting, the biggest pieces I've listed here is in property tax property tax continues to increase because houses increase in value. So a million dollar house becomes a $1,100,000 house. That's $1,200,000 house. However, we're selling less houses than we usually do.

So they're still increasing in value. To make up a number, if we sold a 100 houses last year, we're projecting to actually sell 50 houses next year. So the property tax will increase from 74 to $76,000,000 as an example. But the real property sales tax, which is the transfer from one home to another, we're selling less houses. That's a reduction in $2,000,000. So it's kind of a wash if you look at it in the whole totality of property tax. Property tax and sales tax for the city of Hayward has been doing very well. In the last four or five years, it's been on a continual increase. The piece that we've talked about in the past is there is a $4,000,000 loss in ARPA. ARPA is gone.

It's in now. So this is the last year of the year that we're in for ARPA funding that represented $4,000,000. We are experiencing a $4,000,000 less in sales tax, and this is something that would be new for council to hear and for us to hear in that we have BART cars that were being assembled in Hayward. The BART cars were coming from New York, and they would come to Hayward and get assembled. As they were assembled and sold, if you will, to BART and put on the line, Hayward received that sales tax.

And that was a windfall for the last two or three years. That was a bump in your sales tax that kinda got absorbed and wasn't necessarily called out per se in the last couple years. But this is the last year that BART is receiving and building cards on the line. And so next year, your overall sales tax will decrease by 4,000,000 ongoing. So sales tax was still increasing, but that $4,000,000 bump over the last two years, that's going.

When we first when we first met, I think it was two or three weeks ago, our sales consultant said it was a $2,000,000 loss. We had a meeting literally the like, a week after, and they changed it all the way up to 4,000,000 based on their analysis. So it's a significant amount for sales tax moving forward. And then there was just a million dollars of the revenue. So that's the the net, if you will. Next slide. So as we talked about, we have we have a $218,000,000 projected revenue. On the expense side, we're actually looking at 231. And as you know, over 80%, I think it's 82% of our entire budget is salary and benefits because we provide services to the public, we provide services to the people, and that makes sense, obviously. And that one item one line item is the one that's gonna go up the highest.

That represents an $11,000,000 increase in salary and benefits. And there's a couple of things that are at play that make up that $11,000,000 increase. This is the first full year of the increased minimum traffic required. My understanding last year, we added nine full time positions to the fire department, and that was during the year. This is the first full year that you have them all in your minimum staffing.

It's also your first full year of the budgeted MOU staff commitments, whether it was an MOU or an equity adjustment or other adjustments made. And so all those, this is the first full year that you've seen that impact. And then, obviously, with that comes the CalPERS cost, your open liability and other adjustments also increased with that with those adjustments. Within that, doctor Alvarez had has already had conversations with chief Wilmer and the fire department who talked about reducing overtime in the fire department because they do have over $7,000,000 in projected overtime built into this assumption is the commitment from fire and the city to reduce overtime in the police department in half from 7,000,000 to 3 and a half. So in other words, if we kept the $7,000,000, the deficit would have been.

Right. So that's already built in. And so always been a question of what was the overtime for the entire city. The entire city is about $15,000,000 in total overtime. Obviously, your two biggest would be in your service, which is hiring police. So where's police's overtime represent? So police is part of the 11,500,000.0. So I believe police is 3 or $4,000,000 total.

That's right.

So is there a reduction reflected in here? Because subtracting 3,500,000.0 is what gives you 11.5. Yeah. But we're not seeing a reduction in police over time just yet.

Not yet. Yeah. Not yet. And that's where doctor Alvis is in discussion with police about having a fall revise. Yeah. Look at the small

That's part of their potential reassessment.

Correct. Okay. So we obviously take the 218 projected revenue and the 230 in projected expenses. That's your deficit. Right? And so the projected deficit right now is stands at about $12,200,000. 11 point 0.2. 2. Oh, 12.2.

I see.

11.2 was a salary. Oh, okay. So the net difference in net structural deficit is $12,200,000.

Got it.

As you know, council members, the original discussion, I think it was at 5,900,000.0. Mhmm. Was was projected there's some internal discussions that was going 8 or 9. Yeah. Right? And so where it stands now and after Christina and I and analysts as we conducted all the numbers, it basically stayed steady at 12. Got it. You can tweak it here, tweak it there, but it was landing right at twelve. And so at some point, we called it and said, okay. This is the number. Obviously, with any projection, as and I mentioned yesterday, this is a projection. It's as good as the paper it's on. Right? But the the deficit shouldn't be 15 or 16, shouldn't be five or six, and that's definitely not zero. Right?

So this is an an unbalanced budget. And the structural deficit took time to get here. Doctor Albers mentioned, you know, structural deficit is a structural change. Right? It has been growing over multiple years. We have these reserves. I'll go show you the tools that we've used to balance the budget. But then, obviously, your reserves can't support your construction. Like, it's when we have a finite amount of reserves moving forward. One of the things that doctor Hellwitz and I quickly talked about, think it was on our first day, was looking at having a fall ring bias because the budget is literally due now.

Start printing the budget books. So we need time to reanalyze and and look at what we're doing. And so doctor Alvarez has supported the idea of a fall revise while we come back in the fall. Previously, not following out in September or in October revise, just the fall come back and and see where we can start the course correct. And I've used the example in the picture of the ship. It's a big ship with multiple layers. Right? That takes takes time to turn the ship. And so in order to do that, we wanna come back in the fall, come back at mid year. So we're not waiting six months to first correct, if you will.

I think you heard pretty clear council correction yesterday in the

work session

that we're interested in.

Yeah. Absolutely. Next slide. And so one of the first things when I came as your director of finance was there was always the discussion of every year, Hayward was always in dire straits or Hayward loses money or Hayward's in trouble. But then every year, we figure it out. And every year, it's not so bad. Right? But I couldn't quite wrap grasp my head around that. And then I did some digging, I'll ask you to look back ten years and look back five years and discussion with with Christina and staff. It really is true. Every year, it seems to be difficult, and every year, Hayward kinda figures it out. And the reason why is because you have all these tools that you're able to use. You're able to use ARPA funds. You're able to go back and we're proposing a TOT. You're able to have the real property transfer tax, which wasn't always here and here.

Right? And some cities don't have that tool. You you ask the voters for an a half cent sales tax. You have a UUT increase. You have fund transfers, from your workers' comp fund or your legal fund that you can use and then put back as needed. And then you have, obviously, your reserves, and you have vacancy savings. Being a very large organization of 950 employees, you have 50 employees that are vacant that obviously millions of dollars at your disposal, if you will. So I'm coming in as your new, you know, as your interim director of finance, and I'm looking at levers to balance the budget. Right? So, basically, we've used them all.

Right? So I don't have any last minute thing where we can say, oh, let's turn up the vacancy statement, or let's dial up, you know, property tax, or let's use reserves. We basically use them all. And so this is the year where it's kind of come to fruition where we really need to look at the structure of the organization. And that's where I doctor Albers and I have talked. We had discussions with all of you on one on one. It's basically where the ship is headed, it needs to course correct. We can't afford all that we're doing.

And so we really need to have some discussions on it. Just a quick question on the vacancy savings part of it. So this projected debt sort of 12,200,000.0, is that assuming a change in practice where we're not just assuming the department has a base and that you're already assuming that any vacancy dollar being held by the

Yes. So to answer your question, please, yes, we put in a 5% vacancy rate Okay. Or attrition rate. Yeah. That's about $9,000,000.

Okay.

And and that's factored in. Okay. But I have to say a little bit in terms of my first finance meeting in. You were having a discussion about the vacancies and the vacancy for the salary savings week. And as I'm understanding and trying to to wrap my head around the practices being worked, how and we build it in the mid year budget savings of 3,500,000.0 salary savings. And as we were looking very deeply into all of that, I very quickly came to understand that those salary savings were already utilized multiple times to be able to keep intact operations. So you're taking personnel savings into operations, which is a it's not a good practice.

Mhmm.

And that created another opportunity to discuss, again, what is good public financing and good public management of public funds, taxpayers dollars. The the salary savings in the aggregate, Well, there's no wrongdoing, but each department did what they did to be able to make themselves home. But when you look at the aggregate, it's billions of dollars, and that belongs to the allocation of the savings belong to the elected officials. So that's that's a big change here. It's it's a structural change that goes into practices and policies, and that was a an awakening moment for, you know, newcomers that are coming in from the outside to understand what has been going on here and what we need to do some quick course corrections.

And so the vacancy rate that was built into this proposed budget is going to be a new learning experience for folks in Hayward to put the control measures so that we can realize the savings and be able to speak to good financing and good policy so that in the future, in better years, that you have the opportunity to do the allocations as one time funds because they make it, you know Yeah.

Okay.

So thank you for having a discussion that came out of your conversations.

You typically wanna use your vacancy savings. You're great. End of the year. Right? And so we run out of those levers because we're we've extended those. And so we wanna make sure we got, of course, correct to get back to that. So you can say, oh, we have vacancy savings. That means that we have a surplus.

Got it. Extra extra.

But we've been kind of banking on that and counting on it as we move forward. So Okay. Let me go next slide. So what are the recommendations? What are mitigation strategies? First thing going through this is SS staff went to doctor Alvarez and said, what's the what's the fancy word for slow down or stop or take a break or take a be there for a second? And so what we're calling for is a period of respite, period of rest, you know, period of no growth to really just have the ship slow down for a second as we turn the ship and and the pros and course for it. We're also recommending that we evaluate all programs, have department reviews. As we talked about last night, really redefining core services. Well, everything's a core service Central.

We're really putting a new definition on that. What's what really is essential for the city of Hayward? What are we duplicating in in some areas with the county or with the state or other places? And what's the core function of pay work as we move forward. I was seeing for staff, council, and community feedback as we move forward. And then not lost on all this. This is not just a reduction exercise. It's also opportunities for revenue enhancement and where we can increase our revenue moving forward. Although there's obviously not one magic bullet that can get you that $12,000,000. Yep.

And then very carefully, put down position management, current and vacant. And then you really do have to look at your positions. If it's 82 of your your budget, you really need to look at what what our staff level is, what our staff level is moving forward, what can you gain in savings through attrition and the pieces, and very purposely not saying, oh, we're gonna have layoffs or we're gonna have furloughs because that's not the way to manage this budget moving forward. So really the way to manage it moving forward, and as your finance director, I'm not gonna come to you and say we we need to save $5,000,000. That's not the approach. The approach really should be what programs are we providing? What are we doing? And then those obviously have dollar amounts attached to it. Then we have service levels and staffing attached to it. Make those decisions that way as opposed to a fiscal decision.

And so that and the bottom was basically the the commitment to have a June adoption, a fall revise as needed, the midyear, and the and the June adoption. The midyear is really your point where you take a time out and see where you finish from the year before, see if we have a surplus or a deficit. That's correct. And the fall revise. And all of these council, as you know, we can make these as big or as small as you want. Right? So a fall could be a two hour discussion. You make a couple corrections. You're good to go. Another year of fall could be a $5,000,000. Right? And so this depends on the year and depends on what we accomplished during that time.

Perfect. I'm a.

So as we enter the or growth, I also think be able to have conversations around our headcount is allocated, even that we don't wanna have. We did have a whole conversation in the past around being understaffed or us having the lowest library per capita like other cities in the region. Right? I would still want us to be able to have those kinds of conversations discussing what are our core services and how we allocate headcount towards that. So it's not to say that, you know, certain departments might might not be able to have more staff added, but not as a whole increase.

That's absolutely right. And that's why when the opportunities come about when through attrition, then we which will be a new practice here is to say, you know, moving assignments to fill those critical vacancies and to be able to you provide the services that are key priority to the council. Mhmm.

Next slide. And so some of the notes that we shared with the exec team and shared with staff is, you know, what's our shared message? Is the same message, you know, you stop accounts money on the street the same as you stop about how we're gonna stop. You know?

Because that never happens. Right? And

so what's our shared message? You know, obviously, serving our community is the priority. Everything's on the table. Right? We're looking we're lifting up every rock. And some rocks might take thirty minutes to look at. Other ones might take three years to look at when you put down the rock or make a change. Input from stakeholders is key. Obviously, my main priority is integrity and stewardship of our funds as we move forward, and really making sure we have a measured and thoughtful approach to all the the changes that need to happen. Change does take time.

This is gonna take multiple years to to get course correct, but you really wanna make sure that that that the ship is reaching the point where your deficit is actually decreased next year and then the following year, and you have a balance budget as you move forward. And then the priority based decisions that we talked about, and then you got away all positions and programs as you move forward. But it it's it's really making sure that this isn't business as usual anymore. You don't have the financial wherewithal to keep going. If the ship keeps moving, then your deficit will be $15,000,000 a midyear. $18,000,000 next year, it'll be 20. We definitely don't wanna get to that point because that becomes insurmountable at some point Yeah. As you move forward. So now is the time. I'm not I've mentioned this before, doctor Howard.

I'm not personally concerned per se because everything has a solution. You can have solutions to that. What what what I really wanna see is just making sure that we make measure and thoughtful approaches as we do things, and we're big enough that we can make those changes. But $12,000,000 is significant. It needs to be addressed. And I know that through time, if we can get through those. I think that's what I was.

Right. This is about sinking.

Yeah. That's a different It's a cruise ship.

It's not

That that's a different ship. That's a different name. It's Maybe terrorist. Okay. Yeah. No. I don't know. Before

before I ask counsel for questions, let me open up for public comment and see if there's anybody online now or anybody in the room that wants to make public comment. Seeing none, I'll close public comment, then I'll come to counsel for questions. And who want the who wants to start?

I guess so. Thank you so much for this.

This is really helpful, especially kind of just going through the office then. So that was really helpful. Okay. So we said that there's about a $12,000,000, you know, gap that we saw in our upcoming budget cycle. So I guess in some of the strategies that we looked at, you know so I'm just thinking of between now and then. But is the idea to, like, try to minimize that 12,000,000 before we get to July and there's an actual budget proposal? And if so, I guess, what is the approach to, you know, not come and ask for the 12? Because my concern is if we say, you know, we're gonna take 12 out of the reserve, and then we're gonna do a quality buyer.

I don't

even want that rewrite. Yes. And taking 12 out of the $30,000,000 reserve seen, like, the most prudent approach in some of the strategies that we were looking at, I think, are are great, but they just seem like a little bit more, like, long term rate. So I guess if we are saying a period of respite or no growth, I guess, what does that mean? When is it effective? When are we gonna get to those levels so that we have a sense that that 12,000,000 is heading direction that's more minimal than the 12,000,000 versus kind of what, you know, the the opposite.

Not to speak for doctor Alvarez, but part of the discussion that obviously happened, and we're in April now. And so we're looking at the safest. So you're turning the ship now as close as the swing. So when it's right now, there's a hiring review or hiring freeze, but

what what I call it,

basically, any new position of tomorrow or in May or in June, that gets reviewed. It gets reviewed against the funding stream. What is it serving as a public facing? You know, what's what's the the value behind the position? How long has it been vacant? All those differences. And then ultimately, it goes to

the doctor. Yes. Approval.

Also, it's not an automatic hiring. You know, just put in the requisition and we're hiring. Right? And then all funding's the same. Right? And so it might be fully funded by a grant, might not be fully funded by the all general fund, or it might be all general fund, but but we're facing that's absolutely important. Right? And so police officers are gonna get a different consideration than a a clerk downstairs for revenue as an example. Or a payroll clerk when folks need to get paid might have a little more weight than and then a different position. That's ultimately up to not only the directors, but then doctor office at the end of the day. So we do have natural attrition. And with that, there's a review process. And through that, you would anticipate savings. That is not just businesses. You don't much

So some of these measures are kinda being put into place now. We're not, like, waiting to see what we're prioritizing and what we're gonna do.

And then just to give you an idea, we're gonna be coming to you hopefully soon at the city council meeting with a transit occupancy task increase. I know this was discussed here earlier, and we want to take opportunity of these sporting events that are coming in in 2026. And so our the original recommendations would be has shifted from staff's perspective. Now we're looking at 14%, and that's coming to you in May or June. In May.

In May. And and that's one quick ability to to start making some course corrections. While we have a deferral, the biggest deferral, In my office, we're doing a hiring freeze for now, which is very painful. But it's the beginning because we need to probably and then there's other measures that we can do other than the fall revise that that need to be timed correctly. Mhmm.

Like like a spending rules. And there's many things that we could do just like you had levers to resolve for the budget. There's other ways to resolve for a structural deficit, but timing is so critical. Like, there is the discussion that ongoing discussion about the sale proceeds of the 02/30 lease, which is about $5,000,000. And my question that will be brought back to cancel is when would you like to apply that?

And there's a there's a policy that speaks that any sales proceeds for public properties need to go first to open and retirement. That all that needs to be revisited and and looked at. And do you use that $5,000,000 as an opportunity as a relief now or two years from now? When would you like the oxygen as you're underwater? The first minute or the or the the latter part of the third minute? It's a but that's so

graphic. I like it in the first minute.

But but those those are, you know, very intentional actions. And and our commitment, again, looking back at the practices is that he would over the years has figured out in a good economic times, we have extended ourselves. And then in bad economic times, we come we we retrieve. But this creates we're gonna we can.

I mean,

I also need to

say that, like, that any one time funds need to go back into the reserve period. Like, I mean, because even taking that, like, 5,000,000 and trying to do something with, you know, the 12,000,000 that we're trying figure out. It only seems like a one time band aid that really gets us nowhere. It's like, we have to be able to deal with the 12,000,000. And when you think about it, $12,000,000 gap on a $230,000,000 budget, that's not anything.

We we still have $12,000,000 sitting in overtime after a reduction. I know we're never gonna get rid of all overtime. That's not what I'm suggesting. But what I'm saying is that $12,000,000 in the grand scheme of things to look at ways of doing one time funding things to solve for a $12,000,000 issue, I think, is more incumbent on us to look at structurally how do we change the way that we fundamentally do business and prioritize what we're doing, you know, to be able to get to that savings. Because one of the questions that I also had is I appreciate the fire department reducing their overtime, but was that kind of a direct correlation of us last night saying we were willing to get rid of the Mihoo, which was, like, 1.3?

So, I mean yeah. So, I mean, I mean, I you know, that's why it's so important that we really kind of dive deep into these numbers because some of these conversations, can start to see how the circle becomes, you know, well rounded.

Yes. Absolutely. Thank you. And so the structural effects is gonna take years, but it involves policy, it involves practices, and it also involves a right sizing the organization through a program evaluation. Mhmm.

And so those are the three buckets that you a lot of conversations about, and it involves your participation in having clarifying your priorities so that we can formulate recommendations to be able to right size and and define what do we want to be. Because, you know, there's we Okay. The city of Hayward has done an amazing job to supplement and supplement county services. If that's the priority, then it's fine. Then what what it gives?

Because we did overextend ourselves a little bit. And the good news is that we understand it now, and we can do the work. And in year two, year three, I anticipate things will be better, not bad. We just need to plan to be prepared for the worst and, you know, hope for the best.

Yeah. Because then I was thinking about kind

of, like, the something just just real quick. I with your with the comment about the onetime funds, like, say, the the Caltrans partners. You know, back in, 2010, 2011, the the the policy of, applying Caltrans proceeds to OPEB, The reason why we did that was because our OPEB costs were just, I mean, skyrocketed. And they and we had to figure and and Caltrans properties just happened to fall I mean, you know, that whole you know, that just happened to happen. And we were very, you know, very lucky.

Don't wanna use that use that term. We were very lucky to make that agreement with the state. But the point was that the reason why counsel at that time set that policy was because OPEB was just you know? And so the just a quick follow-up. The question I was having right now was, what is our OPEB rate, and where are we in our in our paying the payment? And Yeah. I mean, I and and where does that sort of fall

in this? Yeah. Very good question, Mary. And one of things that I wanted to mention is that the last four years, we overpaid overpaid on our our Okay. Yeah. Yeah. Is commitment there. And so there's your regular cost is $3,000,000. And then your whole burden

is about 3.5, and then you'd have an additional contribution to pay for that liability proportion.

That's why we paid $3,000,000 above the PAYGO Good. For four years. I have recommended actually paying only one and a half instead of three because we're not doing for the 12. And so, basically, to your question, if we continued the commitment to move forward and overpay the pay as you go, the deficit would be 15. So I took a half as a as a measure. I felt I didn't want to take the entire thing out. Right? You know, counsel certainly could. So this could be a $10,000,000 or 11 and a half million dollar deficit instead of a 12 if you don't go above and beyond your pay bill. But that's very risky, and you definitely wanna do that. I didn't wanna do all months. Yeah. So if necessary, we we can. But definitely for the past four years, we've been paying about $3,000,000 above.

Why were we paying $3,000,000? To lower your unfunded loans than from the liability costs we're getting. Okay. And you you don't think that it's still prudent to do that? I mean, I guess, what's the rationale for the

Only because of the deficit so so high,

because you're at 12,000,000. That's what we believe. So Yeah. So the deficit kind of

I'm gonna absolutely go back.

Yeah. So is there, like, a plan that kind of documents all of that so that if we do make that decision, we make sure to go back.

Certainly talk about that. And that's where the following message comes in mid year. Oh, at mid year, things are better than

the thing. Let's put that in the cost back. Right.

But it's kinda like you're you're paying on your credit cards at home. Yeah. Sometimes it's tough to kinda get back to your minimum balance. Right? And you hope for a year or two, but the problem is we don't. It's all Sometimes. Well, even as early as Mars. These are million dollars you're coming to buy. Well,

there were years where even when times were tough, we were still making that payment. Yeah. And that's why we were able to get ourselves out from a

Like, all the things that we did for myself and for Christina and I and Regina when we were talking, this was the the hardest pain point was lowering that from three to one. Yeah. And that's certainly up to counsel to do so. That's our recommendation.

Yeah. I would add that we would every two years, we have an actuarial study done on our OPEB obligations. And because we've been making the the additional contributions every year, we've actually increased our implicit subsidy, which is like this other piece that goes into the actuarial. So we've been contributing a little bit more. So we've been biting at it a little bit heavier, right, in meeting those obligations.

So that's why when we were looking at it this time, we're like, okay. If we reduce by one and a half, we're not hitting it as hard as we thought we would be because we're still getting the implicit subsidy benefit from the PAYGO and the the additional contribution that we are doing even though we're not at the full contribution of the ADC. So it's it's not great. It's not something that I think that we looked at, wanted to do, but we did definitely consider the actuarial study and where we were hitting at making those contributions and what that impact would be in taking.

And then I just wanna take an opportunity to to clarify a little bit about the fire department over time. In the past, the practice was that the overtime was budgeted at $97,000, and they were coming in on an average of about $7.06. And so they would so so for this year, as we're trying to make some corrections and understand, we have been able to speak to chief of fire administration and say it's not $97,000 that will be in your budget. It's 3,500,000.0. And the additional 3.5 that has been the pattern, we looking at Mihoo as being a potential piece, and then also understanding what not what can we understand in terms of where the overtime is coming from.

So for the last three pay pay cycles or payroll cycles, we've been able to institute overtime codes. So now we know why is the overtime being generated. Is it because people are calling in sick? Is it an emergency response? What generates the overtime so that we can understand that what is the ability for us to better manage the public resource?

And that's going to require also a a small investment in bringing a an organizational assessment of the firefighters operation, which it's something that hasn't already been a similar assessment that was done with the police department. So we're gonna take a look at what's, how we operate in a fire department, and then we can have a better understanding of what's happening there. And we will budget correctly. We just need to understand how to get there quickly. So it's multiple steps.

And, you know, if anything, to that point, I think your your organizational hygiene to try to find a way to budget for those assessments, like, a rolling basis for all of your departments, right, just because it's always good to

I

mean, yeah, these things. Thank you so much for your time. Appreciate your transparency, and thanks for taking all this up for us and for your willingness to, you know, continue to partner to do the good work to help get this budget balance. Thank you. Yeah. Thanks.

Yeah. We just wanna echo my appreciation and gratitude. I know a lot of work went into this presentation, and you've managed to pack a lot in here. So major kudos to you and your entire finance team. I think we have to know what the numbers are so we can actually address them. I think we're going a long way in getting there. As far as the Caltrans properties, I'm of the opinion that I wanna hold off on. Like, I I want you know, obviously, auction now sounds good, but I know we're also dealing with some item closed session that I want us to be sensitive to. And so I'm not eager to immediately apply this just yet. I think this might end up being our auction mask for a situation like that.

Wanna clarify, we're not getting rid of Miyu. We're just pausing it to sort of align the message there. And as far as, like, shared message and notes go, something that I brought up last night is that I really see us getting ahead of recession. Like, we know and we're seeing and major institutions are projecting a recession. And I don't know if that language is helpful in this framework. I'm wondering, is there a reason why or would you prefer if we didn't use that language?

We were talking about this in as deputy director described this quote because we've talked. It's like, this is as good as it gets Mhmm. Today, right, compared to yesterday. Yeah. And so this is without increased tariffs. This is without no federal funding going away or CDBGX or a recession. And if you ask me in public to say, is the recession coming? I absolutely believe a recession is. Not if it's not only already here.

Yeah.

Right? And so this is as good as it gets. Yeah. I think only needs tougher as we move forward. So whatever language we use moving forward, I would certainly support that to say these are these are the best of times. So people are still buying houses. People are still buying Yeah. To the market. People are still going downtown. Yeah. At some point, consumer confidence is gonna go down. You're gonna see property tax and sales tax decrease. Yeah. Right? And so Okay. We're really making start making assumptions on that.

Okay. Yeah. Because the way I'm framing this, when I'm talking about ICS, the city being very responsible here, getting ahead of the recession. These decisions that we're making are difficult, but they would be significant. And so, yeah, I'm aligned with a lot of what's presented here, but that's kind what I'm leading with is we really have no choice unless we wanna be in a worse situation tomorrow. And, you know, the fact that we're I hope the fact that we're taking it seriously this early in terms of trust in the process. Just a question on overtime. So I'm appreciative of, you know, us really looking at these numbers. You're working with the police department. I know that the employees are entitled to their overtime, so forgive my ignorance around HR and and and contracts here.

But is it possible as management for us to say, you know, if this person has reached a certain level of overtime this year already, then other folks should be the ones put forward to get some so that there's not, like, let's say, specific actors that are monopolizing all the overtime, for example.

They are customer service depending on the work units Yeah. Type of work. There are control measures that you can put in place to manage overtime. So overtime, while it we're legally required to pay people for the hours that they work. Yeah. It's also true that we're also required to manage the overtime and how is how it is distributed. Yeah. That's the important piece. Yeah. So it depends on each work unit and there's language specific in what we use. Yeah. And then there's also other control measures that we could put in place, so we're gonna be looking at all of that this year.

Okay. Because I don't wanna apply imply that anyone's taking advantage of it, but I think good policy just helps keep good people honest. And and I just wanna make sure that we don't create a situation where folks can take advantage of it. And then I think I asked most of my questions throughout the presentation. So, yeah, again, really appreciate the work that went into this, and we're embarking on a multiyear process. But I think it's it's again, it's good that we're starting out.

Thank you. Yeah. I I share all the remarks. I have to say, I think this has been one of the clearest sort of budget present first first steps that I've seen. So thank you. Thank you. This is you know, it's good to have a a terms sheet. You know, that's good. So thank you for all that. I I think I share the the sentiments of of, you know, council members.

I know just a couple of things that stick out. Everything is on the table. I mean, we have to you know, as counsel, you know, we we have to you know, even last night as we were talking, there were some big ticket items put on the table. You know? And we're on one hand, we saw the the presentation, and on the other hand, we started talking about the dots. Right? And we had to you know? So we we have to check ourselves. And I think some time ago, you know, I I don't know who was in the group then. Well, when I was but I said we have to slow our roll.

Yeah. This this is part of it. And, you know, we have to if we're talking about everything on the table, we have to put everything on the table in series of offers. And and just the one thing that I and I've brought it up with, you know, for any I it's just I really wanna just I appreciate your your strategy and your sort of calibrating with OPEB. I just I just really wanna stay on top of that.

Mhmm. I know you won't let it get too gnarly, but, you know, I just I just remember that that is that was some traumatic experience of when I first got on the council. Yeah. OPEB was gonna drive this city down into the ground, and we, you know, and we were in a I mean, we were in deep, deep, deep recession, and and we were able to get ourselves out of that. And and it was a lot of work. It was a lot of work. And and so I'm glad we're making payments. I'm glad we're making more. It's good to see that we're actually making a lesser payment, but still still over. That's good.

So, you know, I can you know, my ears are ringing with some of my predecessors in the room, you know, about op ed, so that's why I bring this over. That's it. But I think I think the the the message is clear. You know? And I'll practice I'll practice this tonight when I'm in downtown. There you go. Whoever will listen to me.

That's why was always do a great job of thanking staff and the team. I wanna personally thank and make sure that's you know, I'm only as good as my team. I come with, I think, a lot of expertise, but not the Hayward way. Right? And so I'm only as good as the team that we have. And having deputy Crosby and Regina, assistant city manager, and our two analysts, Nick and Fran and Chrissy. They've literally put in hours and hours and hours of work and everything that you see. And I was thinking, you know, you could see the spreadsheet of all the things that we do and all the spreadsheets behind it and just thousands of roles. And our two analyst friend and make a little bit I don't know. I think all day, all they did today was look at

literally lines and lines and lines trying to get them reconciled.

I just wanna thank them for all the hard work that they've done because it's been baffling, if you will, you know, trying to get to reconcile. And you have it on a Excel spreadsheet is one thing, but having it in the system balance is a whole. I just really wanna thank the team for all the work. And Christina has been my left hand, right hand since I've been here, and, you know, we have discussions, like, six times a day, I think.

At least.

And so I truly appreciate all the work that she's done and the team has.

Well, you know, this is certainly you guys are the hardest working department in the city. Yeah. Yeah.

He says that And I say that in every committee. I say that. Okay.

Thank you. Any other questions? Comments? No? Don't worry. Alright. Thank you very much for that. I will move on to, review and approve the 2025 agenda planning calendar. I know I saw

a quick question ask.

Go ahead. So in May, we're looking at the annual review of city issued debt. I think we heard a lot of conversation and, you know, the unique proposal by director and Mary around how we might finance a lot of that was the a one funded. I think what I'd like I've always appreciated the presentations on the city issue that I find it very informative, but think contextualizing them with if we were to move forward with potential loan, what would debt servicing would like those kinds of loans to help finance some of those projects? That would be my request for that item.

Okay. Okay. Moving on to committee member and staff announcements. Hello? None? Ladies and gentlemen, thank you very much, everybody. Thank you very much. Appreciate it. Thank you.

Alright.

Bye. Thank you.