BOARD MEETING DATE: April 2, 2004
AGENDA NO. 28

Finance Committee

SYNOPSIS:

The Finance Committee met Friday, March 19, 2004 and discussed the issues detailed in the Committee report.

RECOMMENDED ACTION:

Receive and file this report.

Michael D. Antonovich, Chair
Finance Committee   

Attendance: Present were Committee members Michael Antonovich (via videoteleconference), William S. Craycraft, and Jane Carney. Absent was Committee member William Burke.

Discussion Items:

Forecasted FY 2004-05 Budget: Revenue & Expenditure Impacts/Options: Rick Pearce, Deputy Executive Officer/Chief Financial Officer, presented the AQMD’s Forecasted FY 2004-05 Budget projections. Projections indicate a $12.3 M shortfall of which $2.7 M is attributed to an increase in retirement costs for 2004-05 and $6.1 M from the prior year. Increased retirement costs are due primarily to the Ventura I and II decisions and changes in actuarial assumptions by the Retirement Association. Another key issue attributing to the shortfall is a $1.2 M reduction in forecasted revenues for 2004-05. There was a discussion of areas where costs reductions might be obtained. Staffing represents 78% of the AQMD’s budget. Cost Reduction efforts such as refinancing the Headquarters building, leasing of space, expanded use of the State of California Purchasing Card Program, continued privatization contracts, and $6.7 M in reductions in staffing and services/supplies/equipment have already been implemented. Long-term options to consider are: 1) Renegotiate labor contracts to implement work furloughs, restructure skill-based and rideshare programs, reduce employer pick up of employee retirement costs, share future medical and retirement increases with employees;

2) Implement/expand fee applicability; and 3) Restructure annual permit renewal/emission based fees. Short-term options to consider include: 1) Reduce newspaper advertisements; 2) Reduce new systems development; 3) Eliminate subscriptions services; 4) Eliminate student Intern Program; 5) Eliminate emergency response program; 6) Reduce overtime by 90%; 7) Short-term lay offs; 8) Reduce staffing; 9) Issue pension bonds; 10) Rule 301 proposals; and 11) Fee increases above CPI.

Jane Carney stated that although she would support some reductions to advertising in some of the smaller minority newspapers, advertising is a valuable public outreach tool and should be taken into consideration when reductions are made. Jane Carney also stated that she is not in support of staff reductions and would only support a reduction to the student intern program. Ms. Carney would be in support of the elimination of subscription services since information is now available on internet and the reduction of overtime. Also, with additional justification, she might support a fee increase above CPI. Ms. Carney recommended that staff consider what the rule making agenda will be.

William Craycraft requested additional information identifying cost savings and staff’s recommendation for each item. Mr. Craycraft stated that with comparable fee information from other districts he would be in support of a fee increase a little bit above CPI. Mr. Craycraft would not, however, be in support of a 10-20% increase.

Michael Antonovich requested cost savings information on items such as an unpaid work furlough or the elimination of food services provided for various committee meetings. Mr. Antonovich also stated that he did not want to see the student intern program eliminated entirely, but rather reduced perhaps 50%. Jane Carney and William Craycraft concurred.

Approve Preparation of Legal and Disclosure Documents Necessary to Permit AQMD to Participate in the County of San Bernardino Pension Obligation Bond Financing and Authorize the Executive Officer to Enter into Agreements with Bond Counsel, Disclosure Counsel, Financial Advisor and Legal Counsel:

Rick Pearce, informed the Committee that this item was referred to the Finance Committee by the Administrative Committee. The AQMD has an opportunity to participate in the County of San Bernardino Pension Obligation Bond financing and is seeking Board approval to move forward with recommended actions that will be presented to the Board on April 2. Rick Pearce explained the benefits and risks involved in participating and identified other potential actions for long-term stability and what would be required to achieve them. Mr. Pearce outlined factors to look at when considering pension debt. The purpose of the bonds is to cover the District’s unfunded liability in the retirement system.

William Craycraft requested that staff consider issuing bonds for $50 or $60 M rather than the $46.0 M recommended to assure that unfunded liabilities for future years are covered. Jane Carney concurred.

Michael Antonovich asked if there was a way to join another municipality for better rates. Mr. Antonovich asked if there were ways to pass the increased health insurance costs on to employees. For example, LA County charges a person a $10/month higher rate for health insurance if they’re a smoker.

Jane Carney stated that issues relating to shortfalls facing the retirement system need to be addressed now and not carried out for future employees/management to contend with.

The committee members requested that a brief presentation identifying the different scenarios regarding issuing pension bonds ($46 M vs. $50-$60M) be given to the full Board on April 2.

Other Business: None

Public Comment: None

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