City Council Sets Lower Bar for Financial Reserves Despite Objections

The La Cañada Flintridge City Council revised its general fund policy on Tuesday by agreeing, in a 3-2 vote, to set the goal of keeping reserves at 50% of operational revenues.
Councilmen Leonard Pieroni and Greg Brown were the dissenting voices, opposing any amount less than a previous 100% to 150% goal.
“I thought we should keep the reserve goal and target the same as it has been,” Pieroni said after the meeting. “It’s served the city well for a long time and helped us weather some tough times.”
During the meeting, Brown said in 2007 there was a council goal-setting session and the second-highest priority was to maintain reserves at no less than 150% of the operating budget.
“That got watered down to be currently 100 to 150%,” Brown said. “I think it’s a mistake to change the policy. … The reserves were there for a reason, like buying City Hall and doing improvements.”
Nonetheless, the council approved the revision, largely on the strength of the recommendation of a private municipal advisory firm LCF had contracted with for analysis. That firm had cited a Government Finance Officers Association recommendation of keeping no less than two months of general fund operating revenues.
The approval of the fund also includes three other components. An assigned economic stabilization reserve must be maintained at $1 million and the disaster relief reserve must have $1.5 million. An OPEB (other post-employment benefits not pensions) reserve must have $500,000.
Before 2008, the City Council established a policy of maintaining reserves at 100%-150% of the operating budget that existed then, according to a city statement.
During City Hall finance subcommittee meetings over the last couple of months, there was discussion of what an appropriate reserve level should be, said City Manager Mark Alexander. The subcommittee recommended that the City Council adopt a revised policy.
The city’s total general fund reserve balance, including all reserve categories, has fluctuated as the balance reached $18.1 million in the 2016 fiscal year and will be reduced to an estimated $11.6 million at the end of fiscal 2019, the statement said. The drop, officials said, can be almost entirely attributed to the purchase of the new City Hall and improvement costs.
LCF contracted with Fieldman, Rolapp & Associates for analysis that used a Government Finance Officers Association recommendation of keeping no less than two months of general fund operating revenues, which is the equivalent of 17% of operating budget revenues or expenditures. The firm recommended 50%.
Branden Kfoury, a senior associate with Fieldman, told the council that the 50% goal is equivalent to six months’ worth of expenses.
“If something catastrophic were to happen, that’s a pretty healthy cushion to have,” Kfoury said. “That’s the idea of a reserve, to give yourself comfort on a rainy day and have the flexibility and maintain stability. When it goes above that, it sort of brings up some good points from other council members about having an excess amount.”
Mayor Terry Walker said that she agreed with that idea, and the prospect of having a more nimble financial reserve.
“I like a reserve that’s built on fact rather than pie in the sky,” said Walker said. “I do think that a false high reserve harnesses the city [from] putting money back in the community.”
Additionally, the city passed an authorization to proceed with financing of the new City Hall and approval of a fund transfer for that purpose.
Council members approved a “hybrid financing model” for a 30-year term on the City Hall project. Staff members were authorized to apply to the California Infrastructure and Economic Development Bank for $4.915 million and a transfer of $1.43 million in general fund reserves was also approved for property acquisition.
The city purchased the Sport Chalet headquarters, to be used as the new City Hall, in a transaction that included the adjoining Montessori School property in February 2017.
The purchase, for $11.23 million, was completed with a $5.5 million deposit from general fund reserves, $150,000 in operating funds and a $5.58 million interest-free note provided from the sellers for a period of 30 months through August 2019, according to a statement.
LCF has been working to find long-term financing for the balance before the note expires and the financing of renovation costs, according to a statement.
In July 2018, the city started renovations to the building that will become the new City Hall. The total project cost is $18,290,100. The balance yet to be financed is $6,345,000 after offsets and credits.

TREEHOUSE ORDINANCE PASSES

A second reading of an ordinance to govern treehouses in the city was followed by the City Council’s approval of the measure, which will dictate that treehouses can’t surpass an area of 64 square feet and measure more than 8 feet from floor to the top of the structure, said Susan Koleda, director of community development. Additionally, the ceiling height can’t exceed 6 feet and the treehouse must comply with setbacks and height standards for residential-zone structures.

RULES FOR MOBILE BILLBOARDS

A first reading and introduction of an ordinance preventing mobile billboards in public rights-of-way was approved.
The revised ordinance, which resulted from discussion on Sept. 18, regulates vehicles that include a sign, device, board or anything else with a message.
The ordinance does not regulate messages on the vehicle that are in the form of a permanent decal or painting. The ordinance provides exemptions for vehicles parked in public rights-of-way or public parking lots for less than 30 minutes at a time or less than 60 minutes within a 24-hour period, officials said.
“Mobile billboards tend to have negative impacts upon communities,” said Alexander, the city manager. He listed their proliferation, unsightliness and other factors such as increased air pollutant emissions, parking infringement and motorist distraction.
Because of the state of California’s definitions, the ordinance didn’t regulate messaging such as a permanent decal or painting on the body of the vehicle, factors that were part of the original discussion.

PARKING FOR OVERSIZED VEHICLES

A first reading of an ordinance creating parking regulations for noncommercial, oversized vehicles on public streets is set to return in early December. Discussion on Tuesday focused on RV parking on Alminar Avenue.
The Public Works and Traffic Commission had a variety of recommendations, including allowing oversized vehicles on streets with a minimum width of 38 feet with parking on both sides.
“Clearly, this is an ongoing issue where a homeowner keeps using loopholes as a way of semi-storing his RV,” said resident Beth Lynch. “As neighbors, we don’t want to be policing our fellow neighbor, but we want people to obey regulations.”
Council member Brown asked if the council and staff could come up with an ordinance that sets a maximum number of days for oversized vehicles to park.
“That would address the real issue here, which is this abuse situation,” Brown said. “I’m trying to focus on people abusing the system rather than forcing bureaucracy on everyone else.”

SPENCE MEMORIAL OPTIONS DISCUSSED

The possibility of a memorial honoring former Mayor David A. Spence, who died in May 2017 at 80, was discussed. After listening to the council, Alexander said he would return at a later date with more information on several options. They include commemorating Spence with a community room, constructing a gazebo at Olberz Park or naming or renaming a park after him.

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