Agenda

FINANCE COMMITTEE AGENDA

Tuesday, June 12, 2018
8:30 AM
Executive Conference Room, Level Three
Brea Civic & Cultural Center, 1 Civic Center Circle, Brea, California

MEMBERS:
ALTERNATE:

Council Member Cecilia Hupp and Council Member Marty Simonoff
Mayor Glenn Parker

Materials related to an item on this agenda submitted to the Finance Committee after distribution of the agenda packet are available for public inspection in the third floor lobby of the Civic and Cultural Center at 1 Civic Center Circle, Brea, CA during normal business hours. Such documents may also be available on the City’s website subject to staff’s ability to post documents before the meeting.


CALL TO ORDER / ROLL CALL

	1.	Matters from the Audience

CONSENT

	2.	Approval of Minutes of May 29, 2018 Meeting

		Attachments
		05-29-19 FC Minutes

	3.	Fire/Rescue Utility Terrain Vehicle (UTV)

		Attachments
		UTV Quote

	4.	Adopt Resolution Appropriating Additional Funds for Lagos de Moreno Park Project

		Attachments
		Resolution

	5.	Approval of Fiscal Year 2018-19 Property Tax Rate to Fund the City's Paramedic Program

	6.	Approval of Fiscal Year 2018-19 Appropriations Limit

		Attachments
		Resolution and Exhibit A

	7.	Comprehensive Annual Financial Report for the City of Brea for Fiscal Year Ended June 30, 2017

		Attachments
		CAFR

DISCUSSION

	8.	Schedule Next Meeting: June 26, 2018

cc:	Mayor Pro Christine Marick Council Member Steven Vargas

Special Accommodations
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk’s Office at (714) 990-7757. Notification 48 hours prior to the meeting will enable City staff to make reasonable arrangements to ensure accessibility. (28 CFR 35.102.35.104 ADA Title II)


Finance Committee		2.
Meeting Date:	06/12/2018
FROM:	Bill Gallardo

Subject:
Approval of Minutes of May 29, 2018 Meeting

Attachments
05-29-19 FC Minutes


Finance Committee		3.
Meeting Date:	06/12/2018
FROM:	Bill Gallardo

Subject:
Fire/Rescue Utility Terrain Vehicle (UTV)
RECOMMENDATION
Approve the purchase of a Fire/Rescue Utility Terrain Vehicle for $31,251.
BACKGROUND/DISCUSSION
The Brea Fire Department received a generous donation from two Brea business partners, Bridge Energy and FlexFit, to procure a light, off highway, utility terrain vehicle (UTV). These vehicles are often times considered a recreational off highway vehicle and come in a large variety of styles, configurations and platforms. The end result, for our purposes, is a modified vehicle, housed at Fire Station No. 3, that will effectively help respond to off-road emergencies for a multitude of reasons, such as: · Off road medical emergencies · Fire pre-planning and reconnaissance · Fire fuel mitigation · Equipment hauling to off road training and emergency scenes · Heavy rescue operations · Patient packaging and hauling to waiting road ambulances · Large incident overhaul logistics Overall, our Fire Department personnel are responsible for 2,000+ acres of wildland/urban interface between the areas of Tonner, Carbon and Brea canyons. These areas are heavily used for industry and recreation alike, creating significant demand for life and property protection. Combined with our exhaustive training and performance standards, the tools at our disposal are often what it takes to not only mitigate an emergency faster, but to do so with least amount of risk to personnel. Regardless of location, terrain, or other obstacles, our desire is to respond to the need without delay. This vehicle would offer the advantages of a smaller, less expensive, more mobile and more versatile means of response, compared to our larger fire apparatus. As a result, the Brea Fire Department received a very generous donation of $17,000 from the above listed partners. With the specialty mission that these vehicles serve, it is imperative to seek specifications relevant to both the geography of the area and the exact needs of the department. There is opportunity to buy a stock vehicle and modify it ourselves, however, this would likely result in significant time delay and increased costs. It is the intent of the Brea Fire Department to implement this asset prior to the 2018 fire season and busy summer recreational months. It was deemed better suited to seek out one of the few companies who produced a prebuilt UTV for fire/rescue purposes. In doing so, there was one local company who met this need. They are a direct dealer for the base Can-Am platform allowing them to meet all warranty and factory repair needs through the life of the vehicle. Their repair facility is located in Orange, CA. Their patient transport system allows us to do so without reducing seating capacity and cargo space. They have a patented wheel and tire system to prevent flat tire scenarios during response. Lastly, their front rack system on the vehicle allows for more storage space and front end protection than other manufacturers in the price point. It is for these reasons that we would like ATV Corporation to serve as the sole provider for this vehicle. Seeking out three formal bids would likely result in an extended timeline and a non-local manufacturer unable to meet our mission specifics.
SUMMARY/FISCAL IMPACT
The quoted price for the UTV is $29,003.25 which includes all necessary modifications for fire/EMS/rescue purposes. The total cost including sales tax of $2,247.75 is $31,251.00. Donations of $17,000 have been recieved by the Fire Department, with an additional $14,251 recommended to be used from projected Fire Department budgeted savings this fiscal year.
RESPECTFULLY SUBMITTED
William Gallardo, City Manager Prepared by: Wolf Knabe

Attachments
UTV Quote


Finance Committee		4.
Meeting Date:	06/12/2018
FROM:	Bill Gallardo

Subject:

Resolution Appropriating Additional Funds for the Laurel Elementary Magnet School/Lagos de Moreno Park Upgrades, Project 7929

RECOMMENDATION

Adopt Resolution to appropriate an additional $480,000 from the Park Development Fund (Fund 250) for Project Construction Engineering and Administration.

BACKGROUND/DISCUSSION

On June 6, 2017, the City Council awarded a contract to Lucas Builders, Inc. (“Contractor”) in the amount of $1,799,000 and approved a 10% construction contingency of $180,000 for the Laurel Elementary Magnet School/Lagos De Moreno Park Upgrades, Project 7929 (“Project”). This Project will make upgrades to the school and playground by adding ADA access at three (3) separate locations, and install a new restroom, playground equipment, ball walls, benches, tables, and swings. In addition, a 30’ by 30’ shade structure will be constructed between the two playground locations along with numerous retaining walls to accommodate all the new amenities.

Construction of the Project started in July 2017, with an anticipated completion date of November 2017. However, during construction, the Contractor encountered an unforeseen condition with respect to the school’s sewer lateral that lead to a significant delay and additional costs to the Project. The unforeseen condition required the removal and replacement of this sewer lateral along with soil remediation work. This resulted in a mutually agreed upon Contract Change Order ("CCO") in the amount of $159,000 with 30 additional working days added to the Contract, extending the Contract completion date to January 2018. Staff is currently in the process of seeking reimbursement for the extra cost with the Brea-Olinda Unified School District ("BOUSD"), which also includes the construction engineering cost associated with this CCO in the amount of $41,000, bringing the total for this unforeseen change to $200,000. The majority of this cost is currently being covered by the construction contingency and remainder funds in the Project budget.

Additionally, due to performance and other Contract issues with the Contractor, the City issued a Notice of Default and Demand for Take-Over letter to the United States Fire Insurance Company ("Surety Company") and Contractor on March 28, 2018. Currently, City staff and consultants along with the Contractor’s Surety Company representative are working with the Contractor to cure the default and expedite the Project to its completion, which is now presently set for August 23, 2018 (weather permitting) within the Cure Default Baseline Schedule. The performance issues with the Contractor have resulted in extra efforts from staff and consultants resulting in an increase to the Construction Engineering (Materials Testing, Inspection, Construction Management, and Administration) costs, which are projected to come in over the original budget by $685,000 by late August 2018. However, since mid-January 2018, staff has been assessing Liquidated Damages ("LD's") at $1,000/calendar day to the Contractor pursuant to the Contract, which is currently estimated at $122,000 as of late May 2018. Unfortunately, the LD's do not cover the total cost/day for the Department of State Architect (DSA) required Construction Engineering, which is approximately $2,000/day. Should the Project completion date extend out to August 23, 2018, the LD's would reach an amount of approximately $206,000, which would offset a portion of the extra construction engineering costs. The net impact to the overall budget budget is $479,000 ($685,000 cost less $206,000 LDs).

Furthermore, staff is evaluating additional testing and inspection costs associated with the Contractor's performance (included in the $685,000 cost) that would be on top of the LD's charged to the Contractor, currently estimated at $22,000. This construction payment deduct would help off-set the increased cost to the Monument and Art Piece and Shade Structure (approx. $21,000). With the estimated LD's for an August 23, 2018 completion date and the added testing and inspection costs paid for by the Contractor, the total net increase to the Construction and Construction Engineering budget would be $478,000. Staff is requesting the City Council consider appropriating a total of $480,000 (rounded from $478,000) to the Project budget from the Park Development Fund (Fund 250). Any project funds not used would be returned to the Park Development Fund (Fund 250).

COMMITTEE RECOMMENDATION
The Parks, Recreation and Human Services Committee reviewed staff's recommendation at their June 4, 2018 meeting and recommended approval of an additional $575,000 to be appropriated from the Park Development Fund (Fund 250) for Project Construction Engineering and Administration. This amount included an additional contingency amount above the $480,000, if needed.

SUMMARY/FISCAL IMPACT

The total approved budget for the Project was $2,591,473 with funding coming from a combination of the BOUSD ($250,000) (10%), Fund 560, Valencia Median Improvement Program savings ($1,200,000) (46%) and Fund 250, Park Development Fund ($1,141,473) (44%). Staff is requesting the City Council consider an additional $480,000 from the Park Development Fund (Fund 250) to cover the cost of the additional construction engineering efforts less the LDs. This request does not include funding for the BOUSD CCO at this time. However, staff fully expects to receive BOUSD approval of the CCO.

Therefore, a Resolution appropriating the added funds from the Park Development Fund (Fund 250) to the Project is attached for City Council's consideration and approval (see Resolution). There is no General Fund impact from this action. The following table provides a breakdown of the approved budget with the requested additional funds:

Project Expenditure	Approved Budget	Requested Funds	Amended Budget Total
Design	$221,900	$0	$221,900
Construction Contract	$1,799,000	$0	$1,799,000
Contingency (10%)	$180,000	$0	$180,000
Shade Structure	$28,452	$3,608	$32,060
Playground	$162,295	$0	$162,295
Monument and Art Piece	$32,500	$17,500	$50,000
Subtotal	$2,424,147	$21,108	$2,445,255
Construction Engineering	$162,295	$685,000	$847,295
Deduct - Liquidated Damages		($206,000)	($206,000)
Deduct - Testing and Inspection		($22,000)	($22,000)
Remainder	$5,031		$5,031
Total Budget	$2,591,473	$478,108	$3,069,581

Note: Rounded to $480,000

RESPECTFULLY SUBMITTED

William Gallardo, City Manager
Prepared by: Steve Kooyman, P.E., City Engineer
Concurrence: Tony Olmos, P.E., Public Works Director

Attachments
Resolution


Finance Committee		5.
Meeting Date:	06/12/2018
FROM:	Bill Gallardo

Subject:

Approval of Fiscal Year 2018-19 Property Tax Rate to Fund the City's Paramedic Program

RECOMMENDATION

Approve resolution.

BACKGROUND/DISCUSSION

At the March 7, 1978, general municipal election, the qualified electors of the City, by and through the City Council, approved the levy of an annual property tax rate to fund the City’s Paramedic Program. This annual property tax was not to exceed $0.20 per $100 of assessed value (25% of market value) per year. Beginning in 1981, the County of Orange implemented a policy change concerning Assessed Value. The tax roll is now reported at “Full Taxable Value” rather than Assessed Value. This change resulted in a revised paramedic tax levy of $0.045 per $100 of Full Taxable Value. It did not, however, change the actual amount of taxes paid by the property owner.

State law prohibits the City Council from increasing the paramedic levy above the voter-authorized level. The rate of $0.045 is the maximum that can be levied, regardless of program costs, without a voter-approved increase. The passage of Proposition 218 by the voters in November 1996 had no impact on the City’s ability to levy the annual Paramedic Tax, as the tax was voter-approved in 1978. Prior to the beginning of each fiscal year, the City Council adopts a resolution approving the rate of tax upon taxable property within the City of Brea. The adoption of the proposed resolution enables the Orange County Auditor-Controller to apply the rate of taxation to the City of Brea’s property tax rolls, and ultimately enables the City to maintain the Paramedic Program.

Since its inception in 1979, the Brea Fire Services Department Paramedic Program has grown considerably from the days when the paramedics responded to calls in an old red van. Currently, the paramedics utilize a modern paramedic engine company configuration. The original program that began in Fiscal Year 1978-79 had a budget of $200,000 and was fully funded by revenues generated from the paramedic tax. While the actual tax rate has remained constant over the past 38 years, additional revenue has been generated from increases in the property values. Meanwhile, direct expenditures have increased as the program has been greatly enhanced, as outlined below, and as the City’s population and service demands have increased.

About the Paramedic Program
A “Paramedic Engine Company” is considered the most efficient method of Emergency Medical Service (EMS) delivery, and is currently the most common staffing configuration in operation locally and regionally. This configuration provides for Advanced Life Support capability within its fire fighting and emergency response resources without compromising either service. The City’s paramedic units, Brea Engine Company #1, Truck Company #2 and Engine Company #3, are complete units that respond to both fires and medical emergencies. In addition, resources necessary to provide functional support, such as extrication of patients and fire protection during traffic emergencies, are available at the scene with the paramedic unit.

The program started in Fiscal Year 1978-79 with seven certified paramedics. The Brea Fire Services Department currently carries a complement of 21 certified paramedics and one Emergency Medical Services Manager. This allocation level meets the staffing requirement of the Orange County EMS Agency while providing for uninterrupted deployment of paramedics during leave, training and emergency conditions. Just as the nature of emergencies has changed, so has the required paramedic skill level. Paramedics are being delegated greater responsibility in the field as emergency room medicine is continually being evaluated and streamlined. Paramedic staff all receive continuous in-service training on a myriad of topics, including: trauma medicine; air and blood-borne pathogens; environmental emergencies; pediatric medicine, including sudden infant death syndrome; swift water rescue and mass casualty management.

Field techniques have improved greatly since the program began with treatment advances in the areas of Adult and Pediatric Intubation (airway management requiring insertion of appliances into the trachea), cervical-spine treatments and neurological protection, improved treatment for burn victims and the AED (cardiac defibrillation) program, which is in service on all responding Brea units.

Paramedic Response History

Calendar Year

2013

2014

2015

2016

2017

Total Emergency Medical Calls ⁽¹⁾

3,391

3,608

4,052

4,218

4,265

Total Calls for Service from Fire Dept.
(Including false alarm responses)⁽¹⁾

4,308

4,777

5,364

5,413

5,373

Percent of Total

78.71%

75.52%

75.54%

77.92%

79.38%

⁽¹⁾ Data updated to include all call data reported from the Me tro Cities Fire Authority Metro Net Communications Report

SUMMARY/FISCAL IMPACT

Starting with FY 2018-19 Budget, the paramedic tax revenue will be accounted for in the new Paramedic Services Fund (Fund 174) separate from the City's General Fund. The new fund was established to account for revenues generated from the paramedic tax and other revenues as well as costs associated with the Brea Paramedic Program. This includes personnel costs for 21 full-time paramedic positions, one EMS Manager position and related costs to operate the program.

The proposed paramedic tax rate is $0.045 per $100 of Full Taxable Valuation. Based on an estimated Full Taxable Valuation (secured and unsecured value) of $9.952 billion, the estimated tax levy is $4.478 million. The total annual levy also includes a levy on supplemental, public utility and other property values that occur annually which is projected to bring the total levy to $4.898 million.

The former Brea Redevelopment Agency (RDA) which was established in 1971, impacts the flow of paramedic tax revenues to the City. Property owners within the RDA project area pay the same property rate as if they were outside the RDA project area (non-RDA area properties). Paramedic tax for properties outside the RDA project area are remitted to the County and flow directly back to the City. However, under state law, property tax revenue (including the Paramedic Tax) remitted by property owners within the Redevelopment Project Areas to the county was allocated annually first to the Redevelopment Agency.

In 2012, Redevelopment Agencies were dissolved and Successor Agencies were established to pay off the remaining obligations for the former redevelopment agencies. As in all California cities, Brea’s property taxes (including Paramedic Tax) remitted from properties in the project areas, are now allocated to Redevelopment Property Tax Trust Fund (RPTTF) and that portion needed to pay off the obligations for that fiscal year is forwarded to the Successor Agency. The remaining portion of the Paramedic Tax revenues allocated to the RPTTF are passed back to the City.

As the Successor Agency pays down the obligations of the former Redevelopment Agency, the Paramedic Tax revenues that were previously directed to the RDA and now the Successor Agency are slowly, but surely, coming back to the City for paramedic service sooner than they otherwise would have been. For FY 2018-19, it is estimated that 55% of paramedic tax revenues ($1.210 million) allocated to the RPTTF will be passed back to the City.

The following is a summary of the estimated levy; the amount to be allocated to the Successor Agency and the amount to be passed back to the City:

Property Description	Estimated Levy	Amount to Successor Agency	Amount to City	% to the City
Non-Redevelopment Area Properties	$2.699		$2.699	100%
Redvelopment Area Properties	$2.200	($0.990)	$1.210	55%
Totals	$4.899	($0.990)	$3.909

It is estimated the paramedic tax rate of $0.045 per $100 of Full Taxable Value will generate $3,909,000 in paramedic tax revenuesto the City of Brea in Fiscal Year 2018-19. The revenue collected will cover approximately 69.2% of the $5,652,556 of estimated program costs. The difference is to be funded from the City's General Fund in the amount of $1,388,416 and other revenues sources in the amount of $355,140. Other revenue sources include pass-thru revenue received for Advanced Life Support (ALS) Ambulance transport services as well as revenue received from the City of Fullerton for Fire Command Staff Sharing of the EMS Manager position. The City of Fullerton reimburses the City of Brea for 59% of the position.

RESPECTFULLY SUBMITTED

William Gallardo, City Manager
Prepared by: Alicia Brenner, Senior Management Analyst
Concurrence: Cindy Russell, Administrative Services Director


Finance Committee		6.
Meeting Date:	06/12/2018
FROM:	Bill Gallardo

Subject:
Approval of the Fiscal Year 2018-19 Appropriations Limit
RECOMMENDATION
Adopt the attached resolution approving the Fiscal Year 2018-19 Appropriations Limit.
BACKGROUND/DISCUSSION
In November 1979, the voters of the State of California approved Proposition 4, commonly known as the “Gann Initiative.” The Proposition created Article XIII B of the State Constitution placing various limits on the appropriations of state and local governments. The law requires the governing body of each local jurisdiction to establish annually by resolution, the Appropriations Limit for the upcoming year. In effect, the law requires that expenditures subject to the limit cannot exceed the prior year’s expenditures after adjusting for inflation and population changes. In June 1990, Proposition 111 was enacted which modified the formula to allow the Appropriations Limit to be more responsive to local growth issues. Prop. 111 allowed the City of Brea to modify its limit to take into consideration the change in the County or City population, whichever is greater. The Appropriations Limit applies to all taxes levied by and for a municipality. In addition, user fees are excluded from the formula. The Appropriations Limit also excludes the following activities: Successor Agency to the Brea Redevelopment Agency Funds, Enterprise Funds, certain Capital Improvement Funds, and funds received from special assessment districts. Brea’s appropriations that are “subject to the limit” have traditionally been much lower than required by Article XIII B. This year’s Appropriations Limit has been calculated to be $96,851,095. Revenues subject to the Appropriations Limit are $40,312,157 resulting in a favorable gap of $56,538,938.
SUMMARY/FISCAL IMPACT
There is no fiscal impact associated with establishing the Appropriations Limit.
RESPECTFULLY SUBMITTED
William Gallardo, City Manager Prepared by: Alicia Brenner, Senior Management Analyst Concurrence: Cindy Russell, Administrative Services Director

Attachments
Resolution and Exhibit A


Finance Committee		7.
Meeting Date:	06/12/2018
FROM:	Bill Gallardo

Subject:
Comprehensive Annual Financial Report for the City of Brea for Fiscal Year Ended June 30, 2017
RECOMMENDATION
Receive and file the City's Comprehensive Annual Financial Report (CAFR) for the Fiscal Year ended June 30, 2017, which includes the independent auditor's unmodified opinion.
BACKGROUND/DISCUSSION
The City's independent auditor, Vavrinek, Trine, Day & Co., LLP (VTD), has completed its audit of the City's financial statements for Fiscal Year ended June 30, 2017. VTD has issued an unmodified opinion on the City's CAFR, which means the City's financial statements are free of material misstatements; are in accordance with Generally Accepted Accounting Principles; and fairly present both the financial position and the results of operations for the year ended June 30, 2017. Also included are the Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards and the Audit Communication Letter, both dated May 31, 2018. As requested by City Council, these letters are now a part of the CAFR and can be found beginning on page 163. Statement on Auditing Standards (SAS) 114 Report (Audit Communication Letter,CAFR page 171) Statement on Auditing Standards (SAS) 114 was issued by the American Institute of Certified Public Accountants (AICPA) to establish a two-way communication between the independent auditors and those charged with governance (i.e. City Council). SAS 114 requires that the City's auditor communicate, either orally or in writing, certain information to an audit committee or another designated party that performs oversight of the financial reporting and auditing process. The City's Finance Committee has been identified by the City Council to receive and review the report of the annual audit from the City's independent auditor and to review and make recommendations to the City Council to receive and file the report. The Audit Communication Letter did not identify any disagreements with management. The Audit Communication Letter identified difficulties in completing the audit due to clarifications and additional information requested by the auditor and the auditor's time to review the information provided related to the accounting treament for the City's acquisition of water rights and preferred stock (Class "A" shares) with California Domestic Water Company (CDWC). Additionally, material misstatements were detected as a result of audit procedures and corrected. These items included the recording of completed projects from construction in progress to capital assets, the annual adjustment for the City's net pension liability and the market value adjustment on the Section 115 Irrevocable Pension Trust (PARS) investment account. Additionally, the staff consulted with the auditor regarding a change to the calculation of the City's equity investment in CDWC to reflect the cosolidated entity (which included Cadway) which was implemented during the audit. Certain items detected during the audit were identified in the City's Management Letter and have been addressed by management. The City's water rights purchased in FY 2013-14 were inadvertently excluded from the City's Capital Asset Listing. Also, beginning with the fiscal year ended June 30, 2017, the City's preferred stock (Class "A" Shares) in California Domestic Water Company, was reclassified from Other Investments to Capital Assets. Therefore, these intangible assets will also now be included in the City's Capital Assets Listing. Additionally, the City's Capital Asset Policies will be updated as applicable to include intangible assets. The City's Information Technology (IT) division is currently updating the IT recovery plan including procedures related to the City financial system. The IT recovery plan is projected to be completed by June 30, 2019. Upon completion of the plan, the City plans to test the system restoration process to ensure proper functioning of the restoration procedures in case of a disaster. Financial Highlights The City's net position (assets and deferred outflows of resources less liabilities and deferred inflows) increased by $15 million, from $214 million to $228 million as of June 30, 2017. The increase in the City's net position was $11 million from the results of current operations and $4 million due to the restatement for capital asset infrastructure. The City's capital assets represent $271 million of the $410 million total assets. The City's long-term (non-current) liabilities of $179 million primarily include $111.6 million in net pension liabilities and $57.2 million of outstanding bonds and capital leases (which was used to fund capital improvements and finance the acquisition of capital assets). As of June 30, 2017, the General Fund's ending fund balance includes a reserve for the City's unfunded pension liabilities of $6.9 million. The Successor Agency to the Brea Redevelopment Agency financial transactions are reported as a Private Purpose Trust Fund within the Fiduciary Funds section of the CAFR. The Private Purpose Trust Fund is reporting long-term liabilities of $165.7 million of bonded obligations to be paid from future Redevelopment Property Tax (formerly tax increment).
SUMMARY/FISCAL IMPACT
The City's annual audit for the Fiscal Year ended June 30, 2017 (FY 2016-17) has been completed and the City's independent auditor has issued an unmodified opinion on the City's CAFR, which is the highest level of assurance an entity can receive from its independent auditors (a "clean audit"). New procedures have been put in place to address items noted in the City's Management Letter. There is no fiscal impact on the City as a result of this audit.
RESPECTFULLY SUBMITTED
William Gallardo, City Manager Prepared by: Lee Squire, Financial Services Manager Concurrence: Cindy Russell, Administrative Services Director

Attachments
CAFR