Written materials relating to an item on this agenda that are distributed to the legislative bodies within 72 hours before the item is to be considered at its regularly scheduled meeting will be made available for public inspection at the City Clerk’s Office, 300 West Third Street 4th Floor during customary business hours. Agenda reports are also on the City of Oxnard web site at www.oxnard.org.
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Agenda Item Time Estimates include: (Minutes for Presentation + Council Discussion + Public Comment)
AGENDA
OXNARD CITY COUNCIL
FINANCE AND GOVERNANCE COMMITTEE
Council Chambers, 305 West Third Street
July 23, 2024
Regular Meeting - 5:00 to 6:30 PM
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1 OXNARD CITY COUNCIL: FINANCE & GOVERNANCE COMMITTEE
July 23, 2024 - Page 2
b. Public comments on agenda items will be taken following the announcement of the item. After the item is announced, members of the public may register or otherwise be recognized for the purpose of providing public comment.
Please review the Zoom instructions on the registration page to help ensure there are no technical difficulties during your comments and help you understand public comment procedures using Zoom. Detailed participation instructions can be found at www.oxnard.org/city-meetings.
In the event of a disruption which prevents a legislative body of the City of Oxnard from broadcasting a meeting using a call-in option or internet- based service option, or in the event of a disruption within the City’s control which prevents members of the public from offering public comment using the call-in option or internet-based service option, the legislative body shall take no further action on items appearing on a meeting agenda until public access to the meeting via the call-in option or internet-based service option is restored. However, if any of the broadcast options are disrupted, but any of the other broadcast options is still available to the public, the legislative body may take further action on items appearing on a meeting agenda without waiting for the disrupted broadcast option(s) to be restored.
A. ROLL CALL, POSTING OF AGENDA, FLAG SALUTE
CONSIDERATION OF TELECONFERENCE PARTICIPATION PURSUANT TO ASSEMBLY BILL 2449.
During this meeting, Councilmember Teran will be participating remotely from the following location:
Holiday Inn Sacramento, 300 J Street, Sacramento, CA 95814.
B. PUBLIC COMMENTS ON ITEMS NOT ON THE AGENDA
A person may address the legislative body only on matters not appearing on the agenda and within the subject matter jurisdiction of the legislative body. Speaker requests shall be submitted as set forth on the first page of this agenda. Speakers are limited to three minutes. After 30 minutes, if all speakers have not had the opportunity to speak, the remaining speakers will be given an opportunity to speak prior to adjournment of the meeting. The legislative body cannot enter into a detailed discussion or take action on any items presented during public comments at this time. Such items may only be referred to the City Manager/Executive Director/Secretary for administrative action or scheduled on a subsequent agenda for discussion. Persons wishing to speak on public hearing items should do so at the time of the hearing.
C. CONSENT AGENDA
1. City Clerk Department
SUBJECT: Approval of Minutes.
RECOMMENDATION: That the Finance & Governance Committee approve the minutes of the July 9, 2024 regular meeting as presented.
Contact: Rose Chaparro, (805) 385-7805
D. REPORTS
1. Finance Department
SUBJECT: Implementation of the City’s Fiscal Year 2024-2025 $20 million payment for Long Term Debt Reduction for Pension and OPEB. (10 minutes)
RECOMMENDATION: That the Finance and Governance Committee recommend City Council:
1. Direct staff to make an Additional Discretionary Payment (ADP) to CalPERS in the amount of $15 million toward the City’s Unfunded Actuarial Liability (UAL).
2. Direct staff to create one Internal Revenue Service (IRS) Code Section 115 Trust for Pension and one for Other Post-Employment Benefits (OPEB).
3. Direct staff to fund the Pension 115 Trust with the initial amount of $2.5 million and to fund the OPEB 115 Trust with an initial contribution of $2.5 million. 2 OXNARD CITY COUNCIL: FINANCE & GOVERNANCE COMMITTEE
July 23, 2024 - Page 3
Please click the following link to view the required Measure M pre-recorded presentation video: https://youtu.be/ZN8bA7vJP-s
Contact: Javier Chagoyen-Lazaro, (805) 200-5400
2. Finance Department
SUBJECT: Fifth Amendment to Tyler Technologies, Inc. for an ERP Software as a Service Agreement (A-8767), Extending the Contract for a New Five-Year Term, Expiring October 31, 2029. (10 minutes)
RECOMMENDATION: That the Finance and Governance Committee recommend that City Council approve and authorize the City Manager to execute a Fifth Amendment with Tyler Technologies, Inc. for an Enterprise Resource Planning (ERP) Software as a Service (SaaS) Agreement for a First Renewal for a Five-Year Term for an Amount Not to Exceed $5,450,000.
Please click the following link to view the required Measure M pre-recorded presentation video: https://youtu.be/6N8VbLsJveQ
Contact: Javier Chagoyen-Lazaro, (805) 200-5400
E. ITEMS FOR FUTURE AGENDAS
F. ADJOURNMENT
3 FINANCE AND GOVERNANCE COMMITTEE
AGENDA REPORT
CONSENT AGENDA
AGENDA ITEM NO. C.1
DATE: July 23, 2024
TO: Finance & Governance Committee
FROM: Rose Chaparro, City Clerk, (805) 385-7805, [email protected]
SUBJECT: Approval of Minutes.
RECOMMENDATION
That the Finance & Governance Committee approve the minutes of the July 9, 2024 regular meeting as presented.
BACKGROUND
Approval of Minutes.
STRATEGIC PRIORITIES
This agenda item is a routine operational item.
FINANCIAL IMPACT
There is no financial impact.
Prepared by: Rose Chaparro, City Clerk
ATTACHMENTS
1. MINUTES 07 09 2024 Finance & Governance
4 MINUTES
OXNARD CITY COUNCIL
FINANCE AND GOVERNANCE COMMITTEE
Regular Meeting
July 9, 2024
A. ROLL CALL, POSTING OF AGENDA, FLAG SALUTE
At 5:01 p.m., Chair John C. Zaragoza called to order the regular meeting of the Oxnard City Council Finance and Govern ance Committee in the City Hall Council Chambers at 305 W. Third Street, Oxnard, California. The Assistant City Clerk called the roll and announced the posting of the a genda. Chair John C. Zaragoza, Member Gabriela Basua, and Member Gabriel (Gabe) Teran were present in person.
Consideration of Teleconference Participation pursuant to Assembly Bill 2449.
B. PUBLIC COMMENTS ON ITEMS NOT ON THE AGENDA (None received.)
C. CONSENT AGENDA
1. City Clerk Department
SUBJECT: Approval of Minutes.
RECOMMENDATION: That the Finance & Governance Committee approve the minutes of the June 11, 2024 regular meeting as presented.
It was moved by Member Teran, seconded by Member Basua, to ap prove the Information/Consent item as presented. VOT E: Basua, Teran, and Zaragoza voted in favor; the motion passed 3-0.
D. REPORTS
1. City Manager Department
SUBJECT: Whistleblower Activity Report.
RECOMMENDATION: That the Finance and Governance Committee receive and file an update on the City’s whistleblower hotline.
Annie Jensen, Administrative Services Analyst was available to answer the Committees questions. No public comments were r eceived. Report was received and filed; no formal action was taken.
2. Information Technology Department
SUBJECT: Second Amendment to Agreement 32400125 with Hireclout for IT Consulting and Recruiting Services.
RECOMMENDATION: That the Finance and Governance Committee recommend that 5 July 9, 2024 OXNARD CITY COUNCIL PAGE 2
FINANCE & GOVERNANCE COMMITTEE
City Council approve and authorize the Mayor to execute a Second Amendment to Professional Services Agreement 32400125 with Hireclout, Inc. to increase the value of the agreement from $850,000 to $1,500,000 through June 30, 2025, for information technology consulting and recruitment services.
Robert Ruben, Chief Information Officer answered the Committees questions. No publi c comments were received. Discussion ensued among the Committee and staff.
It was move d by Member Teran, seconded by Member Basua, to approve the r ecommended action as presented. VOTE: Basua, Teran, and Zaragoza voted in favor; the motion carried 3-
0. E. ITEMS FOR FUTURE AGENDAS (No requests were made.)
F. ADJOURNMENT
There being no further business on the agenda, and without objec tion, Chair Zaragoza adjourned the meeting at 5:15 p.m.
ROSE CHAPARRO JOHN C. ZARAGOZA
City Clerk Chair
6 FINANCE AND GOVERNANCE COMMITTEE
AGENDA REPORT
REPORTS
AGENDA ITEM NO. D.1
DATE: July 23, 2024
TO: Finance & Governance Committee
FROM: Javier Chagoyen-Lazaro, Chief Financial Officer, (805) 200-5400, [email protected]
SUBJECT: Implementation of the City’s Fiscal Year 2024-2025 $20 million payment for Long Term Debt Reduction for Pension and OPEB. (10 minutes)
RECOMMENDATION
That the Finance and Governance Committee recommend City Council:
1. Direct staff to make an Additional Discretionary Payment (ADP) to CalPERS in the amount of $15 million toward the City’s Unfunded Actuarial Liability (UAL).
2. Direct staff to create one Internal Revenue Service (IRS) Code Section 115 Trust for Pension and one for Other Post-Employment Benefits (OPEB).
3. Direct staff to fund the Pension 115 Trust with the initial amount of $2.5 million and to fund the OPEB 115 Trust with an initial contribution of $2.5 million.
Please click the following link to view the required Measure M pre-recorded presentation video: https://youtu.be/ZN8bA7vJP-s
BACKGROUND
The City is contracted with the California Public Employees Retirement System (CalPERS) to provide post- employment benefits (pensions) for all vested City employees. Over the last twenty years, the vast majority of cities that provide retirement benefits via CalPERS have seen significant unfunded liabilities accrue due to a number of factors that impact how pension funds operate. Lower than anticipated investment returns have had the single largest impact on the funded status of the City’s pensions with losses due to the global recession in 2008 creating a very large gap between the value of assets held by cities such as Oxnard and the value of assets needed to ensure payment for current and future retirees. This gap is referred to as the unfunded actuarial liability, or UAL.
The City’s pension and OPEB UAL as of June 30, 2023, were $397.7 million, with $348.7 million related to pension and $49.0 million related to OPEB liability. On June 18, 2024, City Council approved the City’s FY 2024-25 Annual Budget which included a City Manager recommendation to allocate $20 million of the General Fund surplus to pay long-term debt related to pension and OPEB. The $20 million payment reduces these liabilities by an aggregate of approximately 5%. This report outlines the steps that staff is recommending to implement City Council action.
7 Source: CalPERS
DISCUSSION
Staff recommends using a hybrid approach in funding long-term pension liabilities. This approach allows for both short-term cost reduction and long-term investment accumulation. The staff recommendation allocates a total of $17.5 million toward the City’s CalPERS pension debt. The allocation to CalPERS pension debt would be made through a combination of a one-time $15 million direct contribution to CalPERS, also known as Additional Discretionary Payments (ADP), and the creation and allocation of $2.5 million to an Internal Revenue Service (IRS) Code Section 115 Pension Trust. The remaining $2.5 million would be allocated to OPEB long-term debt through the creation of an IRS 115 OPEB Trust.
In short, this hybrid approach to tackle Oxnard’s long-term pension liabilities provides the following benefits:
1) An ADP to CalPERS allows for instant savings in annual payments to CalPERS. Staff recommends that savings be used to further fund the Pension Trust.
2) The trusts act as a risk mitigation tool, as one of the first steps within the City’s strategic financial planning by:
a) Reducing dependency on CalPERS investment performance and discount rate determination; b) Increasing investment flexibility, and adding diversification with potentially different investment guidelines than CalPERS;
c) Enhancing oversight through regular audits and stringent governance mechanisms, ensuring the funds are managed effectively; and
d) Providing access to the funds for future ADPs to CalPERS, or for retiree healthcare benefits.
ADP to CalPERS
CalPERS required annual contributions include two components: Normal Cost and Unfunded Actuarial Liabilities (UAL). Normal cost represents the contribution needed to pay for benefits earned each year as a percentage of an employee's reportable compensation (the amount of an employee's paycheck that is used to calculate their eventual retirement income). UAL payments represent the minimum payment required as calculated by CalPERS to pay down the difference between the estimated cost of future benefits and the assets that have been set aside to pay for those benefits based on actuarial amortization calculations. Based on the 2022-23 actuarial report, the City’s annual payments towards pension UAL are expected to peak at almost $39 million by fiscal year 2030-31. The next chart represents, on an adjusted scale, the City's expected payments towards UAL based on the 2022-23 CalPERS actuarial valuation report.
8 The UAL is impacted by differences between the assumptions made by CalPERS on many things, such as investment returns, retirement age, inflation, mortality rates, etc., to which actual results always differ, so in some years, the UAL is reduced and in some years, it increases. The UAL has an effective interest rate to the City of 6.8%, and thus, any additional payments made by the City effectively reduce the principal amount of debt owed, and similarly to a personal mortgage, can result in lower interest costs over time.
Payments made directly to CalPERS will be invested by CalPERS will be subject to the same investment returns as the overall CalPERS portfolio. Those payments generate benefits by reducing the City’s outstanding pension debt and the future payments associated with that debt, while improving the City’s CalPERS funding ratio. The City payment to CalPERS as an ADP is like a prepayment for a mortgage. CalPERS debt grows every year at a rate of 6.8%, so the early payment saves 6.8% interest per year. The recommended prepayment in the amount of $15 million could generate annual average savings of approximately $1.1 million for the next 20 years for a total of $27.85 million.
The chart below represents the UAL projected payments before (blue bar) and after (red line) the $15 million contribution. The difference between the red line and the top of the blue bar represents the annual cost reduction in the City's annual UAL payments.
9 The table below represents the data shown in the previous charts along with the estimated cost reduction after the ADP contribution.
Fiscal Year UAL* Projected
Payments
UAL* Projected Payments
After $15M ADP
Estimated Annual Cost
Reduction
2024-25 $28.89 $27.83 ($1.06)
2025-26 $29.90 $28.81 ($1.09)
2026-27 $32.45 $31.33 ($1.12)
2027-28 $34.35 $33.20 ($1.15)
2028-29 $37.30 $36.12 ($1.18)
2029-30 $38.09 $36.87 ($1.22)
2030-31 $38.90 $37.65 ($1.25)
2031-32 $38.08 $36.80 ($1.28)
2032-33 $37.63 $36.31 ($1.32)
2033-34 $35.47 $34.11 ($1.36)
2034-35 $34.38 $32.98 ($1.40)
2035-36 $32.62 $31.19 ($1.43)
2036-37 $29.53 $28.06 ($1.47)
2037-38 $25.99 $24.47 ($1.52)
10 2038-39 $23.99 $22.43 ($1.56)
2039-40 $22.43 $20.83 ($1.60)
2040-41 $21.45 $19.81 ($1.64)
2041-42 $17.87 $16.18 ($1.69)
2042-43 $15.75 $14.02 ($1.73)
2043-44 $27.77 $25.99 ($1.78)
Total $602.84 $574.99 ($27.85)
* UAL: Unfunded Accrued Liability
Amounts in $ million
Source: CalPERS pension Outlook website tool
Creation of Trusts
In addition to the ADP to CalPERS, staff recommends creating an IRS Code Section 115 Pension Trust and an IRS 115 OPEB Trust, allocating $2.5 million to each as the initial funding.
The funds allocated to the trusts are restricted to pay for pension and OPEB liabilities respectively. They have the potential for higher investment returns than the pooled City funds, even with investment strategies that can be more conservative than the CalPERS pension investment portfolio. In addition, they can be used to make ADPs to CalPERS or for retiree healthcare benefits at a feasible time in the future.
Rating agencies and lenders also may take a positive view on the establishment and funding of Pension and OPEB trusts as it demonstrates a commitment to pay a future liability in a manner that may reduce and more evenly distribute the City’s pension and healthcare costs over time.
Next Steps
The City will start a Request for Proposals (RFP) for the creation of the Pension and OPEB trusts, including trustee, investment advisory services, and the corresponding governance documents and investment policies separated from the City’s Investment Policy, to direct and monitor investment activities. The trust’s governance documents will define the rules and regulations that govern the interaction within each trust, ensuring that the funds deposited are used towards the intended use. The governance documents may be supplemented with additional financial policies defining the parameters required to access trust funds.
The FY 24-25 $20 million paydown of long-term pension liabilities is only one step toward addressing the significant pensions issue. As part of an overall long-term financial planning strategy, staff will continue to evaluate options and provide recommendations to City Council on potential contributions to reduce long-term debt related to pension and OPEB with the goal to reduce future cost and improve funded ratios.
Going forward, staff recommends that the amounts calculated as the actuarial savings with the ADP to CalPERS (estimated at $1.1M annually for 20 years) be appropriated annually through the budget process as further contributions to pension debt as part of a comprehensive pension strategy. In addition, for future funding for the OPEB 115 Trust, staff recommends designating $250,000 per fiscal year through the budget process to fund the OPEB trust. For those fiscal years in which the City generates a surplus, staff may bring Council-specific recommendations to allocate surplus to these three categories to further reduce long- term debt for pension and OPEB.
STRATEGIC PRIORITIES
This agenda item supports the Organizational Effectiveness strategy. The purpose of the Organizational Effectiveness strategy is to reinforce, stabilize, improve, and strengthen the organizational foundation of the City in order to build a modern, high-functioning City government that effectively and efficiently supports the operating departments in providing high-quality services and programs for our residents and businesses.
FINANCIAL IMPACT
11 There are no financial impacts associated with the recommendations in the report, as the contributions to pay long-term debt related to the pension and OPEB were appropriated in FY 2024/25 budget adopted on June 18, 2024.
Prepared by: Javier Chagoyen-Lazaro, Chief Financial Officer
ATTACHMENTS
1. Presentation
12 City of Oxnard
Implementation of the City’s
Fiscal Year 2024-25 payment for
Long T erm Debt Reduction for
Pension and OPEB
July 23, 2024
Finance and Governance Committee
Presented by:
Javier Chagoyen-Lazaro, City of Oxnard
Chief Financial Officer
13 Recommendation 2
That The Finance and Governance Committee recommend City Council:
1. Direct staff to make an Additional Discretionary Payment (ADP) to CalPERS in amount of $15.0 million toward the City’s Unfunded Actuarial Liability (UAL)
2. Direct staff to create Internal Revenue Service (IRS) Code Section 115 Trust for Pension and one for Other
Post-Employment Benefits (OPEB).
3. Direct staff to fund the Pension 115 Trust with the initial amount of $2.5 million and to fund the OPEB 115 Trust with an initial contribution of $2.5 million.
14 • On June 18, 2024 City Council approved the City’s
Annual Budget for Fiscal Year 2024-25.
• FY 2024-25 included a recommendation to apply $20
million surplus to pay long term debt related to pension and Other Post-Employment Benefits (OPEB).
• The report includes staff recommendation on how to:
• allocate the $20 million to pension and OPEB
liabilities, optimizing savings; and
• set up a long term strategy to address future
increases in pension and OPEB costs.
Background 3
15 • The City is contracted with California Public Employees Retirement System (CalPERS) to provide pension benefits for vested City employees.
• CalPERS investment returns are the main factor that
explains the increase in UAL, defined as the difference between the cost of providing the future benefits and the values held on behalf of the City to pay for those.
Discussion 4
16 The City also contracts with CalPERS for the
administration of post-employment medical
benefits for employees that retire from the City
and receive a CalPERS pension.
• As of June, 30, 2023
Discussion 5
CalPERS Pension Liabilities
$348.7M
OPEB Liabilities $ 49.0M
TOTAL
$397.7M
17 1. Staff recommendation of how to apply the $20M surplus involved analysis and discussion with NHA financial advisors
2. Recommend a hybrid approach:
a. A $15M direct payment to CalPERS, which provides short-term cost reduction b. Investment of $2.5M in two separate 115 Trusts:
i. Reduce dependency on CalPERS
ii. Increase investment flexibility
iii. Enhance oversight
iv. Allow for long-term “time-investment” accumulation
Discussion 6
18 ADP to CalPERS $15.0M could generate
annual average cost reduction of $1.1M over
20 years.
Discussion 7
Source: CalPERS Pension outlook website
19 • Pension 115 Trust initial funding of $2.5M
• Future/additional annual funding to the Pension Trust with the $1.1M CalPERs cost savings (after this years payment). • OPEB 115 Trust initial funding of $2.5M.
• Future funding for OPEB Trust with $250k annually through the budget process.
Discussion 8
20 Recommendation 9
That The Finance and Governance Committee recommend City Council:
1. Direct staff to make an Additional Discretionary Payment (ADP) to CalPERS in amount of $15.0 million toward the City’s Unfunded Actuarial Liability (UAL)
2. Direct staff to create Internal Revenue Service (IRS) Code Section 115 Trust for Pension and one for Other
Post-Employment Benefits (OPEB).
3. Direct staff to fund the Pension 115 Trust with the initial amount of $2.5 million and to fund the OPEB 115 Trust with an initial contribution of $2.5 million.
21 10
Questions / Discussion
22 FINANCE AND GOVERNANCE COMMITTEE
AGENDA REPORT
REPORTS
AGENDA ITEM NO. D.2
DATE: July 23, 2024
TO: Finance & Governance Committee
FROM: Javier Chagoyen-Lazaro, Chief Financial Officer, (805) 200-5400, [email protected]
SUBJECT: Fifth Amendment to Tyler Technologies, Inc. for an ERP Software as a Service Agreement (A- 8767), Extending the Contract for a New Five-Year Term, Expiring October 31, 2029. (10 minutes)
RECOMMENDATION
That the Finance and Governance Committee recommend that City Council approve and authorize the City Manager to execute a Fifth Amendment with Tyler Technologies, Inc. for an Enterprise Resource Planning (ERP) Software as a Service (SaaS) Agreement for a First Renewal for a Five-Year Term for an Amount Not to Exceed $5,450,000.
Please click the following link to view the required Measure M pre-recorded presentation video: https://youtu.be/6N8VbLsJveQ
BACKGROUND
On October 1, 2019, staff brought to Council a five-year Software as a Service (“SaaS”) Agreement with Tyler Technologies, Inc (Tyler) for a new Enterprise Resource Planning (ERP) system that commenced November 1, 2019 and expires on October 31, 2024. The original agreement was approved by the City Council in the amount of $9,117,985 as part of a total $14,893,817 project cost (including $5,775,832 in additional implementation and hardware costs not payable to Tyler) for a five-year term. The agreement includes the SaaS maintenance fees, implementation fees, and contingency for the purchase and implementation of the ERP system that will continue to modernize the City’s systems.
On November 17, 2020, staff brought to Council the first amendment to the contract, as well a recommendation that Council delegate authority to the City Manager for future Tyler Technologies deductive amendments.
Since the original agreement was approved, there have been four amendments to date with a net impact reducing the contract total by just over $700,000, with the most recent amendment approved by Council on July 27, 2023. Staff projects that the City will spend approximately $5.7 million of the original $9.1 million contract value.
Staff recommends a new five-year term with Tyler Technologies to enable the City to continue to use this essential software for modules that have been implemented within the last five years, as well as complete the implementation, and make use of the remaining modules that are at various stages of development and configuration. The original SaaS agreement between the City and Tyler is 762 pages and can be read in full at oxnard.org/ERP. The four previous amendments are attached to this report. 23 DISCUSSION
An Enterprise Resource Planning system is the central nervous system of any organization, and the City of Oxnard is reliant on the tools and functionality of Tyler Munis, Executime to manage and report all of the city’s financial information including all invoice payments, budgetary control, fixed asset management, grant management, project accounting, general billing, financial reporting and very soon, the calculation and payment of all payroll for all employees (HCM). Furthermore, the City is at various stages of configuration and implementation of additional Tyler modules, provided under this agreement, to update and enhance the city’s planning and licensing operations (EPL), asset management (EAM) and utility billing functions (UB).
Originally approved in 2019 at $9.1 million, it was anticipated that the City would implement all these modules within the first five year term, however, as staff has communicated to Council in prior Tyler contract amendments, project management contracts and annual ERP reports, the initial assumptions have been updated over the years as the City has learned more about the scope and magnitude of the changes necessary, and during this period, the COVID-19 pandemic significantly impacted all City function, projects, not least the ERP project.
These modifications to the time frame, project management structure and phasing of implementation had the effect of reducing the amount of resources required under this agreement with Tyler resulting in an anticipated cost of $5.7 million compared to the original contract total of $9.1 million, a reduction in anticipated spending of $3.4 million. Much of this reduction in spend is due to reducing the amount of Tyler consulting services and extending the timelines for the implementation of later phases as the City’s understanding of the complexity of the project evolved. In September 2021, the City hired Kreative Core Technologies (KCT) to provide an assessment of the overall ERP project and provide recommendations on how best to deliver the needed improvements. This report provided a new strategy to which the City has made significant progress, delivering Core Financials in October 2022, and KCT continues to be key strategic partners assisting the City to design solutions for the remaining modules, supporting staff to implement the solutions, as well as providing key IT support. On April 16, 2024 Council unanimously approved a seventh amendment with KCT to continue these services for the City under contract number 9431-21-FN.
At the time of this report, The City has implemented two major phases of the multi-phase project, Core Financials and Executime, with the Human Capital Management (HCM) / Payroll system due to launch in the coming weeks. This amendment is required for the City to continue to operate and record and report financial transactions as is required to ensure accurate and timely information and meet external audit and grant reporting requirements. All three of the remaining phases are underway and anticipated to be implemented within the term of this amendment.
Therefore staff recommends a new five-year term not to exceed $5.45 million for a new contract total of approximately $11.2 million (ten year total) with Tyler to include implementation consulting services, project management, conversion support, hardware and annual software licensing costs. The current agreement sets out a maximum increase that can apply for any extension term of five percent (5%) for the largest portion of the contract, Software as a service (SaaS) fees. Other aspects of the contract are based upon time and materials with current estimates based upon the latest information and progress for the remaining phases to be implemented.
Staff anticipates continuing implementation consulting services and Tyler project management over the duration of the implementation phases of the remaining modules; HCM, EAM, EPL and UB anticipated to be completed by September 2027 when the current plan projects the final phase to be live and stable.
A copy of the amendment will be provided when this item goes to the full council along with all previous amendments. In addition, staff will return to Council for the ERP Annual Update early in calendar year 2025.
STRATEGIC PRIORITIES
24 This agenda item supports the Organizational Effectiveness strategy. The purpose of the Organizational Effectiveness strategy is to reinforce, stabilize, improve, and strengthen the organizational foundation of the City in order to build a modern, high-functioning City government that effectively and efficiently supports the operating departments in providing high-quality services and programs for our residents and businesses.
FINANCIAL IMPACT
Funding for the first year of this amendment is included in the Fiscal Year 2024-25 and staff will include the necessary appropriations for future fiscal years as part of those future budgets. Implementation costs are part of a Capital Improvement Program project C2034, funded currently by the General Fund via transfer to the Capital Outlay Fund due to the Aaron Starr lawsuit that prevents the City from issuing bonds. Council had approved a second set of ERP bonds for approximately $9.1 million in October 2022 that would have provided more funding for the ERP project. The Court ruled in favor of the City during its review of this case, however the case is currently under appeal, meaning the City is still unable to issue bonds at this time.
Software licensing fees for modules that have been implemented are charged to the City’s Information Technology Department in Fund 731, whereby they are subsequently recharged to operating departments via Internal Service Fund recharges as is the case with all enterprise wide software products.
Fiscal Year & Item Cost 2024-25 2025-26 2026-27 2027-28 2028-29 As needed
Total
Saas Fees 677,490 705,809 705,809 705,809 705,809 3,500,726 Proj Mgt 90,000 78,000 72,000 18,000 0 258,000
Implementation Consulting 327,600 280,800 243,360 60,840 0 912,600 Travel/ Conversion /
Hardware Contingency
75,925 684,000 759,925
Total 1,171,015 1,064,609 1,021,169 784,649 705,809 684,000 5,431,251
The table above shows anticipated timings for services including the annual licensing fees (Saas). The implementation of remaining modules is anticipated to be completed by FY2027-28 and as with previous phases, staff anticipate there may be the need to amend plans as implementation begins and staff learn more about the functionality of the remaining modules. It is sensible therefore to carry a contingency that will only be used as needed and directed by project leadership. Staff are in final negotiations with the software vendor, and so these details may change a little as that process is concluded. Staff will present the final details at a future council meeting prior to the expiration of the current agreement on October 31, 2024.
Prepared by: Mark Sewell, Assistant Chief Financial Officer
ATTACHMENTS
1. 8767-19-IT 1st amendment
2. 8767-19-IT 2nd amendment
3. 8767-19-IT 3rd amendment
4. 8767-19-IT - 4th amendment - Signed by Tyler
5. Fifth Amendment - Tyler Contract PPT
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45 Fifth Amendment to Software as a
Service Agreement A-8767 with
Tyler Technologies, Inc.
Finance and Governance Committee
July 23, 2024
Mark D. Sewell,
Assistant Chief Financial Officer / Assistant City Treasurer 46 RECOMMENDATION 2
That the Finance and Governance Committee Recommend
that:
City Council approve and authorize the City Manager to
execute a Fifth Amendment with Tyler Technologies, Inc. for an Enterprise Resource Planning (ERP) Software as a
Service (SaaS) Agreement for a First Renewal for a Five-Year Term for an Amount Not to Exceed $5,450,000 for a New Ten- Year Contract Total of $11,200,000.
47 2016 - City issues RFP for new ERP software
2019 - City Council award a five year agreement with Tyler Technologies, Inc. for ERP, including project management, implementation support, business process engineering and annual licensing fees for a total of $9,117,985. Implementation begins.
2021 - Executime (Electronic Employee Time Entry) Launched. 2022 - Core Financials Launched.
2024 – Implementation continues:
Human Capital Management, Enterprise Planning and Licensing, Enterprise Asset Management and Utility Billing Phases
First Five Year Financials:
$5.7 million anticipated to be spent of the $9.1 million by October 31, 2024.
BACKGROUND
48 ERP projects are extremely complex and learnings
incorporated into planning and execution led to amendments:
Prior Amendments
1. Bid Management module included in initial contract
removed after initial evaluation
2. Business Process Consulting removed from scope.
3. Addition of Data and Insights platform
4. Reduction in scope of some SaaS modules, Testing and restructuring of SaaS fees saving the city $606,502.
FOUR PREVIOUS AMENDMENTS
49 Amendment 5 extends the agreement for an additional five year term. • Annual software as a service license fees make up the majority of the contract value. • Implementation continues for a number of modules.
• Requires Project Management and Implementation Consulting. • Approx: 10% Contingency ($500k) included for scope / functionality / conversion costs as needed and approved by City project leadership .
Staff will return to Council in the spring with the Annual ERP update.
AMENDMENT 5 – Extending the Term of the Agreement.
Estimated Contract
Allocation
FY
2024-25
FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
As
Needed Total
SaaS Fees $ 677,490 705,809 705,809 705,809 705,809 3,500,726 Project Mgt $ 90,000 78,000 72,000 18,000 0 258,000
Implementation
Consulting $ 327,600 280,800 243,360 60,840 0 912,600
Travel / Hardware /
Contingency $ 75,925 As
Needed
As
Needed
As
Needed
As
Needed 684,000 759,925
Total $ 1,171,015 1,064,609 1,021,169 784,649 705,809 684,000 5,431,251 50 ANY QUESTIONS?
6 51