06-28-2022 City Council Meeting Minutes Page 1
MINUTES OF THE SECOND REGULAR MEETING OF THE TRINIDAD CITY COUNCIL TUESDAY, JUNE 28, 2022 (LIVE/HYBRID)
I. CALL TO ORDER
Mayor Ladwig called the live-hybrid meeting to order at 6:00pm. Council members in attendance: Ladwig, West, Tuttle in-person. Kelly by teleconference. City Staff in attendance: City Manager Eli Naffah, City Clerk Gabriel Adams. Approximately (10) participants were present online at the beginning of the meeting.
II. PLEDGE OF ALLEGIANCE
III. APPROVAL OF THE AGENDA
Motion (West/Tuttle) to approve the agenda as submitted. Passed unanimously.
IV. ITEMS FROM THE FLOOR
(Three (3) minute limit per Speaker unless Council approves request for extended time.) Paula Levine – Trinidad Water Customer
Read from a written statement included in the public comment record/packet for the meeting.
V. CONSENT AGENDA - None
VI. DISCUSSION/ACTION AGENDA ITEMS
1. Discussion/Decision regarding Resolution 2022-11; Adopting the FY 2022 City Budget City Clerk Adams explained that building up to the regular meeting on June 14, staff reviewed several factors that occurred during FY2022 that made anticipating the FY2023 budget process a challenge. Workforce dynamics, increasing costs, loss of water/public works staff continuity, and revenue fluctuations scrambled an organizational structure that Trinidad has been used to for several decades. Economic changes, environmental pressures, and a heightened awareness of how delicate the Luffenholtz Creek water supply is, force the City to recalibrate its approach to providing the core services this community is used to.
The current draft of the 2023 Budget aims to provide transitional stability for the turbulence experienced last year. Staff emphasizes that this is a “working draft” that will need adjustments as the year progresses. It accurately reflects the desires of the community based on priorities set by the Council. The draft includes revenue and expenditure budget worksheets for each of the fund categories; General Fund: Administrative, Public Works, Police, & Fire Restricted Funds: Water & Cemetery
Special Revenues: Gas Tax, Transportation (TDA), & COPS A recap of Fiscal Year ending June 30, 2021, along with projections for Fiscal Year ending June 30, 2022 were presented in summary formats for comparative purposes at prior meetings.
General Fund: It is still unclear how the rising inflation rate will affect Trinidad’s top two revenue sources, sales and occupancy taxes. The City’s conservative approach to spending, coupled with steady revenues from the baseline economy and significant contributions from visitors has helped build the City’s reserves over time.
However, the loss of cell tower income beginning in July 2022 will have a notable impact on the City’s revenue profile.
Sales and Occupancy taxes are volatile revenue sources. They are strong when the economy is healthy, but easily disrupted by natural disasters such as wildfires, droughts, pandemics, or human-triggered disasters such as housing or market crashes. It is common for cities that are primarily funded by fragile revenue streams to maintain healthy reserves. Since 2005 Trinidad City leaders have prioritized fiscal stability and responsibility, and the reserves established exemplify that commitment.
The reserves provide short-term insurance to shield the City from sudden changes, to use as matching funds to leverage larger grant funding, and to stabilize the budget in an emergency. Several of the following situations are examples of changes that the City has been anticipating; • Verizon exit of the Cell Facility lease on Trinidad Head. • Reduction of occupancy taxes due to a reduction or pause in STR licenses issued. 06-28-2022 City Council Meeting Minutes Page 2
• Measure Z Funding is unavailable for additional law enforcement coverage • Harbor Area converts to Federal Trust status and loses sales and occupancy taxes it generates. • Cover increasing costs due to State of Federal mandates and regulations • Emergency repairs to fragile infrastructure (coastal bluffs, roads, etc.) • Staffing increases to improve the quality of services provided to the community and balance the impacts that visitors have on the City.
Balanced Budget: The budget presented conservatively projects that the transitional period ahead may require dipping into the reserves while costs to provide general and special revenues are evaluated during this pivotal year. Staff has maintained a budget strategy of keeping revenue expectations modest, and expenditures generous. This practice helps the City to course-correct ahead of changes rather than behind them. The budget summary predicts a slight deficit this year, but there are several revenue sources that have been under-anticipated. If revenue sources exceed expectations, the budget will balance by year-end 2023.
Water Fund: The cost to operate the water treatment plant has risen dramatically in the past 5 years. A simple way to understand why is to separate expenses in two categories, hard and soft costs, and evaluate the trends in each category. Hard costs have been consistent, but soft costs have increased significantly.
Hard costs include general operating expenses such as energy costs to run the plant, in-house licensed personnel, treatment technology, filters, hardware, vehicle and machinery, treatment processes, etc.
Soft costs include technical and engineering staff time required to evaluate demand from a growing community, future planning, drought consulting in response to the changing environment, resiliency effort, and loss of experienced operators.
At year-end June 30, 2021 the water system spent overspent approximately $25,000 more than it earned in water sales revenue. The deficit was anticipated and authorized by the Council due to the Van Wycke temporary water line repair project. Consultant expenses (soft costs) were budgeted that year for creek flow monitoring and drought planning, but overall the fund balance remained in-check due to the steady and reliable hand provided by the Chief Plant Operator, Ryan DeSmet.
At year-end June 30, 2022, the water system is expected to overspend approximately $200,000. Operating costs remained steady until DeSmet resigned in September 2021. Hard costs stayed on target, but soft costs increased significantly. Despite a robust recruitment effort to find DeSmet’s replacement, the City had to hire an outside firm to operate the Plant on an interim basis. It has taken several outside consulting firms (Coleman Engineering and Pacific Watershed Associates) and other resources collectively to replace one in-house Chief Plant Operator. Additional demand has been placed on GHD, the City Manager, City Clerk, and several other technical consultants to assist in piecing together that position.
At year-end June 30, 2023, the water system is projected to overspend approximately $160,000 as the soft costs during this transition will spill over into the upcoming year. The water fund reserve is structured to withstand the impact – that’s what it’s designed to do. Although the hope is to reduce the need for an outside consultant to operate the Plant and stabilize expenses, the transition to a completely new water treatment staff will take time.
The cost of operating a small water system, maintaining its efficiency, in a very desirable area to live, functioning to provide a precious resource to a community that has emphasized a desire to live “within its means” (or local watershed), will prove to be a challenge for the rate payers. The water system will rely on reserve funds to operate until the rates are adjusted to reflect this new reality, and this budget will authorize staff to put the wheels in motion to begin evaluating a new rate structure. 2023 Budget Goals & Priorities Summary:
1. Utilize reserves established from prior fiscal years, if needed, to support staff transitions.
2. Evaluate and update charges for services to reflect the times (General & Special Funds).
3. Maintain current law enforcement coverage and improve vital government services.
4. Educate and enforce new laws passed to discourage overnight parking, camping, etc.
5. Reclaim Water Plant Operations from licensed, interim consultants.
6. Monitor, educate, and pivot with the challenges faced by the historic drought season ahead. 06-28-2022 City Council Meeting Minutes Page 3
7. Provide support to the Water Advisory Committee overseeing new grant opportunities received from the Department of Water Resources to improve water system resiliency.
8. Update the Water Rate Structure to reflect the true costs of operating a small water system in high demand.
9. Maintain and invest in public buildings, parks, and property.
10. Support community groups that enrich the community for locals and visitors, as they emerge from pandemic hibernation.
11. Continue promoting an inclusive dialog with Tribal Governments, and finalize the Government to Government policy to facilitate consultation on important topics of mutual concern.
12. Continue grant programs that will help the City satisfy several elements of the General Plan update.
Council comments/questions included:
Kelly: We need the water rate analysis done asap. I was a supporter of connecting to Humboldt Bay Municipal Water, but we have to ensure that while we are utilizing our own water system, it needs to cover its costs. I also want to see the General Plan complete, and more money spent on public safety.
Ladwig: There is a lot included in this budget and I appreciate the work that went into developing it.
Public comment included:
Patti Fleschner – Trinidad
Legal costs are expensive and only the law firms win. I hope the Council will end the lawsuits.
Paula Levine – Trinidad Area resident
I agree with Patti. Hire a mediator and resolve the lawsuits. Regarding the water system, the Council has emphasized a desire to live within its means. The water rates were last adjusted in 2012. Everyone should be paying the same rate inside or outside the City. The cost to transition to Humboldt Bay would have been much less than all the spending going on with grants.
Motion (West/Tuttle) to approve Resolution 2022-11; Adopting the FY2023 Budget. Passed unanimously.
FUTURE AGENDA ITEMS
- General Plan Element and suggests to move the process to a conclusion.
ADJOURNMENT: 7:30pm.
Submitted by: Approved by:
_____________________________ _____________________________ Gabriel Adams Steve Ladwig
Trinidad City Clerk Mayor