Recommendation to receive and discuss an overview of the Proposed Fiscal Year 2018 budgets for the following Departments: Harbor and Water; and
So I just we made that one change because there's so many folks here for four Alba. And so we're going to go back to the start of the agenda and finish up the budget hearing. And I will turn this over to the clerk. We can please read the first item. Report from Financial Management Recommendation to receive and discuss an overview of the proposed fiscal year 2018 budgets for the following departments harbor and water and receive supporting documentation into the record. Conclude the public hearing and take the actions necessary to adopt the fiscal year 2018 budget citywide. Okay. Thank you, Mr.. Mr. WEST. Mr. Mayor, Councilmembers. This is our last series of departments for budget hearings. We're going to hear from the harbor department and also the water department. So first up is the chief financial officer with the harbor department. Welcome back, Sam. Sam, Joe Blake Thank you. Good evening, Mr. Mayors. Members of the City Council, the harbor department is pleased to present the proposed budget for fiscal 2018. As Wayne mentioned, my name is Sam John, but I'm here on behalf of our executive director, Mario Cordero, who is currently traveling on port business. Our proposed fiscal 2018 budget is conservative, reflecting the financial challenges and ongoing uncertainty facing the maritime industry. The budget projects a modest revenue growth while keeping operating expenses in check and headcount flat. It reflects investment in the community and our commitment to be a good steward. It is important to remember that the harbor department is not a taxing authority and does not rely on tax revenue to fund its operations. Our operating revenue is derived from private businesses leasing port properties. Looking back, fiscal 2017 was a year of transformation within the shipping industry, with new alliances being formed, which has a significant impact on cargo volume and a major shipping line ceasing operation which impacted the port directly. Our industry leading capital investment program to modernize the port infrastructure and to provide world class service to our customers today and in the future is about 3 billion over the next ten years. Among our projects is the ongoing construction of the iconic Gerald Desmond Bridge replacement. We have 215 million for this project, which is about half of our total fiscal 2018 capital project budget. It's a major project and we are making progress. As you know, Long Beach container terminal at Middle Harbor is among the world's most technologically advanced and greenest. And our fiscal 2018, we have budgeted about 94 million for continuing construction. Part of the new terminal opened in 2016 and more acreage comes online later this year. Port staff is excited about moving to downtown closer to the port and other city staff in fiscal 2018. We have over 5 million budgeted for the Civic Center. We have 30 million budgeted for safety and security programs in 2018. This year we have seen delivery of the second of our two new Firebirds. These are the protector and the vigilance appearing in the slide, putting on a very impressive show which were commissioned to update our fire protection and safety capabilities and this big ship age. These state of the art vessels are two of the most advanced and powerful fire boats in the world. Our proposed fiscal 2018 budget is conservative, reflecting the fiscal prudence of the harbor department leadership. The budget protects modest revenue growth while keeping our headcount flat. The proposed budget totaled 748 million, which include for 57 million in capital investments, or about 61% of the total budget. As part of our investment and a multibillion dollar modernization program that is the largest of any seaport in the country, we expect operating revenue to slightly increase to 380 million or about 2% compared to fiscal 2017 budget . This comes as we faced increased competition from other gateways and the expanded Panama Canal. Here's a breakdown of our sources of funds comparing the proposed 2018 budget to the 2017 budget. Of course, the biggest source of funds is our operating revenue. Some of the users highlights, again, modest operating revenue growth. We have also 225 million and planned new bond issuance in fiscal 2018. Of course, we will come to the City Council and seek approval before issuing any new debt. Our fiscal 2018 proposed budget of 748 million represents a 3% decrease from fiscal 2017 budget, mainly due to slightly lower capital spending. Still, the for 57 million capital program in fiscal 2018 leads the industry. And here's a breakdown of the uses of funds compared to 2017. Some of the highlights of our expenditures. As you know, the Tidelands transfer of about 19 million for fiscal 2018 was recently requested by the City Council. Protecting the environment continues to be a top priority for the port. Our air quality programs have reduced emissions dramatically compared to 2005 levels. This slide shows our very impressive report card. We are currently working with the Port of Los Angeles to update our joint pioneering 2006 Clean Air Action Plan to continue to reduce emissions and to aim for zero emission operation in the future. Public comments on the draft updated cap clauses on September 18 and the proposed plan is scheduled to go to a joint session of the two boards on November 2nd. And we continue a multi-year program that will provide 400,000 and fiscal 2018 for community mitigation grants to reduce the health effects. Of pollution. We continue to partner with the community and the city to make Long Beach a better place to live and work. One way is through our community sponsorship program, where we work with local groups to help reach residents. For fiscal 2018, the Board of Harbor Commissioners has budgeted 1 million for sponsorships. The first round of call for applications is open this month. So far in fiscal 2017, we have awarded 911,000 and sponsorships to 272 community groups. In addition, we also conduct education outreach. Since 1993, the port has awarded 721,000 and scholarships to 425 students pursuing careers in international trade and goods movement. Lastly, I would like to highlight our commitment to service, which really sets us apart. As you may have heard, we were ranked the top North American Seaport for the 19th time in 22 years at the annual Asian Freight Logistics and Supply Chain Awards in Singapore held earlier this summer. We are committed to provide the highest level of customer service to all those who interact with the port, from our customers to our community. This concludes my prepared remarks along with other staff. I'm happy to answer any questions. Thank you, Sam, and welcome back. So we're happy to have you back. I'm going to go ahead and Lester's objection to take the water presentation and then do questions for both that there's questions. So, Mr. Gardner. First, I want to point out there is no harbor without water. So is this on? Can I get my presentation, please? There we go. How do I do this? Right. Oh, there we go. Thank you very much. It's my pleasure to present the War Department's Fy18 budget. We are forming the citizens of Long Beach in 1911, and the White Port Department now provides water and sewer services to 90,000 service accounts, along with the delivery of safe drinking water. Customer service is our top priority for the Water Commission. For myself and for 220 employees. We are staff to handle water and sewer emergencies. Calls 24 hours a day, 365 days a year, handling over 10,000 such calls annually. With all the recent concerns across the nation regarding the quality of drinking water, our residents can be assured that Long Beach's drinking water meets or exceeds all federal and state regulations. To ensure this is the case, the water department has a team of highly skilled scientists, technicians and engineers who perform nearly 60,000 water quality tests annually. The backbone of our system is our 2500 miles of water and sewer pipelines located underground in every street in Long Beach. We have a strong pipeline replacement program, having replaced over 225 miles of water main pipelines since the early 1990s. For fiscal year 2018, we will be reinvesting $17.5 million of our ratepayer revenues back into the system for pipeline replacement and other critical infrastructure improvements. This chart demonstrates a great success story in the 1990s. We averaged about 150 water main breaks a year, with some years reaching nearly 200 main breaks in the late 1990s. The water department strategically targeted the long range replacement of our aging castor and pipelines as they were the most vulnerable part of our system. As you can see on the chart, our main breaks have dropped by 80% and now number about 30 year compared with the average of 150 a year previously. We're wisely reinvesting our customers water revenues back into the infrastructure, resulting in reduced long term costs. Another key area of investments in the area of technology. On the screen are three examples. This next fiscal year, we'll be assisting Parks and Rec by installing 20 smart meters to locate leaks in their irrigation system. As you've heard, they have quite a bit of leaks in the system. And with the smart system that we'll be installing, we hope that they will be able to help locate them and monetize the value of the lost water. On the sewer side, we have trench list technology, so sewer pipelines are below the ground, much lower in depth than water gas pipelines. And so we're using this new technology where we unfurl a sock, if you will, into inside the old damage pipeline and then we put treated water through there. And what it does is forms a brand new resin coated pipeline within the old pipeline that prevents us from having to trench the entire alley or street. And it's something that we're looking at doing on the water side also as we go forward. The last is a something called the smart cover. So on our sewer system, we have certain areas where we have rising sewer levels and we've installed these new smart covers which use sonar technology that hangs down from the lid of the manhole cover. And it will give us a text message in advance of the sewer level rising up to the street level. And so we'll get that either through text mail or email or through text messages. We get it. We installed at a local hotel and they receive a text message a few hours in advance, and we're able to prevent a sewer spill. With the full support of the wider commission, we have reorganized the Department so as to increase focus on quality control. Specifically in our pipeline work, we have created two key positions. One is the director of field operations to oversee both our water and sewer field planning and operation. The other is a superintendent of water construction to directly manage our water pipeline crews. Another key changes we have contracted back in the inspection responsibilities, increasing our team from two inspectors to now having eight inspectors on the team. They oversee the quality of both in-house and contract work. In the past, our in-house work was not subject to inspection and quality control suffered accordingly. Importantly, from the standpoint of the public and their neighborhoods, this reorganization includes much more attention on how we impact and leave the streets when we do our pipeline work. Previously, work was separated by main and service work performed by two separate field crews under two different supervisors. The work was poorly coordinated, resulting in lengthy interim period during which temporary patches could be left in place for up to a year rather than the preferred maximum of ten days. This was the chief complaint that we had from our neighborhoods. We're now treating all pipeline work as one project from start to finish and under one field supervisor and reviewed by one inspector. The result will be a finalized project with permanent paving that will be completed a much shorter period of time and fully in compliance with public works projects, without exception. What long drought has officially been declared over. I'm glad to say that the efficient use of water is a normalized way of life in Long Beach. Our Long Beach residents and businesses continue to use the water wisely, resulting in double digit reductions in water usage every month this past summer. As I mentioned before, Long Beach residents and businesses use in total about the same volume today as they did back in the 1950s, despite a 40% increase in our city's population. Most people don't realize it, but about 65% of a home's water usage is for outside irrigation. As such, Long Beach water continues to provide Lundegaard incentives up to $3,750 for eligible customers. The details are available on our website. Our successful lawn and garden program has resulted today in 6 million square feet of thirsty lawn being replaced with drought resistant plants. For future capital needs are utility constantly plans ahead to meet the long term water and sewer needs of our customers. On the near horizon, we expect to be investing in the development of new local water wells to maintain or at least expensive source of water, expanding the availability of reclaimed water to additional areas of the city, greatly increasing our replacement of our large and medium valves to enable better control of our pipeline system and the possible transition to smart meters for 90,000 customers, similar to what the gas utility has done. In terms of dollars, our fiscal year 18 budget is roughly $106 million in expenditures, with a forecast of $103 million in revenues. The bulk of our expenditures are tied to the purchase of imported water supplies. The cost for pumping locally produced water. The treatment of the water to ensure safe quality. And then the delivery of the water with all aspects of customer service. Some of the cost drivers include what we paid to the Metropolitan Water District or MWD for the purchase of imported water supplies from Northern California as well as from the Colorado River. This cost is increasing by 4% next year. Likewise, we pay a fee to the water replacement district or D to replace the groundwater we pump locally, which makes up about 60% of our water supplies. The cost paid to our D is increasing by 5% in 2016 I'm sorry, 2018. And the suicide or expenditures are about 22 million and our revenues are about 19 million. Sure costs are fairly stable. However, some costs are increasing primarily due to regulatory requirements for inspecting and maintaining our nearly 1000 miles of sewer pipelines, as well as the department responsible. Paying down some outstanding debt in the sewer fund. To keep the needed rate adjustments moderate and affordable. We will be drawing down our reserves in both the water and sewer funds. This allows us to keep our rate adjustments to 4% for water and 2% for sewer for the average residential household. The impact for water service will be a dollar 71 per month, while the sewer increase is only $0.23 per month. The chart behind you shows the combined average water sewer bill in Long Beach in comparison with similar usage in the other major California cities. As you can see, Long Beach is average residential bill. Even with the proposed rate adjustment included, it's far below those incurred by residents in other major cities. Thank you for your time and attention and will try to answer any questions you may have. Thank you, Mr. Gardner. Excellent. Oh, you know. That that's. That's actually true. Let's just give them more money. Okay. You're so funny. Okay, let's out. Any questions for for your presentation? And we'll start with Councilwoman Price. Q I have a question for Harbor. So, Sam, thank you very much for the presentation, and thank you very much for the briefing that you provided to me and presumably other council members as well. So I appreciate that. One of the questions that I talked with you about during our budget briefing that I know is something that I get asked a lot about because of press coverage and things like that is can you explain in terms of revenue sources and revenue expectation the fluctuation we've seen and how the sources of revenue that we are committing to our capital projects are going to assist us with future revenues, hopefully in the years to come? Absolutely. First of all, if I may, I would like to just mention that, you know, in the presentation I mentioned that we are striving for eventually a zero emission operation. We are also working on waterless harbor. So that may also come to pass. So the as far as the operating revenue is concerned, as you may remember, in about a year or so ago, one of our major tenants filed for bankruptcy, hanjin shipping, and we were able to replace that tenant with another major shipping line, which is really the second largest shipping line, and that stepped into Hanjin shoes. However, that caused a major hiccup as far as our operating revenue is concerned. So for 2017 we are slightly trailing behind, but we expect to close that gap by the end of this fiscal year. The predictability of operating revenue, which ties directly into the transfer to the Tidelands Fund, it's at the mercy of what happens in the shipping industry. So in April of this year, there was a major change in the shipping alliances. And shipping alliances really determine what cargo goes to what port having shipping lines. It took them quite some time to figure that out. So there was as well a bottleneck in the Far East that was caused by the confusion that the shipping lines were trying to figure out who goes where and and what. So hopefully all this is behind us. It is still unfolding as we speak, but that is part of the reason our operating revenue is very conservative, that we are only budgeting 2% one given what happened in 2017, but also given all the competition that we are getting from the East Coast Port and Panama Canal. And North West ports and Canadian ports and Mexico. My God. Thank. Okay. Thank you. Absolutely. Any other questions, Councilwoman Pierce? Oh, sorry about that. Yes, you can go ahead and stay. Stay. Yes. Thank you very much. Appreciate it. Sam, I really enjoyed meeting with you and the team, I believe, a little over a week ago. And I appreciate the budget and the conversations that we had around how our sport has adjusted to a very, you know, uncertainty that we've had. We also I was going to ask if you could talk a little bit about the TARP program. Sure. So the two ports allocate what's called technology advancement program funds and projects come in front of a committee that's formed of the two ports, and I think it has outside members as well, HMD and possibly CARD. And they decide those projects as which ones are technologically advanced that merit funding them. So a lot of these projects are innovative. They're projects that cannot find funding otherwise without the ports help because they are out there that they're not proven technologies. They're at the cusp of trying to, you know, breakthrough into something that is great and that will be of great benefit in the future. So the two ports fund those projects and those are very vital component. Thank you. And I just for my colleagues, a little bit of context. I think as we're talking about what a great resource it is to have the port in our city. We also talk about some of the high asthma rates we have. And I know that in Long Beach our asthma rates are still exponentially higher than L.A. County. And some of the conversation we hear from our port is we don't have the technology to go as fast as we'd like. And some of the community conversation is, you know, we'd like to see more advancements to get to zero emissions quickly. And one of the pieces that we don't talk about publicly enough. I believe, is the fact that we invest. In technology and that that is something that our port on top of being, you know, a huge economic engine is that we do have money allocated to do some of that. And so as we're moving forward, I think that we need to make sure we educate our community about the resources that we're doing and that we're investing in technology and trying to help create opportunities to move that technology faster. And any conversations that we can have in the, you know, with council or folks here at the city to to help assist that I think is really, really important. Good point. Second. I know we had some conversations around the fire station and I didn't ask the question before the council. But could you did you get an answer on whose property that is? So whose responsibility that is partly funded by by the port that's fire station five and partly by the city. So we are working with the fire department on some renovations there. Great. So I know that, you know, for our city, obviously, as the Queen Mary development gets built out, making sure that we have fire, I think our new fire boats are fantastic. But I know there's still some challenges with how they get in and out around that area. So anything we can do to make sure that our investments are protected. Thank you very much, Sam. I appreciate it. Thank you. Thank you. Those are the two comments. Is there a second on the motion? Mayor, just to receive and file? Yes, I did have. Please go ahead for. For water. Mr. Gardner? Yes. You want to go first? You know, I had a couple of questions, too. I apologize. Just one. In regards to the in assisting Parks and Rec with the smart meters to locate leaks in the irrigation system, have you identified where those smart meters will go? And do you know whether any medians will be included? I don't believe I don't believe medians will be included. But we met with Parks and Rec last week and we asked them to give us the list of 20 sites that they would like us to put the smart meters on. Okay. Because I know that I mean, obviously, there's a great need throughout the city, but in some of our medians, we've recently and not just in my district but throughout the city, we've invested a lot of money in plants, new plant palettes and some design work and things like that. And it would be nice if we could have some way to monitor that and be able to be more efficient with that. I know they're doing a great job, but that's something to keep in mind. Maybe a smaller smart meter for the medians cheaper will. Eventually mini eventually. But we're looking at IS and we're studying it right now whether we should install smart meters on all 90,000 accounts and so we may get there fairly soon. That's great. Thank you very much. And I apologize. I did have the question earlier. So council woman Peirce was very kind to let me jump back in. Thank you. All right. Councilman Pierce? Yes. I also want to thank you for the meeting that we had last week and this powerpoint looks awesome. Nice changes. I the same comment. I think that our water department has done a phenomenal job and technology like we just talked about. We don't share that information with all of our constituents and making sure that we're talking about how we as a city are saving saving those dollars. And so I think that that's really important. And I wanted to just ask if you could give an update on the California Water Fix and if the city has taken a stance on that yet? Actually, we're going to be having the general manager of the Metropolitan Water District come speak to our Water Commission on 26th, September 14th, I believe, at 9 a.m. at the Water Department. And so we have issued a press release and trying to get the public aware of that so that they can come out and hear directly from the general manager. All aspects of the California Water Fix. They expect that there will be a vote of the Metropolitan Water Board at the end of September. It may be pushed back a bit, but right now it's scheduled for the end of September. Gloria Cordero, our water commissioner, is on the board from Baltimore district and she'll be voting. She does not represent the water board. She represents the city of Long Beach on that board. Great. And then my last question is, we talked about recycled water and capture storm runoff, is that I know that we have some of the infrastructure in place. How are we with applying that citywide and what projects are? Stormwater under public works, but we're certainly in discussions with them on ways that we can assist them. All right. Thank you. Thank you. Thank you. Casey, no other questions for the reports if have a motion in a second to receive and file both of those reports. Any public comment casher votes. Motion carries. Okay. Thank you. We're going to go we're going to go ahead and go on to item 1.2.