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Addendum (2) PREPARED BY: SHELLEY NEIS ROB SCHULTZ Clerk Administrator Town Attorney _______________________________________________________________________________________ Reviewed by: N/A Assistant Town Manager Town Attorney Finance _________________________________________________________________________ S:\COUNCIL REPORTS\2016\10-18-16\12 Commission Appointment Policy\Addendum.docx 10/17/2016 1:06 PM SLL MEETING DATE: 10/18/16 ITEM NO: 12 ADDENDUM COUNCIL AGENDA REPORT DATE: OCTOBER 17, 2016 TO: MAYOR AND TOWN COUNCIL FROM: LAUREL PREVETTI, TOWN MANAGER SUBJECT: REVIEW AND DISCUSS THE POLICY COMMITTEE’S RECOMMENDATIONS TO AMEND COUNCIL POLICY 2-11 ENTITLED COMMISSION APPOINTMENTS REMARKS: Attachment 3 contains public comments received between 11:01 a.m. October 13, 2016 and 11:00 a.m. October 17, 2016. Attachments (previously received with October 13, 2016 Staff Report): 1. October 13, 2016 Council Policy Committee Staff Report with Attachments 1 through 6 2. September 29, 2016 Council Policy Committee Staff Report Attachment received with this Desk Item Report: 3. Public comments received between 11:01 a.m. October 13, 2016 and 11:00 a.m. October 17, 2016. From: Phil Koen [mailto:pkoen@monteropartners.com] Sent: Monday, October 17, 2016 4:32 AM To: Laurel Prevetti Cc: Robert Schultz; jvannada@gmail.com; Terry Duryea; Lee Fagot Subject: Please include this email in the Addendum for Item 12 of the Town Council Meeting on October 18, 2016 Response to the Policy Committee Report dated September 19, 2016 In Other Comments of the above mentioned staff report, the comment below was included regarding adding residents to the Finance Committee. The Staff’s response is in italics and our response follows. Add two resident members to the Council Finance Committee to ensure communication from residents with Chief Financial Operator (CFO) experience to ensure that residents with financial background and interest can have maximum understanding of the existing and proposed financial plans of the Town. The Town appreciates the interest of residents to participate in budget and related financial discussions. The Town has two Council Committees with only Council Members. The Council Finance Committee is a public meeting and the public is welcome to participate to achieve the abovementioned outcome of residents having maximum understanding of the existing and proposed financial plans of the Town. It is our position that the residents of the Town of Los Gatos are not well served by the current structure of the Finance Committee. Under the current structure the unfunded accrued liabilities of the pension and post-retirement health plans have increased from zero in 2000 to approximately $50m as of June 30, 2015. In a January 15, 2016 memo to the Finance Committee the Town Manager clearly pointed out the dire position the Town now faces…..”With the recent approval of the $12.2m commitment to the Almond Grove Street project, there remains no readily available dollars within existing reserve funds to access for pay-down purposes”. The status quo is failing the residents of Los Gatos. The current committee has 2 council members as voting members with Staff attending the meetings. Residents are able to attend sessions and address the committee in an allotted amount of time determined by the Committee. Diversity of views and deep inspection of competing ideas cannot be accomplished in a committee comprised of 2 people. A committee of two is not a committee. Additionally, none of the members of the current Committee are financially trained nor does the current structure of the Committee comply with GFOA best practices to include independent financial experts on the Committee. We believe that observer rights are not the same as full participation and voting rights. The Town’s finances are owned by all of the residents. Including highly qualified residents on this committee will improve the diversity of discussion, transparency and resident involvement in an area that is foundational to the Town. We have not been given any compelling reason why residents are not included as members of the Committee. We strongly encourage the Town Council to revise the current Committee structure and appoint 2 residents as full members of the Committee. Terry Duryea Lee Fagot Phil Koen Jak Vannada From: Phil Koen [mailto:pkoen@monteropartners.com] Sent: Monday, October 17, 2016 10:43 AM To: Laurel Prevetti Cc: Robert Schultz; leefagot@gmail.com Subject: Response to attachment 1 of agenda item 12 Laurel, Would you please pass this to the Town Council in response to Attachment 1 for agenda item 12. Thank you. Lee Fagot Phil Koen Response to the October 15, 2016 Memo from Staff Below is the section of the above identified Staff report which discusses the request to add two residents to the Finance Committee. Our responses to the Staff report are in RED below. In response to public requests to add two resident members to the Council Finance Committee, the Committee requested additional information regarding several questions. The questions and the requested information are provided below. • What is the difference between a Council Committee and a Commission? A Council Committee is a subset of the Council. As such, only two Councilmembers are appointed to the Committee in compliance with the Brown Act. A Council Committee reviews matters in detail and makes recommendations to the full Council. For example, every year the Council Finance Committee considers the draft Comprehensive Annual Financial Report (CAFR). The Town Manager, Finance Director, and the Town's independent auditor answer questions and address issues raised by the Council Committee. This level of review and recommendation allows for detailed exploration of the information prior to the full Council considering the CAFR. Response: This is an interesting issue because it is our understanding that since the Council Finance Committee currently consists of only two members of the Town Council, a number which is less than a quorum of the Town Council, and the Committee meets infrequently on an “ad hoc” basis, there is an argument that currently the Committee might be exempt from the Brown Act. We would request that that City Attorney review and confirm that the current Committee is subject to the Brown Act and that the Committee has continuing subject matter jurisdiction. The Finance Committee has no members with a formal finance education or training. The GFOA best practices recommends that at least on independent financial expert be on the Finance Committee. It is difficult to see how the current committee can provide the proper oversite of the annual audit and detail review of the CAFR without having the appropriate technical background. A Commission is advisory to the Town Council. A Commission consists of residents appointed by the Council. Commissions typically consider emerging issues and make recommendations on new ordinances, studies/plans, or programs. For example, the Youth Commission worked with the Town Attorney on the recently enacted smoking ordinance; the BPAC is assisting with the preparation of the Bicycle Pedestrian Master Plan; and T&P is exploring potential Vision Zero measures. Response: We believe the Town Council has wide latitude in properly creating a Finance Committee through a formal action. The action can include a specific charter which would address those issues which are important to the Town. We would suggest that we work with Staff to create such a charter for the Town Council’s consideration. • What are the implications of adding residents to a Council Committee? Most cities have Council Committees (some are called Council Subcommittees) that do not have residents. This is important because it allows for Council members interested in a topic to develop expertise and fully examine issues prior to consideration by the full Council. The Council Committee recommendation reflects a subset of the elected body which is directly accountable to the voters. All meetings are public and residents are welcome to provide comments and participate in the Committee meetings. Response: A Finance Committee that comprised both Town Council members and residents can serve this purpose. Council members that are interested will be able to participate and fully examine issues prior to consideration. Additionally they will be able to become even more fully informed when interacting on the Committee with highly qualified residents of the Town. Properly approved, with a comprehensive charter and regularly scheduled meetings, this newly constituted Committee would also be subject to the Brown Act. The Town losses nothing and gains greatly. Adding residents to a Council Committee would mean that it is no longer a Council Committee. It becomes a different kind of advisory body, such as the Conceptual Development Advisory Committee or General Plan Committee with a mix of appointed residents and elected officials. If one resident is added, the Council members would be a majority of the Committee. Adding two resident members is not practical as the Committee may end up with tie votes; however, adding three would result in a majority of resident members. Response: We find this concern interesting because today there are only two members on the Committee. Are there issues today with tie votes? We think that the Finance Committee can be thoughtfully constructed to achieve a number of objectives, the most important one being resident participation. The current structure is broken and does not serve the residents well. As provided to the Council Policy Committee at its last meeting, in 2015 , the City of Newport Beach modified the membership of its Finance Committee to add four citizens appointed by the full Council to a Committee that historically (since 1994) had three Councilmembers. The Mayor appoints the chair subject to confirmation by the full Council. Based on a scan of other jurisdictions in California, this is a very unique situation. Typically, if a jurisdiction has a need for citizen advice, it would create a Commission. Response: We do not agree that having a Finance Committee comprised of residents and Town Council members is a “very unique situation”. What we have found a number ofprogressive cities adopting this model as a result of realizing that government finances are becoming increasingly more complex and difficult to manage. Incurring $50m in unfunded pension and post-employment medical plans should be a compelling enough reason to change. Including subject matter experts who are residents and have “skin in the game” is an enlightened model. We would gladly welcome the opportunity to work with the Staff to create a thoughtful charter for a newly constituted Finance Committee. • What are the implications of adding a new Commission? If the Town were to create a Finance Commission, the Council would need to adopt an enabling resolution and clearly articulate the purpose and area of responsibility for the new Commission. For example, the City of Los Altos has a Financial Commission which provides advice on the City s investment policies that are ultimately considered and adopted by its Council. Response: We agree with Staff that clear charter for this newly reconstituted Finance Committee needs to be developed. We have looked at a number of existing charters and would welcome working with Staff to draft such a charter for the Town Council’s consideration. Including oversight of the investment policies and activities of the Town is an idea we agree with. A Finance Commission in Los Gatos would be supported and staffed by the Finance Department with the associated expenses of preparing agendas, writing action minutes, researching and preparing Commission reports, attending meetings, and completing other tasks. If the Council Policy Committee is interested in this option, it should be raised at the Council's next priority setting session intended for early 20I7. Staff would then determine the budget implications and any staffing augmentations that might be needed to suppo11 the new work associated with a new Commission. Response: We would only urge for the Town Council to address this quickly. There is much work to be done and there is no benefit in waiting.