07-12-2018 - Special Meeting - MinutesCITY OF WEST COVINA
CITY COUNCIL/SUCCESSOR AGENCY/
PUBLIC FINANCE AUTHORITY
THURSDAY JULY 12, 2018, 6:30 PM
SPECIAL MEETING -FISCAL YEAR 2018-2019 4 th PRELIMINARY
BUDGET WORKSHOP
CITY HALL COUNCIL CHAMBERS
1444 W. GARVEY AVENUE SOUTH
WEST COVINA, CALIFORNIA 91790
MINUTES
INTRODUCTION
CALL TO ORDER — Mayor Lloyd Johnson called the meeting to order at 6:35 p.m.
PLEDGE OF ALLEGIANCE — Led by Mayor Pro Tern Tony Wu
ROLL CALL
Present: Councilman Mike Spence, Councilmember James Toma, Councilmember Corey
Warshaw, Mayor Pro Tem Tony Wu, Mayor Lloyd Johnson
Staff Present: City Manager Chris Freeland, Assistant City Manager/Community Services
Director Nikole Bresciani, Deputy City Manager Laura Biery, City Attorney Kimberly Hall
Barlow, Assistant City Clerk Rosalia Butler, Interim Finance Director Judy Lancaster, Public
Works Superintendent Micah Martin, Planning Director Jeff Anderson, Police Administrative
Services Manager Alex Houston, Assistant City Engineer Monica Heredia, Human Resources
Director Edward Macias, Police Captain Richard Bell, Police Captain Doug Murray, Fire Chief
Larry Whithorn
Thursday July 12, 2018
DEPARTMENTAL MATTERS
Staff Reports
1) Business License Tax Analysis and Ordinance Review
It is recommended that the City Council take the following actions:
1) Authorize the City Attorney to draft an ordinance amending Chapter 14 entitled
"License and Business Regulations" of the West Covina Municipal Code ("Business
License Ordinance") that would adopt a new fee structure for business license taxes based
upon Gross Receipts - Classification Based Tax Rates; and
2) Direct staff to prepare necessary documents to allow the City Council to call for an
election for voters to consider the amendments to the Business License Ordinance.
Interim Finance Director Lancaster introduced HDL Representative Josh Davis and stated
that he would be presenting a brief report regarding the rate comparison between the
current and proposed tax rates, as well as the proposed tax structure for Option #2 Model
#2. He explained that Option #2 would replace all categories with gross receipts tax, and
Model #2 was a classification-based tax rate. Mr. Davis also indicated that multiple options
for modifying the tax code were previously discussed at the Regular City Council Meeting
on May 1,2018. In addition, he also stated that a neighboring jurisdiction comparison chart
had been included for Council and staff reference, and informed Council that he was
available to answer any and all inquiries regarding Item No. 1.
City Manager Freeland indicated that the aforementioned item had been previously
discussed by Council in order to modernize the City's business license tax structure.
Mayor Pro Tern Wu expressed concerns regarding Option No. 2's high tax rates and the
impact on business owners within the City.
HDL Representative Davis addressed Mayor Pro Tern Wu's concerns and stated that HDL
was only required to review the tax code, simplify the code, and expand the rates to be
more in line with a gross receipts model. Mr. Davis also stated that the proposed model
provided the most equity for businesses, as well as the one that would produce the highest
amount of revenue for the City. Furthermore, he also stated that if there was a concern
regarding the tax rate being too high, Council could opt to modify the proposed model to
fit the City's needs.
Mayor Pro Tern Wu expressed concerns regarding the possibility of business owners being
taxed twice with the proposed business tax model.
Mr. Davis indicated that the tax for commercial rentals only applied to those businesses
that were not owner occupied and would only apply to the business owners who are renting
their building to another individual. He also stated that the gross receipts model is the most
common method of taxation. In addition, he also addressed Mayor Pro Tern Wu's concerns
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regarding the appeal process for those individuals who have made mistakes on their tax
returns.
Councilman Spence expressed concerns regarding the aforementioned proposed tax and
asked for further explanation as to why the additional tax is necessary.
City Manager Freeland stated that since the City is not generating the substantial amount of
revenue it needs to thrive, the system must be modernized to ensure that the City received
all the potential revenue possible.
HDL Representative Davis indicated that multiple factors pertaining to how the City would
be impacted were considered in the company's final report.
Councilman Spence shared his concerns regarding the enforcement of said tax and stated
that the proposed tax would drastically affect business owners within the City.
Councilmember Warshaw stated that this item needed to be brought to a vote to place the
aforementioned item on the ballot. He also indicated that said item would be placed on the
upcoming ballot, in order to let the residents, determine whether or not they wanted to
implement the proposed tax measure.
Mayor Johnson expressed concerns regarding the approval of Item No. 1 without any
amendments.
City Attorney Hall Barlow stated that once the public voted on a measure, it would set the
maximum tax rate, and informed Council that they could choose to reduce or suspend any
particular category in the proposed measure if they wish to do so.
Mayor Pro Tern Wu expressed concerns regarding the usage of the same business license
model for all types of businesses.
Mr. Davis indicated that while Model No.1, Option No. 2 stays at a lower rate, the
proposed Model No 2, Option No. 2, provides a variety of different tax rates depending on
the classification type of the business.
City Manager Freeland indicated that staff needed Council direction in order to determine
what changes they wished to incorporate into the proposed measure before the deadline on
August 10, 2018.
Councilman Spence expressed concerns regarding the upcoming deadline and stated that
the business license tax measure vote should be postponed until Council can obtain further
information from HDL.
Councilmember Toma asked for more information pertaining to which businesses would
be classified as a contracting firm.
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Thursday July 12, 2018
HDL Representative clarified that a contracting firm would be defined as businesses who
contract third party companies to complete projects and developments on a larger scale.
Mayor Johnson opened the public comment portion for Item No. 1.
PUBLIC COMMENTS/QUESTIONS - ITEM NO. 1
Bill Robinson expressed his disapproval regarding Item No. 1.
Jerri Potras shared her concerns regarding the proposed tax measure and advised Council
to retain the current tax rate.
Phil Kaufman expressed concerns regarding the amount of gross receipts tax and stated
that hotels and residential real estate should not be placed in the same tax category.
John Shewmaker stated that Council should not place the aforementioned item on the
upcoming ballot and indicated that Council should postpone this item until further
information could be obtained.
Chris Miller expressed concerns regarding the proposed business model and asked Council
to postpone the item until more information could be obtained.
Mayor Johnson closed the public comment portion for Item No. I.
City Manager Freeland gave responses to speaker inquiries.
Mayor Pro Tern Wu expressed concerns regarding the amount of the proposed business
license tax fee for business owners and stated that the high rate would drive businesses out
of the City.
Couneilmember Toma asked for clarification regarding what kind of changes needed to be
made in order to approve said item.
Councilman Spence indicated that the process to determine the changes for the
aforementioned tax measure was going to take some time and was an issue that should not
be rushed.
Mayor Pro Tern Wu expressed concerns regarding the possible ramifications for approving
the item prematurely.
City Manager Freeland stated that while the August 10, 2018 deadline is tight, many
nearby cities were following the gross receipts taxation method and asked for Council
direction regarding the changes they wished to implement.
Councilmember Toma asked what changes the Council was considering making to the
proposed business license tax model.
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Thursday July 12, 2018
A motion was made by Mayor Johnson and seconded by Councilmember Warshaw to hold
Item No. 1 over until the next Special Meeting on July 26, 2018 with an Option No. 3.
Motion was carried by a vote of 3-2, with Councilman Spence and Mayor Pro Tern Wu in -
opposition.
AYES: Toma, Warshaw, Johnson
NOES: Spence, Wu
ABSENT: None
2) Fiscal Year 2018-19 Fourth Preliminary Budget Workshop
It is recommended that the City Council provide staff direction on the various City
priorities related to the Fiscal Year 2018-19 Operating and Capital Improvement Program
Budget.
Interim Finance Director Lancaster provided a brief report on the City's budget and
discussed all previously approved budget cuts.
City Manager Freeland discussed a variety of measures and items for Council
consideration and discussion in order to balance the City's budget. He also informed
Council that an additional $17,000 must be made to the City Clerk's Office budget in order
to retain the Municipal Code.
Fire Chief Whithom gave a brief overview regarding the fees for tire safety inspections for
businesses.
Mayor Pro Tern Wu and Councilman Spence both expressed concerns regarding the
proposed fees.
Mayor Johnson shared his concerns regarding the lack of fire safety inspections completed
in the past.
City Manager Freeland indicated that part-time staffing for the Fire Inspector position was
being utilized in lieu of filling said position full-time and stated that no additional staff
would be added.
Fire Chief Whithom clarified that due to a decrease in staffing, state mandated fire
inspections have been a priority over mercantile and business fire inspections in the past.
However, he stated that the West Covina Fire Department was proposing to reinstate the
business and mercantile inspections to ensure safety and address potential fire hazards.
Mayor Pro Tem Wu asked for clarification regarding which businesses were included in
state mandated fire inspections.
City Manager Freeland clarified that the businesses included in state mandated inspections
consisted of: hospitals, hotels, motels, apartments, daycares, convalescent homes, and high-
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rise buildings. In addition, he also informed Council that the inspection fee differed
depending on the type of business.
Councilman Spence asked why the state did not mandate annual inspections for the other
types of businesses not included in the aforementioned list.
City Manager Freeland stated that staff was asking for Council direction concerning the
fire inspection fees.
Councilmember Warshaw explained why there was a difference in fees for a state
mandated fire inspection versus a business fire inspection, and asked Fire Chief Whithom
how long a business had to bring any fire violations up to code.
Chief Whithom answered Councilmember Warshaw's inquiry and stated that the business
owner was given 14 calendar days to fix the violation and if they were making progress to
correct it, they were given an additional 14 days to address the issue. However, if the
business owner did not comply with this regulation, they were charged a $550 non-
compliance fee.
Mayor Johnson opened the public comment portion of the meeting for Item No. 2.
PUBLIC COMMENTS/QUESTIONS- ITEM NO. 2
Sammy Arvizu expressed concerns regarding the operating budget for the Public Works
Department and spoke on the impact that the restructuring process would have on City
employees.
Gilbert Luna asked Council to extend the deadline of the staff layoffs in the Public Works
Department.
Jim Grivich expressed concerns regarding the amount of overtime and retirement benefits
for public safety employees.
Fabiola Wong shared her concerns regarding City expenditures and asked Council to
explain how they planned to remedy the City's budget.
Bill Robinson spoke on the fiscal decline of the City and stated that the only way to avoid
declaring bankruptcy was to implement new procedures in order to keep the budget
balanced.
Jerri Potras expressed concerns regarding the City's financial situation.
John Shewmaker shared his concerns regarding City expenditures and the proposed tax
increases.
Chris Miller spoke on the Athens franchise tax increase and expressed his concerns
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Thursday July 12, 2018
regarding employee lay-offs.
Ray Edmonson expressed approval pertaining to the fire inspection fees and spoke on the
decreased staffing in the Public Safety Departments.
Nick Preciado shared his concerns regarding the deadline for layoffs in the Public Works
Department.
Mayor Johnson closed the public comment portion of the meeting for Item No. 2.
City Manager Freeland and City Attorney Hall Barlow gave responses to speaker inquiries.
Councilman Spence asked for clarification regarding the schedule for the two current part-
time fire inspectors.
Fire Chief Whithorn clarified that the two part-time employees worked anywhere from 10-
15 hours which was substantially less than that of a full-time employee.
Mayor Johnson asked City Manager Freeland if the items related to the Fiscal Year 2018-
19 Operating and Capital Improvement Program Budget could be voted on separately or if
they must be voted on as a group.
City Manager Freeland indicated that the items could be addressed and voted on separately
if Council chose to do so. He also informed Council that staff would comb through the
City's budget in order to find additional methods for closing the budget gap of $1.7 million
by the next Special Meeting on July 26, 2018. Furthermore, Mr. Freeland discussed the
various expenditure cuts previously discussed at the Special Meeting on July 2, 2018, and
informed Council that due to a staff resignation, the City will also un-fund a Planning
Assistant position.
RECESS — City Council recessed to Closed Session at 9:17 p.m. and reconvened the
meeting at 9:39 p.m. with all Councilmembers present.
City Attorney Hall Barlow indicated that no reportable action was taken in Closed Session,
but that staff was given direction by Council.
Councilmember Warshaw stated that Mayor Pro Tern Wu had a plan to reduce staff
overtime by hiring more employees and asked Mayor Pro Tern Wu to present his plan to
City Manager Freeland.
Mayor Pro Tern Wu indicated that he needed more information from City staff and
consultants working with the City to gather all data in order to implement a plan to control
major expenditures and reduce the amount of overtime for the WCPD and WCFD.
City Manager Freeland stated that the overtime calculations for the Police and Fire
Departments have already been formulated by Staff and were available for additional
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Council consideration if desired.
Councilmember Warshaw expressed concerns regarding overtime for Public Safety
employees.
Mayor Johnson asked City Manager Freeland how the elimination of the vacant positions
with the Fire and Police Departments would impact employee overtime.
City Manager Freeland indicated that by eliminating the vacant positions, you were also
eliminating opportunities for current employees to receive overtime for backfilling said
positions. He also stated that Interim Finance Director Lancaster could give Council a brief
overview of the concepts on employee overtime if the Council wished.
Interim Finance Director Lancaster gave a brief overview on the overtime analysis of the
Public Safety Department.
Mayor Pro Tern Wu expressed concerns regarding the amounts presented in Interim
Finance Director Lancaster's report.
City Manager Freeland indicated that there are a variety of reasons as to why Public Safety
employees were being awarded overtime.
ADJOURNMENT
Mayor Johnson adjourned the meeting at 9:54 p.m.
kosalia'A. But MMC
Assistant City Clerk
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