Palm Desert City Council - Study Session, December 11, 2025

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[00:05:14] Mayor: Palm Desert City Council study session meeting. It is 1:30 and let's just, we have a lot here, so let's get to work. Is there anything that you want to change order, or are we just going to dive straight in? Okay. So the first is to provide an overview of the Riverside County Fire Department workshop.
[00:05:40] Staff: Welcome. Good afternoon, mayor, council members. We've brought the executive team from the headquarters over to do an abbreviated study session presentation for you. We have deputy director Diane Sinclair, chief deputy Jeff Heon, and newly appointed county fire chief Robert Fish here to answer any questions you may have and do a little bit of presentation. I'll turn it over to them.
[00:06:07] Speaker: Thank you.
[00:06:12] Robert Fish: That's very loud. Okay. The presentation that we're about to give is an abbreviated version, typically about an hour to two hours. The councilwoman attended, so just to give you an idea, we usually are much more detailed because it often leads to questions. So, in service of your time, it's going to be fairly consolidated. If there's additional questions, we're welcome to answer them today or follow up in writing with the city manager if necessary. So again, we're from the executive team of the county fire department. What we're here to talk about primarily is our cooperative agreement history and the benefits of specifically the cost allocation. So, our cost allocation is something where we pool cost and then we divide proportionally based upon individual services for each one of our city partners. The easiest way to break this down is that it's a whole pie, but Palm Desert, along with the other 19 city partners and one service district, pay only a sliver of that pie, but get the benefit of the entire pie. And it's a proportional cost. And so we are able to leverage our ability and economies of scale as a large fire department, currently the third largest in the state of California from a municipal perspective. And so that benefits both you as a council from a budgetary perspective, but also your citizens for the horsepower that we can bring as a fire department. Next slide, please. Okay. So, generally, our cooperation between the county fire department and the state of California, the Cal Fire portion, goes all the way back to the 1940s, where when it was very rural and mostly agricultural-based county, the population was very small, obviously, and they recognized in those days that Cal Fire and the Riverside County Fire Department had an overlapping mission and that if they brought their resources together in some sort of consolidated fashion, they could amplify what both departments were doing. So that formal relationship, which was informal in the early '40s, was formalized in 1943 and Cal Fire has been serving as the personnel for the Riverside County Fire Department since then. So it's a very old agreement that has been reaffirmed multiple times over the years and continues to go strong. Currently, we have, as I mentioned earlier, 19 individual city contract partners, yourselves being one, the cove communities collectively all being a portion of that, and one community service district, which is a water district that provides fire protection as well. So it's very large and very robust. The largest member of that, which kind of goes unstated, is the actual county, which is the largest individual contributor of the overall cooperative group. So what the county fire department contract brings, I'm sorry, excuse me, what the Cal Fire component brings to the larger county fire department, as articulated up here on this slide, is all of these individual elements proportionally are paid for by Cal Fire directly. So their personnel, like myself as the county fire chief, the county doesn't pay for me. I'm paid for by Cal Fire, but the county gets the full benefits of my position and all.
[00:10:00] Speaker: ...the benefits that come with that along with our two out of our four deputy chiefs. And then as it articulates, we're on track right now. 16 of the 42 battalion chiefs that cover daily and respond to active emergencies as your frontline leadership on incidents. Again, paid for by Cal Fire. That comes at no cost to you. It comes no cost to the county. It's a benefit of the Cal Fire cooperative contract from the county. So there's multiple layers of benefit. The state is benefiting from the larger workforce capacity for surge. The county is benefiting from the cooperative relationship with Cal Fire. And then you as a city, because of that horsepower and that larger economy of scale, are benefiting from all of that working together to lower cost individually for each individual sector of what we do. Next slide.
[00:11:01] Speaker: And I'll turn it over—excuse me—I'll turn it over to Deputy Director Diane Sinclair.
[00:11:07] Diane Sinclair: Good afternoon. As part of your cooperative agreement with the county, we have what's called a cost allocation plan. That is a distribution of direct and indirect cost related to the contract that was developed in early 2004 along with several city partners and cooperation together. We developed that plan. That plan basically ensures there is no admin fee from the county to any of our partners. We don't charge an admin fee. This is what we use to distribute indirect and some direct cost related to the cooperative agreements. One of the sections of shared cost is the administrative support. This includes the leadership, the executive team that's part of the county fire department. It includes what we have as a warehouse. So all of the protective gear that all our firefighters use on a daily basis. And that warehouse provides service 24 hours, seven days a week coverage because when you do a large incident, there could be water needs, there could be protective gear needs and things like that. Another piece that's related to is fire prevention. We have prevention officers. There are some in a few in the east. There are also several in the west, both sides of the county, and those provide arson investigation services. We also provide equipment. So all of the equipment on the engines, our city partners will pay the first set of equipment that's on an engine. But after that, all of that maintenance and the replacement is part of this plan. We will replace all of those items as needed based on use and wear and tear, etc. Also we have training. We have a lot of training that's needed for each of our firefighters. And we have a training center, a Ben Clark training center. And then there's also the Roy Wilson training center. And those are included in the administrative shared support. Next section...
[00:13:16] Diane Sinclair: The next section we have is a volunteer reserve program. We manage volunteer reserves and each of our city partners participate in that and it provides over basic costs related to this is just the oversight of that program and the needs of their protective gear and so forth and we use that as a feeding section to get hires. So that's a key component that we use to hire folks. So that's kind of like the beginning step. So, we like to get people first in high school or in their younger years in the explorer program, then to volunteers, and then hopefully into the system and as employees. Another component of share costs is our medic EMS administrative support. This section, this bureau provides training to our medics. Another key piece they provide is quality assurance to ensure that we are providing the best level of care to the residents. Another piece is we provide defibrillators and monitors replacement program. So you as a city partner would only pay for the first one when you're putting something new into service. But then after that we provide the maintenance, the replacement of all the preventative maintenance to ensure that there's always one in working order and for use. And then lastly, the medical program. We provide narcotics drug management. We ensure that everything is properly tracked and accounted for as required. And then what we have, the most newest section, is our battalion chief support. Due to different changes in the MOUs within...
[00:15:01] Speaker 1: Calire, our battalion chiefs have changed in their work schedule. So we've had to buy to add additional battalion chiefs to ensure all that proper coverage. So those are shared amongst the entire cooperative agree, all the cooperative system. So everyone pays their piece. We have, is it 42, 40? Yeah, around 42, in the 40s of battalion chiefs, and everybody just pays their piece. So that ensures that you're not having to pay for a large number of battalion chiefs just for the stations that you have, that you have that coverage. And then I will hand it off to Chief Peton.
[00:15:44] Chief Peton: Good afternoon. Thank you for having us. The topics that I'm going to cover is fleet services, and that's really the maintenance of our apparatus, and that too is a shared cost. We like to try and get as finite as we can, and I'll give an example of fuel. But if we were breaking down every gallon, that's tremendously cost-prohibitive of us to track that detailed. So we share those costs based upon our cost allocation table and how many incidents you're running, how many employees you have, and these are all broken down that way. But the other thing that we do through our fleet services is all of that maintenance, whether it's major maintenance, a whole engine rebuild, or it's tire replacement, we pull all those costs together, and then they're divided up based upon our cost allocation matrix, which we are happy to provide to you. We're going to give those to the city manager today, and then you guys can see the details behind all that. The other one that's probably the biggest is our communication and information technology bureau. We replace computers at about a five-year interval. We can't afford to have one of our emergency computers go down or be out of date. So, that's a constant ongoing. By the time we get to the end of the line, we're right back at the beginning trying to make sure that we're staying up to date, as well as all the staff that's included in those sections.
[00:17:07] Chief Peton: Probably what I would refer to as the heartbeat of our organization is our dispatch center, to us is referred to as the emergency command center. This is probably where we've seen the biggest growth on the county side of employees, and part of that is some of the successes that you guys are going to start seeing in being able to divert calls to a nurse navigation line. And those are the low-acuity calls, the 'I've had an earache for several weeks and I need an ambulance to go to the hospital.' If we can get those patients to the right place to provide the right care to them without backlogging the emergency rooms, that's really what we want to do. But at the end of the day, if they still want to be transported by ambulance, we're certainly going to make sure that they still get that transportation there. This is an area that we see huge advantages going forward of really being able to divert almost 30,000 to 40,000 calls at full deployment countywide to this nurse navigation line. It's really a 24-hour a day, 7-day a week nurse that's backed up by additional call questioning to really find out what their need is and get them, like I said, to the right location. One of the things that we learned as we went through the nurse navigation partnership with REMA and Global Medical Response was that we only have two 24-hour urgent cares in the entire county. So really what we're trying to do is get those patients away from the ER so we can bring down those wall time delays that we experience, and we experience here in Palm Desert with your ambulances sitting on the wall waiting for an available bed. If we can get those lower acuity patients to the right location to have the right care, that's really one of the things we're striving for out of the command center. One of the other cost allocations that we have is hazardous materials services, and that's those emergency hazmat calls that we get. Those are based upon prior year calls within your jurisdiction and then a baseline ongoing cost to maintain the program, and that includes the vehicle for the program. Flow back to you.
[00:19:12] Speaker 1: Yes, back to me. One another of the components that we have that's, it's not necessarily part of the cost allocation plan, but it is part of cooperative agreement is the fire engine use agreement. This basically ensures any of our cooperators that actually want to sign up for this, it basically ensures that there's always a functioning fire engine available, and it also ensures that when the fire engines are ready to be replaced, it's automatically replaced. You don't have to budget anything extra. It's already been included in your contract over the years, and when it's ready for replacement, we simply replace it with no additional cost. It's already been counted over the years. The last, it's based on the last fire
[00:20:01] Speaker: ...engines that we've purchased and received. Those costs, it will be going up to approximately $55,000 annually because the cost of our engines have grown quite a few over the years. It's now about $1.1 million to replace a fire engine. So, this basically ensures that there's always an operating engine. So, if you have a catastrophic failure, there's an engine there. We will take care of it. It'll have to, it'll get replaced if, um, it's pretty, it's a pretty good deal that we offer and a lot of our city partners sign up for it, and I'm passing it off to Chief Fish.
[00:20:41] Chief Fish: So again, the purpose of this is to kind of, one of the things we recognized is that a lot of the folks who were the originators and the participants, both at the city staff level and city council levels, have actually moved on. And so we have a whole new series of folks at our various contract cities that haven't been exposed to this information in any sort of detail, which was the intent of the presentation. The benefits really come down to, this is just another list of all the things that come with your portion of that pie that is proportionally split amongst the partners. You're getting the full benefit of our capabilities as a department to do all of these things: deal with automatic aid agreements with our various partner mutual aid agreements throughout the valley and outside the valley to other county agencies. You also are able to leverage a lot of resources that smaller departments have a hard time and struggle with, such as technology enhancements, CAD to CAD, using technology to increase our efficiencies and our capabilities as a department. And then also, because of us being part of Cal Fire, we serve as the operational area coordinator for the Office of Emergency Services. And how what that translates to you is if we had a large, massive disaster that exceeded the local capacity to respond, both individually and regionally, we would have direct and rapid access to resources from outside the region. Also, as an example of where that benefits us, during the Palisades Fire coming up a year ago now, we actually had a mobilization center where many of the out-of-state resources were staged here in Riverside County because of our role in that. And we had over 350 fire engines from throughout the western United States here in the county prepared to respond to emergencies both in and around our county. So another leveraged asset that comes from a benefit of being a larger system. Next slide.
[00:22:54] Chief Fish: And then just to give you an idea of kind of where we're headed again as a collective body and you participating in the larger system as a city, we are currently working on a standards of coverage document that is updating, and also let me caveat that also with community risk assessment. What those two documents will do is validate and look at our system and have an outside body assist us in evaluating our current workflows and our processes to ensure that they're as efficient as possible and that we're achieving the most, but also to help us continue our culture of looking inward and evaluating and constantly trying to find efficiencies in the way we deliver services like nurse navigation to your citizens to ensure that the right resource is available at the right time for the right emergency and that we're not overresponding or underresponding. Eventually, what we would like to do is lead that towards a process of becoming an accredited fire department for the county fire department, which you would also receive the benefit of. And what that is is essentially a recognition that we're meeting or exceeding many or all of the National Fire Service standards. What it would put us amongst the recognized elite fire departments of the nation, and something that we intend to complete and do for our communities because we think, well, I'm pretty confident, I know we're already doing most of it. It's about the process of articulating that to an outside group that can validate it. But it's also about creating that culture and maintaining that culture from the lowest levels to the highest level of constantly looking inward and asking, is what we're doing the right thing, the right way, and is it efficient and cost-effective, and is there a way that we can squeeze more performance out of our system in a meaningful way? And then we're also evaluating, and I'm...
[00:25:02] Staff: Sorry, not evaluating, but participating in RIFFO one, which is a data-sharing process at the county level that I'm sure most of you are familiar with, and using our integrated services to look for additional ways besides nurse navigation. But our call volume as a county is rising at a market rate consistent with our growth in population, and all of our cities, and the county included, are not going to be able to build fire stations and staff equipment as fast as population is growing. So again, we have to find efficiencies, and we believe by participating in the integrated services process that we can actually reduce the number of times your fire engines and ambulances are responding to non-acute calls. And again, so over the long run, while call volume may go up, our actual responses may flatten out and provide us some bandwidth between where we're at trajectory-wise versus the realities that we'll see. And then you also get the benefit of the regional model. So, you're about to bring Station 102 online here soon, which I'm very excited for, and I think actually speaks to the values that you as a council bring to the city in reinforcing our capacity and increasing our ability to respond timely and effectively here in Palm Desert. But you also get outside your four fire stations, you're getting the benefit of the entire regional system. So when you have large emergencies or multi-alarm fires, the city alone wouldn't be able to stand very effectively on its own by itself as an individual, but you have the benefit of all your partners around you responding to you and you responding to them. So that we are the benefit of having a larger blanket of redundancy and surge capacity for each other, and that works very effectively in mitigating and keeping what could become a large issue often very small because of that response capacity. So that concludes our presentation. We're happy—I know that was very abbreviated and it may have created more questions, but we are happy to take questions or answer any follow-ups.
[00:27:25] Mayor: Thank you. Are there any questions?
[00:27:29] Mayor: Please.
[00:27:30] Councilmember: Earlier this year, my understanding that Congress launched an investigation into the rising costs of fire engines. Is there any—been any recent developments on that?
[00:27:43] Staff: I'm unfamiliar other than the hearings that they had, which I'm sure is what you're referring to. Generally speaking, it was happening prior to COVID, but COVID accelerated it. There was a mass consolidation in apparatus manufacturing to basically 30 large manufacturers. What that has meant for us is escalating costs beyond inflation and also reduced capacity for competition and generally longer times in the builds for everything. For your ladder truck, I think we paid—I think the current one was 1.2 million.
[00:28:23] Councilmember: 1.2?
[00:28:25] Staff: No, was that two? Okay, 2.2 million, I believe. No, I—
[00:28:30] Councilmember: I was asking for truck 33 right now.
[00:28:32] Staff: Oh, I'm sorry.
[00:28:33] Staff: Yeah. So, truck 33, the one that's currently in service was 1.2 million. Today's dollars, it would be 2.4 million to replace it, and you've only had it for five years. So, gives you an idea of those impacts. And so those are the things that we try to look for ways of not only communicating with city staff but also giving you opportunities to be prepared but also look for efficiencies. So, Geoff, did you have more?
[00:29:00] Staff (Geoff): No, I think the only thing that I want to add is one of the things that your county fire department has done is really looked forward and looked ahead. We have consistently ordered on the average of about seven engines a year. I think last year we had a total of 21, 22 because we've had cities add additional apparatus, but we have been far ahead. And when you look at what went on in LA and the shortages of engines and the lack of engines being in service, we were a model for them that they've come to us now and said, 'How are you guys doing this?' And part of that is the relationship that we have with all of our cities. So, while we sent—I want to say we sent 30-plus engines to LA from the county fire department, that includes City of Palm Desert as well. We had probably three out of service out of our entire fleet of rolling stock.
[00:29:48] Councilmember: Wow.
[00:29:50] Mayor: You have a question?
[00:29:52] Councilmember: All right. Thank you. Two questions. You talked about getting accredited from a national organization or outfit. Would that have, if we are able to achieve that—
[00:30:01] Councilmember: Would that have any real-world implications for our residents in terms of like homeowners insurance costs? Like we had, I know we had a higher rating for our individual fire department.
[00:30:10] Staff: Yeah, for your ISO—yeah, your ISO rating, or now what's called V-Risk. That traditionally has had impacts on insurance rates inside a jurisdiction. The accreditation is not part of the insurance piece; it would not affect anything to do with access or affordability for insurance. What it really is, is an outside third-party organization built from the fire service to look in at fire departments to validate that the self-evaluation and that the processes and workflows meet or exceed national standards. And usually when you do things correctly, you perform. You know, if you're training your folks appropriately, you're equipping them, you have your response times in alignment with your deployment models, each one of those things means performance for the citizen that's receiving the services when you call. So, unfortunately, no. To answer the question that you're really asking, though, which is how do we increase affordability and access to insurance for our residents, is where I think you were going with that.
[00:31:28] Councilmember: A little bit. I guess, well, go ahead. Have you gone through media training?
[00:31:33] Staff: Yeah, yeah. Because actually—
[00:31:35] Councilmember: I've worked with some supervisors before, so—
[00:31:39] Councilmember: So getting accreditation might benefit the department and the residents by being maybe a recruitment tool, something you boast about and spread far and wide, give us confidence.
[00:31:46] Staff: Yes, absolutely.
[00:31:48] Councilmember: Okay. And then another—
[00:31:49] Staff: But the insurance piece, let me speak to that. That is one of the things that we're working on comprehensively at the department level is trying to find pathways for cities to become Firewise communities, Firewise communities, things that we're trying to approach comprehensively even in the fire code. How do we create a more resilient, fire-resistant community so that insurance companies are more likely to provide insurance in our county? And we're trying to do that not individually with just Palm Desert, but try to approach that both on the county side and all the contract partners so that instead of it being individual pieces, it's more comprehensive, and so people look at Riverside with lower risk overall. And that's still a work in progress, and as you're well aware of, there's lots of challenges, and we're working through trying to figure out what is the most effective way to have that impact for our citizens.
[00:32:45] Councilmember: Okay. Because we want that highest ISO rating for sure. We're almost there. Second, you talked a lot about mutual aid between departments within the system. How about—a little bit—how does mutual aid work with municipal departments like Cathedral City or Palm Springs, if at all?
[00:33:05] Staff: So, with both of those cities, we actually have what we call an automatic aid agreement where we already have pre-established parameters for sharing resources automatically. Mutual aid is slightly different where you are requesting or reaching out to another fire department, and they have the ability to say, 'Well, we don't have the resources available to send.' Fortunately for us, within the valley, we share excellent relationships with both Cathedral City and Palm Springs, and we respond to them and they respond to us without fail, in my experience. They're very supportive of us, and we're supportive of their needs, and it's a cooperative effort. There are limitations to it, obviously, but the reality is, as a fire department, we certainly don't want to leave a situation that could create harm or impact to our neighbors without stepping in and trying to provide some resource or assistance.
[00:34:06] Councilmember: Questions?
[00:34:09] Councilmember 2: This is amazing, and I hope that in the future we can, in a more elaborate presentation, get down to the wonderful numbers—not only the services, but I was very impressed with the numbers and the financial sense that it makes to be a part of this. But my question is, since the rollout of the nurse navigation system, how has that impacted your response times, which then impact the ISO? Well, I'll—do you want to answer that?
[00:34:39] Staff: Sure.
[00:34:40] Staff 2: I'll hand it over.
[00:34:41] Staff 2: So when we—one of the things that the industry has not caught up with completely is response times. ISO uses the NFPA standard of response times, but what it doesn't account for is the prioritization of calls. One of the things that every fire department is trying to do is work with NFPA to try and revise that because they—
[00:35:01] Speaker 1: They've got that set time frame of what they expect a response to be. Now, there is some greyness in the way their wording of it is that it's an emergency. So, when we send something to nurse navigation, we are not seeing that globally as a true life or death emergency. If that was the case, we'd be sending the closest resource, lights and sirens, ambulance, the engine, whatever is closest to it. But when we get to those items that are like I was giving the example of an earache that's gone on for several days, right, is that really a true emergency? And how do we prioritize that and get ISO to look at that more clearly? We provide that information to ISO when they come out and do the evaluation from the dispatch center perspective. I mean, those are conversations that we have and they see the same challenge we do with the way that they're currently doing it.
[00:35:56] Speaker 2: Well, knowing that you are as exceptional as you are and always setting the trend and being the model, hopefully you guys can be part of that conversation that helps address it, that only would support again getting the firewise and fire safe communities that benefit everyone. But thanks again.
[00:36:13] Speaker 1: Can I, since you did remind me of firewise and fire safe communities, when we're able to get a community on a focal list, and really that's important in the areas, and I know it's very small in the city of Palm Desert, but there are still areas that are in those fire hazard severity zones. We actually took the county fire ordinance 787, our fire code from a county perspective, to the board this week. One of the calls we got before taking it to the board, which was very positive in what I view, one of the larger single-family dwelling manufacturers actually asked us to be one of the first communities that they build a focal and firewise community within Riverside County. And they had already been talking to some of the other major builders as well about trying to make sure that they are building that from the ground up because they see the same challenge we do with making sure that we're building residences that have the ability to get insurance.
[00:37:11] Speaker 3: And Councilwoman, I just on the nurse navigation numbers specifically, we're still in the infancy and we're still kind of crawling. We're approaching it from a crawl, walk, run perspective. And though while we believe that we can achieve a lot, we're still in that early piece where we're proving and validating. Our intent is to communicate with all of our partners as that data becomes more clear and we start to advance through that process. That information will come through Mike or your city fire chief, and we'll maintain that line of open communications because we want you to be a partner in the process, not just on the receiving end of it.
[00:37:48] Speaker 2: One of the reasons why that was to me important that it be said in a public setting was the impact or the opportunity for it to grow after—what was it, over seven—that one individual made over 700 calls to 911 in one year. Clearly not all were life-threatening, and looking at how this will be a substantial deferral and deterrent that benefits and will save lives overall. So I'm looking forward to how that progresses.
[00:38:19] Speaker 3: To your point, that's also where the integrated services and Divco 1 program ties in is us at the county level sharing data so that we can identify those and find the appropriate treatment for people who call 911 700 times. It's probably not the fire department most of those 700 times.
[00:38:39] Speaker 4: Do you have any questions?
[00:38:41] Speaker 4: Any other questions?
[00:38:43] Speaker 4: So, thank you very much. And we're excited about 102 also.
[00:38:49] Speaker 2: So excited, we were all there for the groundbreaking and it's exciting. We know we need it in that end of our city and to really take care of our residents. So, we appreciate your pursuit of educating our community, which is so important. And a good reflection of that is what happens at mini muster in our schools. You know, make a difference early on and educate them. But thank you for your pursuit of safety and excellence, and we know it makes a big difference. And I do want to say yesterday we had Coco with the Mayor. Was it yesterday or two days ago? And fire was there to speak to the students from third to fifth grade. And I think you've recruited a lot of future firefighters, so...
[00:39:36] Speaker 1: Excellent, that's great for us. We want—this is a shameless plug on our part—we want kids from the Coachella Valley to grow up here, to be educated here, and then to work in the community. We think it's an important part of what makes us an effective fire department is being reflective of the communities. And I know when I was growing up and working here in Palm Desert as a firefighter, we had a much higher rate of residency here and we're trying to rebuild that as a...
[00:40:01] Speaker: department. So, thank you for mentioning that.
[00:40:03] Speaker: Well, you inspired many students on Tuesday. So...
[00:40:07] Speaker: Wait till they get on the fire engine and then they'll be hooked.
[00:40:09] Speaker: Well, and the fire engine was parked on the playground, so they were inspired. So thank you so much.
[00:40:17] Speaker: Thank you for your time.
[00:40:21] Speaker: Okay, the next is the report on fiscal reserves, reserve policy and best practices. And Miss Chavez...
[00:40:39] Veronica Chavez: Good afternoon, honorable mayor, members of the city council. Veronica Chavez, director of finance. Today's study session, it will focus on a reserve analysis and several policy considerations to help guide the city for long-term fiscal stability, which is always our goal. I'm going to try and get through this slide presentation as quickly as possible because I know you guys have a lot to do, and give you guys more time for questions. But I did write everything down, so if I'm not looking at you, it's because I don't want to miss a beat.
[00:41:10] Veronica Chavez: So, for today, I know my goal is to walk you through the reserves and why they matter, what best practice standards are and which are recommended, how our ten-year projections look, and some options that we can consider to move forward. Prior to Measure G, our cash flows that I brought to you typically were saying we had urgency, the sky is falling. And so the umbrella on this page is just to represent that that is not the case this time. But it is me coming to you asking if you could grab an umbrella because there are a few clouds on the horizon.
[00:41:53] Veronica Chavez: So when we talk about the importance of reserves as a city, our reserve funds act as our savings account. It's one of our most important tools so that we can maintain financial resilience. It also gives us an opportunity to plan out projects, staffing, and various opportunities to grow with the community. The reserves also protect us during uncertainties such as economic downturns, major emergencies, or unexpected revenue changes. In my short time here with the city, the ones that I experienced myself were 9/11, the 2008 housing crash or the fall of Western civilization, the dissolution of RDAs in 2012, the 2020 pandemic, and most recently Storm Hillary in 2023. Reserve funds help ensure that financial stability allows us to maintain service levels even during those challenging times.
[00:42:56] Veronica Chavez: And the multi-million dollar question, pun intended, is always how much is enough?
[00:43:05] Veronica Chavez: So GFOA, that's the Government Finance Officers Association, which is who we typically turn to for what best practices are in the finance world. They recommend maintaining at least two months or 16.7% of operating revenues or expenditures as your unrestricted reserve. They also emphasize the importance of multi-year forecasting, having a structured use policy, and transparent reporting. The city currently does three out of four of these requirements. The 16.7 threshold is one that we have not included, and that's one of the policy recommendations that I'm asking you to consider tonight. Not at that level, but just to consider what that number represents, and it is a theme throughout our presentation.
[00:43:59] Veronica Chavez: Whoops.
[00:44:01] Veronica Chavez: So when we compare our thresholds to those of other cities, most fall within a range of 15 to 25%. Oops, I went too far. How do I... Okay, 15 to 25%. This gives us a useful benchmark as we evaluate whether our existing categories are appropriately calibrated or potentially too restrictive. As you can see on the list here, LA even uses a lower amount at 5%, which is a little daunting to me, but then if you take a step back and think about the size of their general fund, I'm sure that's a substantial number in the grand scheme of things, but I'm just glad I'm not managing it.
[00:44:41] Speaker: Quick question.
[00:44:42] Speaker: Can you go back one slide, please?
[00:44:44] Veronica Chavez: Yes.
[00:44:45] Speaker: So, Rancho Mirage, 84% of estimated fund balance, right? The others are measured in terms of revenue or expenditures of the general fund.
[00:44:53] Veronica Chavez: Correct.
[00:44:54] Speaker: Can you make that distinction?
[00:44:55] Veronica Chavez: So general fund, so they're taking the end of the year and looking at whatever their fund balance... So if their fund...
[00:45:00] Staff Member: Balance is $100 million at the end of the year, they're reserving $84 million for the subsequent year. I did not have the opportunity to speak to Kofi at Rancho Mirage. I got this, you know, out of the internet world, but downloaded from their documents. My initial hesitation with using that sort of measurement is just that it's a snapshot in time. And so 84% of today's fund balance tells you nothing about where you're at tomorrow. And so I do want to get back with Kofi and understand that a little bit better, but that is what was represented from their reserve.
[00:45:39] Council Member 1: Okay.
[00:45:43] Staff Member: So when we look at our reserve categories, we have our operating reserve and emergency reserves, which I know in the past I've said for myself they feel duplicative. They are almost used in tandem in most areas. And so we reserve almost, well I should say exactly, 45% of our budget annually, which is about just under $45 million a year is put in a savings account just to sit in case of emergency. And the operations part is usually used for the first six months of the year where revenue is not coming in, it's coming in slowly. And that's the idea, is that it's a cash flow operations account and/or if we need some sort of appropriation, that's what that is there for. All of the rest of those reserves are the additional ones that we've included that have a measurement to back them. There's something that we know there's a potential for use. The one that we use most often is the facilities reserve. A lot of the reason why we use that is because we had a lot of deferred maintenance and we've been catching up on that reserve, but we do keep an amount for facilities. Capital improvements has one in there for any sort of deviation from the cost that we're anticipating in our 5-year plan. Our liability reserve is based off of what CJPIA requires as a minimum contribution from the city. And then the employment benefits reserve is based off any sort of increase or variation in the discount rate that PERS receives or PERS—I'm going to say this backwards—PERS allocates to the city, which would change our annual payment and it could have a dramatic effect. So we do reserve for that in the event that happens. Other fund stability, that's one that we had included in there, but what I've chosen to do rather than reserve it is I transfer the funds as soon as they're approved with the budget. So on day one, on July 1st, we take the money that we say we're going to transfer from the general fund and we put them in the other funds. What was done previously is we would hold them in the general fund and reserve that amount until the end of the year, and then at the end of the year we would transfer it.
[00:48:08] Council Member 1: Yes. When you talk about end of year, you're talking about calendar or fiscal year?
[00:48:12] Staff Member: Fiscal year.
[00:48:13] Council Member 1: Okay. Thank you.
[00:48:13] Staff Member: Yeah, yeah. So, and we do that to ensure that the reserve is always there for those items that we said we were going to do. Equipment replacement, all of our equipment, we base it on what the numbers are in the AVER and we put that amount into the reserve for that. Economic development is solely based off of the Sarda property sales, which is dwindling now. We have three areas left to sell, and so it's sporadic and it is a small amount that goes into that. And we'll be talking—that's one of the recommendations I'm making tonight. And then the last one is just what's not spendable out of the amount that we have to reserve, and that's about $3.1 million, and those are the leave balances and any amounts we're holding in trust for anyone that we're holding funds for. So in total, it's 77.7 million, which works out to 66% of our total fund balance this year. That's where that 84% question comes into play. Like next year, our balance is going to be different, so it's going to be a different measurement. So it's really not something that you can rely on, in my perspective, on a year-over-year basis as far as reserving.
[00:49:23] Council Member 2: Before you switched, can I ask you one question?
[00:49:25] Staff Member: Yes, ma'am.
[00:49:25] Council Member 2: Um, I saw that for a lot of these, the liability reserve is 4 million across the board. So, does that set in stone and will never change? Because I see projections shifting all over the place, but that has been flat, right?
[00:49:36] Staff Member: Right. All of the rest of them are projected off of a percentage base amount. That one is very specific in our policy that it is whatever the amount that CJPIA requires, which is our insurance. Whatever they require, that's the amount we leave in there. And currently, it's $4 million total. Liability is 2 million and workers' comp is 2 million.
[00:49:58] Council Member 2: Gotcha. And has that shifted at all?
[00:50:00] Speaker 1: during your time that you've been here?
[00:50:02] Speaker 2: No, not since 2018.
[00:50:04] Speaker 1: Okay. But what was it pre-2018?
[00:50:07] Speaker 2: I'm not sure.
[00:50:08] Speaker 1: Yeah, that was just my consideration that since it has changed within 10 years, is there a possibility that it could change again and we're not having that under consideration?
[00:50:20] Speaker 2: So, we can look into that. I know that typically even on our own policies, we require one-to-twos and we've been requiring them for a very long time, but I can look into that a little bit further in those prior years.
[00:50:32] Speaker 1: Thank you. Much appreciated.
[00:50:33] Speaker 2: No problem.
[00:50:34] Speaker 3: I have a quick question, and I do look forward to hearing more about Rancho Mirage's policy because that just seems so squishy to me when you're trying to make a budget.
[00:50:44] Speaker 3: The other question though: who might we be holding funds for in trust?
[00:50:49] Speaker 2: Typically, you'll see developer deposits in there. So if we're doing any work for them, the Rose Garden, we have deposits for that. The rest of them are not coming to me at the moment, but there's varying reasons why we take deposits from either commercial or residential constituents.
[00:51:07] Speaker 3: Okay, thank you.
[00:51:09] Speaker 4: Okay, there are no other questions on this one.
[00:51:13] Speaker 3: I might as well ask now.
[00:51:14] Speaker 4: Okay.
[00:51:15] Speaker 3: Facilities maintenance reserve, help me understand what 70% of the 2018 replacement reserve study annual requirement means.
[00:51:27] Speaker 2: This is exactly why I want to change that. So, we did a replacement reserve study in 2018 where we hired a consultant. They came in and they evaluated all of our facilities. They took a look at every single thing in there and said, 'This is what it's going to cost you. This is when you're going to have to replace it, and here's what you should save over the next 30 years.'
[00:51:49] Speaker 2: So, when you look at that, there's a sensitivity to it on whether or not that comes to fruition because some things outlast their lifetimes and some things don't. And at the time, we were comfortable saying that 70% of that number would be enough for us to use. What we found by 2022, it was a much lower number, which is why we had such a big catch-up in the last few years, and we still haven't hit the 70% number.
[00:52:21] Speaker 3: You say it was a big catch-up, meaning that the amount we were saving was insufficient.
[00:52:26] Speaker 2: It was more than what we were using.
[00:52:29] Speaker 3: Okay. And then does that money accrue to future years?
[00:52:34] Speaker 2: So originally, we had been doing that. In 2022, we made the decision to stop doing that because we had about 64 million in replacement reserves for facilities that we had accrued as part of the reserve, which was being locked up and unable to be spent for other things. And realistically, there's no way we could do that much in any given year. So, we basically hit reset. We started with each year, and we were just kind of trying to see what it really works out to, and the annual amount is what we're able to facilitate and really what comes up within that time.
[00:53:22] Speaker 3: Would it be possible to at least roll over a portion?
[00:53:25] Speaker 2: Absolutely. Not all of it.
[00:53:26] Speaker 2: We can do whatever we're told. You know, it's whatever the decision is. It was just clear at that time there was no way we were going to spend that much, and to release those funds allows us to do some of the projects and programs that we were wanting to do at the time.
[00:53:43] Speaker 3: How frequently is the replacement or their audit of their equipment? I think that would help guide how much to help preserve. And part of the reason that comes to mind is the difficulty in having that create a 'use it or lose it' mentality, and either having unnecessary or duplicate purchases or creating projects that aren't necessary. Not that they're not good, but they're not necessary at the time because they're under a 'use it or lose it' mentality.
[00:54:24] Speaker 2: And I'm trying to connect that to everything right now in my head. So, in the event there is any major component that needs to be replaced, that is certainly something that I know Public Works looks at on an annual basis. How often they review it, I would have to lean on Randy for. The replacement reserve, I have been intending to go back out and get it updated. It is quite costly—it's about a quarter of a million dollars to do that, which is why I was trying to look at how other cities were doing their replacement reserve for facilities. When I found the one for Colorado, it completely made sense. And at the end of...
[00:55:01] Speaker 1: At the end of the day, when I did the calculation, it was very similar to what we got from the replacement reserve. In addition to that, you don't have that gap of knowledge of how Palm Desert works that you do with the people that are conducting the reserve. And you also have a little more flexibility with where those funds can be used considering all the facilities we have. So that was the idea behind that. Anytime we add facilities, we increase the value of that facility. And so that 4% would continue to increase with that. So at all times, we should have a 25-year lifespan on all of our facilities that we're reserving for. I hope that's clear.
[00:55:46] Speaker 2: This is a meaty subject, so there are going to be a lot of questions for me if you don't mind. When you answer Joe's question about the fact that we have been collecting more for the facilities maintenance reserve than we were spending when I first was elected and came on council in 2022—early 2022—you know, the kind of the ethos was we have a lot of capital, we have a lot of improvement projects that were deferred maintenance that we got to catch up on.
[00:56:13] Speaker 1: Yep.
[00:56:15] Speaker 2: So we responded. You saw the surplus, and it was almost by design because it was policy to sort of save during COVID, right?
[00:56:21] Speaker 1: And then we've spent it out now. So we're talking about the same subject basically, that we got rid of that surplus by improving the projects that need to be improved.
[00:56:29] Speaker 2: The 4% that we were looking at—and I know that's maybe a step or two ahead here in the program, but is that inflation-adjusted? Because over the course of 25 years, I would assume it is. I mean, it seems like a rudimentary question, but...
[00:56:42] Speaker 1: So, it'll be adjusted for the value of the properties, and as they're improved, that amount will increase. And so any inflation on those improvements would impact the reserve.
[00:56:58] Speaker 2: Okay, cool. All right, that's it. Thank you.
[00:57:00] Speaker 3: Okay, any questions?
[00:57:02] Speaker 4: Ready to roll.
[00:57:03] Speaker 1: Okay, great. Thank you for the questions. Okay, so beyond looking at the categories, I just wanted to give you an idea of how we set these up and why they are the way they are currently. I also wanted to go back and look at '23-'24 and just remind us where we were at then. When I talked about the sky is falling, when I came to you guys then, it was in '29-'30. We were seeing a $13 million deficit in operations, and that was terrifying at the moment. And it was, let's be proactive, let's do something now. And that's when we went into education mode on Measure G, and we were able to get that initiative passed. When we look at the new 10-year, excuse me, what we see is that by 2034-2035, we have the ability to meet our operational costs by dipping into reserves at those last four or five years. We do not have a problem with meeting our costs, which include our capital expenditures, but we do have a problem meeting our reserve requirement. And so, I wanted to make sure we had this conversation because we have so many projects anticipated over the next 5 years, it does take a hit to the general fund and its reserves and its ability to reserve long-term. What you see up there on the first 5 years is the CIP plan. And in doing this, what I realized is for '26-'27, we are going to have staff do a 10-year CIP so that we have a broader scope and that projects like the regional park, which we know is not going to be facilitated in 3 years, but that was all they had to choose, can be spread out and normalized and have a better measurement for you. So when we look at the results of the reserve analysis, considering all those projections for the next 10 years, what we see is that we're underfunded in the reserve by about $69 million, which means we're only funding our reserve 21%. And if you'll remember, GFOA says 16.7% should be your minimum reserve. So we exceed that, but it's nowhere near what we're used to reserving at. And so it's your comfort level that we're discussing here with that.
[00:59:41] Speaker 3: Please.
[00:59:43] Speaker 5: So I'm trying to wrap my head around this because does that mean that the sales tax as we know it today in all the cities that will keep going up and up? Because there's other states that are bragging about lower tax rates, and if...
[01:00:01] Speaker 1: If you lower tax rates, you're going to improve revenue. I'm not sure if your projections are factoring in this concept.
[01:00:09] Speaker 2: So, sales tax can only go up to 10%—excuse me, they can only go up 2% more than the base. So they can go from 7.75 to 9.75 in addition to what they have for streets. So we're limited on how much it can go up.
[01:00:32] Speaker 1: I'm hoping that is not going to be our solution.
[01:00:35] Speaker 2: No, it's not. No, I was just answering your question. As far as—let me go back one page if I can. As far as revenues, what I did was staff pulled our historical data, and what we wanted to see is typically we'll use a 2% or 3% conservative number as far as growth. And what we did this time was we took the full 10- or 20-year look back to see what our overall trends were, and we took the average of those trends and used that as our projection going forward. So that takes into account the ebbs and flows of how the economy typically operates. And so when you look at our property tax, the average was about 2%. Let me get my cheat sheet out for you. The average growth was about 2% over that time period. With sales tax, it generated 3%. With TOT, it was 14%. But what we did take into consideration with TOT is the thought that we will max out our hotels and be built out by '28-'29. So from '28-'29 forward, we went to 3% to match what we're seeing in sales tax. And then Measure G, we copied the growth in sales tax after 2030-31. The projections up to '30-'31 is what we got from the sales tax consultant based on their latest numbers, and then all other growth on average was 2% as far as revenues grow. So we did try to take into consideration all the factors historically and what we see in trends to this analysis.
[01:02:19] Speaker 1: Okay.
[01:02:20] Speaker 2: Okay. Okay, we covered this. So, this is what it looks like as is—a little disconcerting. Staff wanted to see if there were any ways that we could add flexibility so that we could meet the needs of the community and the goals of Council. And so, a few things that we thought about is combining the operating and emergency reserves to be a total of 25%. We would suggest splitting them still, keeping them separate and doing one at 10% and one at 15% so that one is—I'm going to forget the term. Hold on. One is committed and one is assigned. The one that is assigned, the City Manager has access to use that for operations on an annual basis but must come to the City Council for ratification. So to keep business moving, it's there. But the amounts that are committed are specifically for emergencies and must be approved by City Council. So, it just keeps that level of oversight there, but still reduces the amount from 45% to 25%.
[01:03:35] Speaker 2: I'm going to go too fast. I knew it. The other thing was simplifying the facilities reserve and use a 4% replacement value similar to what we saw in Colorado. It gives every facility a 25-year life. And so it just standardizes things. It makes it easier to come up with a calculation that we can tell you on any given day versus understanding whether or not everything has been considered. One of the things in the reserve study that we noticed, it conflicts with what we have in our system with Public Works. And part of that is it's only as good as the person who's giving them the information. And so I just wanted to remove all the human error that we could and use something that was more standardized that could be relied on. That's why I'm suggesting that. And it ultimately ended up with a very similar number as what we got from the reserve, which I found very interesting. The third one is probably the most important one, and that is taking what we're reducing the operating or the emergency reserve and applying it to the economic development reserve and investing in the community and only using it proactively with an ROI requirement. And so, the idea is if we kept the $5 million in the bank and we're keeping it out as a reserve, our investments are required to—we use the 5-year T-bill as a...
[01:05:02] Speaker: ...benchmark for our investments. And I would suggest using that same benchmark for the ROI return at any given time. If someone, you know, comes in with a project and we want to be proactive and, you know, assist them with that, we can, but they have to give that return within 5 years. And so I put an example of that in the staff report to help depict what the idea was. I think that's the best way for us to manage those funds and grow revenue proactively.
[01:05:33] Speaker: And then the fourth one is one that I'm asking you to consider, but I have not included it yet. I just want to throw it out there for when we do get to that point with the housing fund closing in on depleting its fund balance out of necessity. I'm suggesting that we use the same 4% replacement value but reduce it by net income from the properties on an annual basis and then we reserve that difference.
[01:06:03] Speaker: And then the last one, you know, we talk about being forward-thinking and an innovative city. And one of the things that is usually spoken about on innovation is you can't say you're innovative without backing it with money. And so this would be a way to do that and put some skin in the game for the different divisions so that if there's a program or project that they want to do in the upcoming year, if they maintain some sort of savings in the prior year, they can put the request into the city manager and create that fund and use it for a pilot program or whatever program that they're wanting to create for the city to be innovative. And that's the idea behind that one. So implementing all those changes makes no difference to this. Our cash flow stays the same. I cannot consider the revenue that I'm hoping Martine will create by investing the $5 million until it's recognizable. So, I can't recognize it here, but I'm assuming it'll be there at some point.
[01:06:57] Speaker: As far as the reserve analysis, what it does is it changed a reserve requirement from 87 million to 72 million at year 10 and then increases that amount that is reserved from 21% to 25%. It's not a big number, but it's progress. And you know, as a powerlifter, 1% every day is progress. And that looked, you know, better than what we had before. So, that's the idea there. Everything in green you see there is what I'm suggesting that we make adjustments to and the impact of that.
[01:07:35] Speaker: And then the last version that I wanted to present just so you have this, part of the reason for the issues in the 10 years is how fast we're coming up with a lot of really big projects over the next few years. And so the thought of, you know, do we issue debt, a lease revenue bond that can absorb that influx of cash and smooth it out over the next 20 to 30 years and repay it at a much lower cash, you know, take than you would see from an actual project being done in the first four or five years. And so we took an $85 million issuance, just an example, and came up with what the debt service would look like, and the impact at the end of the day is a fund balance of 51 million at year 10 versus the 18 million we were seeing before. It puts us at 71% funded at that point. It really is one of the most, you know, progressive ways of managing those funds over time. But again, it is something that city council will have to consider.
[01:08:53] Speaker: So, let me make sure I didn't miss something on that. Oh, and creates that long-term stability that we're always looking for. So that's really the intent of showing that for you guys to see.
[01:09:07] Speaker: So the policy questions under consideration really are how much is enough or how much is too much when it comes to reserves? Is the current policy too restrictive given the city's evolving needs, and should we revise the policy for greater flexibility or and better alignment with best practices?
[01:09:27] Speaker: Along with the policy changes, you know, staff is also considering other solutions. We're looking at EIFDs, CFDs, any type of revenue opportunities that we can create to support city goals, and also consideration of debt issuance is always out there. The last thing is to mitigate risk. We could also put into the policy that there is a limit and use GFOA's limit as that limit as far as how low we'll go on our funded reserve.
[01:10:03] Staff: And so that 21% that makes us uncomfortable maybe we include in the policy. It says at no time will the general fund reserve balance dip below current suggested minimum established by JFOA. We don't have that in there now. It's something that we could consider so that in the future we never go below a certain amount, whatever that number looks like. This sheet is just, you know, bottom line one sheet. In year 1, any of the changes that I'm suggesting, there's not a dramatic effect. It really is year 10 where we see what the impacts are. And so, you know, as is by year 10, we're looking at potentially $69 million underfunded reserve versus year 10 with the changes and with a bond at being 20 million underfunded. At no time are we unable to make operations and planned goals as of today. So, our ultimate goal is to move forward strategically. Staff remains committed to strong financial management. Next steps focus on long-term value creation and proactively support growth in the coming years. Staff is seeking direction and if approved, staff will return in January with a formal request to revise the policy and implement those changes. That concludes my presentation. I'm happy to answer any additional questions.
[01:11:31] Mayor: Thank you very much. Uh let's start over here. Do you have any questions?
[01:11:36] Councilmember 1: Still thinking of it, settling from my questions earlier to the new info and letting things fall into place, but this has been very helpful. Please.
[01:11:51] Councilmember 2: Yes. Oops. I went too far.
[01:11:56] Councilmember 2: Oh, yeah. I'm trying to digest this. So, if you take this projection where I see all the green, which is good, and then this last one you showed had a lot of red again.
[01:12:08] Staff: Um, so the green is just to show you what I'm changing. The red is at the bottom. Really, that's the main number to focus on. So...
[01:12:17] Councilmember 2: Okay. So, it's okay. That was my mistake. I was really happy for a couple of minutes thinking that... Never mind. You've answered my question.
[01:12:29] Staff: It does. It is in the red, but we're not as deep in the red. It goes from 50 million to 20 million,
[01:12:36] Councilmember 2: But still in the red,
[01:12:38] Staff: But it's just our reserve. It is not our ability to meet our expenditures.
[01:12:44] Councilmember 2: Right. Okay. I just... I'll let my other council members talk now.
[01:12:49] Staff: Completely.
[01:12:51] Mayor: Are you ready to ask questions?
[01:12:53] Councilmember 3: Yes. So this is, again, as we mentioned, the reserves. If we were able to get, let's say, like we were able to get a transportation grant, would any of that money stay in that grant fund, or can we take some of that left over or shift some of that into the reserves?
[01:13:14] Staff: So what would happen is the reason why we don't show those in the general fund forecasting is because, well, two reasons. One, there's no guarantee you'll receive it, and we saw that with our grant that we got awarded, and then it got taken back, and then we got reawarded. You know, there's always that risk. Two, most of the grants that we receive are reimbursement. And so the city has to spend general fund dollars so that it can get the work done and then turn those into whatever the entity is that's granted us the funds and get reimbursed. Depending on how the grant is written will determine whether or not it can refund or it can be transferred back to the general fund.
[01:14:03] Councilmember 3: That's why we love grants until we realize it was our money from the beginning.
[01:14:08] Mayor: Do you have any questions?
[01:14:10] Councilmember 4: Yeah, some of your policy proposals are super smart.
[01:14:16] Staff: Thank you.
[01:14:16] Councilmember 4: The idea of creating incentives for innovation, I like that a lot. The economic development incentive, I like that a lot. We don't have RDA, so having some way to invest, those are great things. When I look at this, it appears that our current reserve policy is flashing a red light. You know, spending's going up. So there's two things at play here. It's our policy and our spending. So our measure and our behavior. So a couple of things I want to look at is just on the...
[01:15:01] Speaker 1: Policy itself and understanding that and kind of setting a true compass that we could then look at our spending. Um, I like everything. So, like those proposals, the borrowing I have to get my head around because a lot of what our facilities are not necessarily assets. A park may be an amenity, but there's costs to carrying that amenity, including operations and maintenance and then long-term replacement. So that, that's essentially a liability. So, if we borrow against a facility that only carries with it operational and maintenance costs, uh, and long-term replacement, if we borrow against that to buy a or pay for a new park, are we not using one liability to finance another one?
[01:15:59] Speaker 2: I think I got lost in what you're, when you're talking about the borrowing, you're talking about the debt, issuing debt. Okay. Um...
[01:16:06] Speaker 1: Like if we issue debt, I, I, I presume that like, uh, the facility lease bonds, what do they, what are they called?
[01:16:13] Speaker 2: Lease revenue bonds.
[01:16:14] Speaker 1: Lease revenue bonds. We have to secure that with something, right? So if we did like City Hall...
[01:16:19] Speaker 2: Right.
[01:16:19] Speaker 1: There's no revenue from City Hall, but we do have to pay to maintain it and operate it and eventually replace it.
[01:16:27] Speaker 2: So we're borrowing or we're, we're, we're bonding against a facility that has costs.
[01:16:32] Speaker 1: Yes, to build a new facility that has more costs.
[01:16:36] Speaker 2: Yes. No. Um...
[01:16:38] Speaker 1: Okay. No, no. Keep it simple. Like...
[01:16:39] Speaker 2: Honestly...
[01:16:40] Speaker 1: Keep it dumb for this guy.
[01:16:42] Speaker 2: What we would be, the money that we would be using is the money that we have allocated to the projects, not for the operational costs. Those are already included in operations. So, two separate, um, uh, numbers completely. Although we're borrowing against the city with each debt service payment that we're making instead of putting the cash toward these projects, um, the asset is released back to the city. So, it's not a long-term loss of the asset. It is, that's the loan part, right? Um, but the actual money exchange is frontloading the cash out of reserve versus spending it over time. But there's a, of course there's a cost to borrowing. So we're incurring that for the purpose of just having more money in flexible access...
[01:17:37] Speaker 2: ...in contrast to having to push out projects that we can't afford to do that cost more in later years as we've seen.
[01:17:45] Speaker 1: Right.
[01:17:46] Speaker 2: So that, those are, that's the balance.
[01:17:48] Speaker 1: Okay. And then in my experience with the County of Riverside, for many years the reserve policy was 5%. And for many years they operated below that and it was a reminder to maintain fiscal discipline because 5% is already fairly low. So when I look at this, I think two things. One, going below our reserve policy is not the end of the world if we have a plan to get back up. So it goes back to statements you made before that after year 10 it looks like we have a rebound. Is that still the case?
[01:18:29] Speaker 2: It depends on whether, what the second five years of that capital improvement looks like. And so that's why I want them to spread it out so that we have a better idea of what that realistically looks like. Just the way it is right now, it does.
[01:18:45] Speaker 1: Okay. And then that capital investment plan is us, right? So we could look at that and just say, instead of changing the policy to lower it to get us to build more stuff, we could look at it and say, 'All right, there's too much risk. We're going to defer or delay this project until we can afford it in cash,' if that's what we choose.
[01:19:12] Speaker 2: Absolutely. And that's that balance. That's, that's the whole thing. That's why I'm bringing it to you because it's, you know, do you want to do these things now at a lower cost assuming, um, and get them done? And do you want to do them with cash? Do you want to do them with, um, debt? Um, and what that impacts with those decisions, and do you want to, or do you want to wait? And, you know, either way, we'll, we'll plug and play. We're good.
[01:19:38] Speaker 1: In the 10-year projections you bring back, is there any way to put in there what bringing housing in would look like when those funds exhaust?
[01:19:47] Speaker 2: Mm-hmm.
[01:19:48] Speaker 1: Okay.
[01:19:48] Speaker 2: Yes.
[01:19:49] Speaker 1: Okay. That's it. Thank you.
[01:19:50] Speaker 2: I think I did an estimate. It was an additional $4 million.
[01:19:55] Speaker 1: Oh, that reminds me. One more question in terms of every year we set aside 4%...
[01:20:01] Speaker 1: ...of the life cycle replacement and, but there's those funds do not accrue, right? So if we set aside 6 million, that's 4% next year, the estimate is 6 and a half, we just put another 500,000, but we don't add another...
[01:20:18] Veronica: That can totally be up to how you guys want me to revise the policy, but the way that I presented it was as-is. It's just one year at a time.
[01:20:27] Speaker 1: Okay. I, you know, we'll have that discussion, but in terms of growing maintenance costs and replacement costs, I think it would be prudent if we set some target that's reasonable that if, you know, maybe setting 60% of replacements aren't too high, but if we set a certain amount where we reduce what we contribute every year, probably might make sense.
[01:20:52] Speaker 2: Okay. Thank you, Veronica. Um, I know this is a reserve discussion and we're talking about reserve policy. However, what kind of strikes me in the presentation is the, um, general fund, uh, revenue versus general fund expenditures over the course of what are we looking at, 10 years? I'm sorry.
[01:21:12] Veronica: Oh, that's...
[01:21:12] Speaker 2: ...20 about eight years, right? Up until, I'm sorry, no, no, no. We're looking about 10 years up to 34-35. And in each case, under each scenario, schedule one as-is, you know, schedule two with recommended changes, and then schedule three issuing debt. Uh, in each case, it's the same numbers. And we're looking at, um, deficit spending to the, you know, most of the last sort of four to five years of this projection, which is something I don't ever remember Palm Desert doing. You know, we were always able to live within our means. So, what happened? You know, that all of a sudden we're looking at general fund being at a deficit year-over-year operationally.
[01:21:51] Veronica: So what has happened over the last 5 to 10 years, expenditures outpace revenue growth, and when looking at the trends, it was revealing in that as well. And so those trends that we've applied there are very realistic, and that's what you're seeing. In addition to that, what we now have is an addition of the library and staffing for the library. So, there's that, but we got the revenue that comes with that as well. Um, we also have, um, within measure G, the requirement for, um, capital improvements. And so, if you can see on the bottom of the, um, schedule, I have the numbers in purple. Those are assumptions that we're spending like we said we would with measure G. So, I've transferred all the funds that are necessary to cover fire and, um, what was the other thing we said? The facilities that we said we would cover with, um, measure G, but we also said we had, um, projects. And there's never been a time in history where we haven't had an overload of projects. So, I thought that was the safest assumption. Council can always decide not to do projects in any given year. However, what I will caution us with is when we talk about, um, like the, um, landscape plan, that project alone absorbs every one of those dollars that I'm using in there as a placeholder. So, it's the most realistic way to show it. It's what we have been talking about. So, I didn't want to remove anything without direction.
[01:23:34] Speaker 2: With the library, it seems like we're staying, we get about $2 and half million dollars a year from the county and our operations. So, you're talking about facility maintenance versus actual...
[01:23:43] Veronica: ...new library when we transition operations for the new library.
[01:23:46] Speaker 2: So, the expense will come in maintaining the building versus actually salaries and benefits because that's more or less it seems covered.
[01:23:53] Veronica: I have to assume that there's some delta. So, um, it's, it is built in there based on, um, staffing trends and, um, current revenues, the stream of how, so let me just make that make sense. Um, salaries and benefits have traditionally been a 5% growth, 4% on salaries, 6% on benefits versus, um, property tax which only grows up at about 2%.
[01:24:18] Speaker 2: Okay. And then so, but there is some wiggle room in our operations. This is not set in stone. In other words, absolutely. We made, there's discretion.
[01:24:28] Veronica: These are, these are projections.
[01:24:29] Speaker 2: We like, one big one that comes to mind is if we don't, hey, the regional park might be overkill. We don't need it.
[01:24:35] Veronica: Absolutely.
[01:24:36] Speaker 2: Um, and we can't afford it. That could be something that could be struck and...
[01:24:40] Veronica: ...that's exactly why we're having this conversation.
[01:24:42] Speaker 2: Perfect. All right, that's it. Thank you.
[01:24:44] Speaker 3: Okay.
[01:24:46] Speaker 3: Any more questions?
[01:24:49] Speaker 4: So, I like the idea of including, uh, the wording regarding the minimum, uh, requirement and just putting that in...
[01:25:00] Mayor: There. I think that's a nice little safety net for us and keeps us aware, and it's a good idea. I also like the idea, as Joe had mentioned, rewarding innovation. One thing we know with this city, we need to continue investing in our investment. And so many of the things we have done in our city are investments in the future, and we have to keep investing in those, just like we would in our homes. We have to look at, since we don't have redevelopment anymore, what do those EIFDs, what do those CFDs look like, and where can we apply them? Where can we put them in? And they are a good economic solution to so many things. So, let's continue looking at those. And of course, we always have to make sure we're looking at grants and how we can reimburse ourselves while maintaining the character and the integrity of this community. And this is—I kept looking at it going, 'Oh my god, thank God for Measure G, because we'd be in real bad shape without that additional revenue.' And we have to look at the fact that we built this city. So many cities and communities have a nice solid property tax base. We don't have that. And so we have built our revenue projections and those things that fund our city on sales tax and on TOT. And we have to make sure that we remain attentive to that. How do we continue investing in those investments? So, I thank you for all of this. Are there questions that have not been answered, or do you feel confident in—you have something?
[01:27:09] Councilmember: I was just going to give my comments, but—
[01:27:11] Mayor: Oh, okay. So, but are there more questions that we need to answer for you? The only one I didn't hear about is: are we okay with collapsing the two emergency ops into one?
[01:27:28] Councilmember: I think that makes sense.
[01:27:30] Councilmember: That's what I was going to say.
[01:27:32] Staff: Yeah. Combining the—
[01:27:34] Mayor: 10 and 15.
[01:27:35] Staff: Yes. Or I should say, and then the 25-year life replacement value, and combining the operating and emergency reserves, give replacement value of 25 years. And again, we said everything else. Yep.
[01:27:48] Mayor: Okay. Any other comments or questions?
[01:27:51] Councilmember: In terms of merging those, I'd still like to see a little bit more of parameters that would be in there. For example, the threshold of, you know, the amount that needs to be spent, or the threshold or approval, just to have that. Merging it, of course, is a great idea. It creates the flexibility, but as we look at future projections, we're not sure of who could be in a leadership position that may just want to spend it down and put us back into the situation.
[01:28:26] Staff: And I apologize, let me clarify. I mean merging the total percentage. We would still keep them 10 and 15, whichever one you guys prefer. If you want the one that comes back to council to be 15, which is the committed, we can do that, or swap them, either one, because of that.
[01:28:44] Councilmember: Yeah. Perfect. Perfect. Thank you.
[01:28:48] Staff: One last thing, if you don't mind, Mayor, I did forget to mention that, you know, when I talked about the emergencies that I've lived through here, when we looked back at them, none of them exceeded that 25%. The biggest one was a housing crash, and that took two years to materialize at a drop of 23%.
[01:29:10] Mayor: What did you name that again?
[01:29:12] Staff: The fall of Western civilization, and I do need to give credit to predecessors for that name.
[01:29:20] Mayor: Okay. You have—
[01:29:22] Councilmember: One final comment. I agree with my colleagues, and when you come back with proposals or with the policy in the financial projections, well, I'd like to say I'm okay with lowering the combined amounts to answer to the public if they say, 'Look, you guys are spending a lot, and then you change the goalpost to make it not look so bad.' I want to say, 'No, we changed the policy because it's smarter, it creates incentives, it creates flexibility.' So I want to treat it distinctly, and it's easier for me to justify shrinking that amount if we're making—
[01:30:00] Councilmember: ...sure that we're secure on replacement and maintenance savings. So, if we accrue that 4% to any point, it's going to affect our cash flow projections. I'd like to see what that would look like, and I don't know what a smart limit is. I'll ask you to figure out what that could look like, whether we accrue 4% until it hits 20 and then it levels out, and then we just fund it to that 20. That way we have wiggle room. And then if we could see that on the cash flow along next to the housing, and that way we have a good picture. And I like you're already thinking ahead and showing us the regional park shifted further out, and then also one with that project removed.
[01:30:48] Staff: Okay.
[01:30:49] Councilmember: All right. Thank you.
[01:30:49] Staff: I can do that.
[01:30:51] Mayor: Any other questions or comments?
[01:30:54] Councilmember: Okay. And I want to say, because I too was here during that big crash, and it is such a testament to the importance and the value of hiring consultants when we need extreme expertise in a specific area, when we went down more than 30 employees out of necessity. So, when we do use consultants, there's good reason for it, and it makes a lot of financial sense. So, thank you.
[01:31:28] Staff: Thank you.
[01:31:30] Mayor: Okay. Now, I want to remind everybody that we do have closed session at 3:30, and not that we can't be flexible and do whatever we have to do to make sure that we get through this in a way that we get to have a full and complete discussion, but do remember. So, the next one is provide input on pursuing landscape and lighting districts on citywide privately maintained medians and select parkways.
[01:31:55] Councilmember: Madame Mayor, I've been advised to recuse myself because I live in an HOA that maintains some of this property and is adjacent to another one. So, I'll remove myself.
[01:32:05] Mayor: Okay. Thank you very much.
[01:32:14] Chris Gary: Good afternoon, Mayor and members of the Council. Chris Gary with your Public Works Department. Today's item explores whether certain privately maintained landscaping in the public right-of-way should be evaluated for inclusion in city-administered landscaping and lighting districts, or what we'll refer to today as LLDs. This review covers two related but distinct types of privately maintained landscaping: both medians and parkways. First, I'll provide a brief overview of LLDs and how they function in Palm Desert. We'll then examine the specific median and parkways under consideration, and then from there, we'll review what is known and what remains unclear in this discussion. And finally, we'll conclude with some considerations for Council discussion. So, what is an LLD? At a high level, it's a state financing and management tool that allows cities to maintain the public right-of-way while recovering those costs from those who benefit from it. They fund ongoing services such as landscape maintenance, irrigation, streetlights, as well as related streetscape elements. In practice, LLDs are established as part of development conditions or formed through a Proposition 218 ballot process. And once established, assessments are levied annually and collected through the tax roll, through property taxes. And overall, LLDs provide a city-managed maintenance framework that results in consistent services, inspection standards, and long-term reinvestment across the areas that they serve. So, today in Palm Desert, we operate a single consolidated LLD that administers all city-managed landscape and lighting areas. Within the consolidated district, there are 33 special benefit zones, and each zone corresponds to a specific neighborhood, development, or geographic area whenever they were formed. And this map on the right illustrates the distribution of those 33 zones, and areas outside those zones fall into one of three categories: they're either maintained by the city under a different funding source, maintained privately under legacy agreements or HOA responsibilities, or consist of parcels that are not accessible under Proposition 218, like government parcels or quasi-government like utility companies. These zones currently cover parkways, certain landscape retention basins, and the Haystack channel. However, they do not include any landscape medians at this moment. So, we'll begin with privately maintained medians, which again are separate from parkways that will be discussed shortly. In Palm Desert, the city maintains...
[01:35:00] Staff: Nearly all medians, with the exception of nine segments. These segments are assigned during development as conditions of approval and placed under private maintenance agreements or some type of similar structure. Because the city does not maintain these areas, service levels can vary at these locations.
[01:35:17] Staff: Here displays a privately maintained median—all the privately maintained medians across the city. And they're distributed amongst several corridors and account for over 250,000 square feet of landscape. And beyond these segments, the city maintains the remaining medians, as previously mentioned.
[01:35:42] Staff: So here displays the largest segment, located along Silver Spur Trail, and the median covers approximately 66,000 square feet and includes a landscaped traffic circle.
[01:35:54] Staff: Here's the smallest segment, which runs along Hovey Lane East between Beacon Hill and Waterway, and it's about 8,000 square feet.
[01:36:03] Staff: And finally, another example. This median runs along Country Club—west along Country Club—as well as south on Portola Drive. And at approximately 35,000 square feet, this was the second largest segment.
[01:36:20] Staff: So next, we'll turn to privately maintained parkways, which again are distinct from what we were just discussing with medians. And when discussing parkways, we're talking about landscaped areas in the public right-of-way that are along the street between the curb and the private property, as an example in this picture. Those parkways typically include frontage landscape, irrigation infrastructure, lighting, and some streetscape features.
[01:36:47] Staff: Today's discussion focuses on 10 privately maintained parkways that fall under specific conditions. These parkways are maintained by small, ungated HOAs under legacy development agreements. And along these same corridors, HOA-maintained parkways sit directly beside city-maintained LLDs. This creates kind of a checkerboard pattern of responsibility where maintenance standards and reinvestment can vary along the same street. It also places ongoing maintenance obligations on some HOAs that don't apply to their nearby neighbors. For example, along Shepherd Lane, which is shown in this photo, there's a total of 15 HOAs. Six of those, which represent about 41% of the frontage landscape, are maintained through LLDs, while the other remaining nine HOAs maintain their own landscaping.
[01:37:39] Staff: Here shows locations of those privately maintained parkways. As displayed, most of the HOAs are located along Shepherd's Lane, with one additional HOA with similar conditions located along Hovey Lane West. And collectively, these parkways account for about 68,000 square feet of landscaping.
[01:38:00] Staff: And the next two slides are just examples of parkways along Shepherd's Lane. Here displays Kingston Court, which is the largest HOA in this group and consists of about 64 households and about 11,000 square feet of landscaped parkway.
[01:38:16] Staff: And here's Portola Point, which represents about 16 households and 3,000 square feet of landscaping.
[01:38:25] Staff: So based on the information available, here's what is known and here's what is unknown in this discussion. We know that these identified medians and parkways were a result of past conditions of approval or similar instruments, and over time those decisions have resulted in differing maintenance responsibilities across similar locations, and the initial rationale for those differences is unclear. We also know that establishing LLDs may offer a more consistent framework for addressing these types of legacy agreements, although we don't know if property owners or HOAs are interested. Notwithstanding, we have been contacted by one HOA, Portola Place, that is interested in converting its maintenance obligations into an LLD.
[01:39:13] Staff: And as Council considers this item, there's several questions or several items to weigh. First, does the city want to assume responsibility for new LLDs? And bringing these areas under city management does create more unified maintenance standards and routine inspections, as well as reinvestment practices. However, it also expands the city's operational responsibilities, including contractor capacity, workload distribution, and long-term resource planning. Another consideration is whether affected property owners would support forming a new LLD. As discussed, any new LLD requires approval under Proposition 218 through a balloting process. And so, if there's greater consistency as the goal, it may not
[01:40:02] Chris (Staff): ...be achievable in all locations. Council may also wish to consider what conditions are suitable for the city to assume responsibility. Some of these areas may require a larger investment for initial rehabilitation, such as adding separate water meters, replacing irrigation systems, as well as updating landscaping. And if that is the case, costs would be incorporated into those LLDs and then recovered through property owner assessments. And again, that may have its own challenges and deter interest, depending on what those costs look like to the property owners. And lastly, there's just a broader policy question of precedent. Including these segments may prompt other neighborhoods with similar agreements to request evaluation of their terms as well.
[01:40:46] Chris (Staff): In summary, staff is seeking council input on whether to proceed in a more detailed evaluation and return in the future with a clearer picture. If interested, next steps can include outreach to affected property owners or HOAs. Staff could also continue to coordinate with the City Attorney's office to evaluate how existing maintenance obligations could be potentially transitioned. And then finally, staff will continue to engage our assessment consultants to understand, evaluate cost, and overall feasibility. And that concludes today's presentation, and staff is available for questions as well.
[01:41:18] Mayor: Okay. Thank you. Questions? We'll start over here. Question. Do you have any questions?
[01:41:26] Council Member: Yeah.
[01:41:27] Mayor: Please.
[01:41:28] Council Member: Okay. Thank you for the presentation, Chris. It's kind of hard for me to give direction without knowing if this will put us in a deficit or surplus by virtue of what's collected through the assessment and what expenses will be incurred. I guess you couldn't even venture a guess, or you would have included it, I would imagine, on how that goes. So, that's what I'm kind of struggling with.
[01:41:51] Chris (Staff): In theory, Council Member, LLDs should pay for themselves, and we work within the budget that's provided. And there also is a CPI increase on LLDs.
[01:42:03] Council Member: So in other words, you would do the math before implementation.
[01:42:06] Chris (Staff): Yes.
[01:42:06] Council Member: Got it.
[01:42:07] Chris (Staff): And after implementation, we'd work within our existing budget.
[01:42:12] Council Member: Got it. Okay. Thank you.
[01:42:14] Mayor: Questions?
[01:42:17] Council Member Kent: My question is, when you say that one of the communities is already amenable, did they hear about it and reach out and say, 'We're interested,' or have you reached out to them and no one is interested except them? Where are you with that process?
[01:42:34] Chris (Staff): Council Member Kent, this came up organically. We were contacted many months ago by Cors Cordas, who was interested in this conversation before we were even having these conversations. They only have 20-plus homeowners, and they have limited homeowners or part-time homeowners, and so they're looking for opportunities to kind of alleviate some of the responsibilities they have on their own block when they come here to spend their time as part-time residents. So they approached us because they thought this would be a way to really improve the quality of life within their own block, where they don't have to engage in so many administrative decisions with only 20 homeowners.
[01:43:14] Council Member Kent: My other question is, as the intention is for it to be self-sustaining, are all of our other special assessment districts self-sustaining to your knowledge? Is this one we can reasonably say it's going to handle itself?
[01:43:32] Chris (Staff): Yeah, I believe for LLDs, they have been self-sustaining. I would defer to our Public Works Director, who has more history with it.
[01:43:38] Public Works Director: Yeah, the majority of them are, with the exception of three. And those three, we've reduced services. And some of them have reduced landscape. So they still get maintained, they still maintain themselves, but with a less frequency.
[01:44:02] Council Member Kent: We had some problems on Deep Canyon, is that just like you just described?
[01:44:08] Public Works Director: Yeah. So the one in Deep Canyon, Palmgate, fortunately they did vote to increase their levies, so they're doing pretty good. But the three that are underfunded, mostly they're on Holy Lane West.
[01:44:21] Mayor: Thank you. Any other questions? Finished?
[01:44:28] Mayor: Oh, you're finished.
[01:44:30] Council Member: Got it. Okay. So that's where we have some wiggle room if the numbers don't match up, is we can go back to them and say, 'Well, we plan, you know, you can vote again to increase the assessment amount per resident,' right? And then it would have to be by a vote or their consent, of course, or without that, we can choose to reduce services. Got it. And when this is presented to each of the groups of homeowners, they will know the dollar amount that's being assessed. In other words, they're making an educated vote.
[01:45:00] Staff: ...to get to that two-thirds majority. It's all spelled out so they can compare and contrast current HOA fees to what the assessment will be.
[01:45:07] Mayor Harnik: Okay.
[01:45:08] Staff: Absolutely. Council, Councilmember, or Mayor Pro Tem, I think as a tentative after this meeting, we'd really have kind of these collaborative discussions with them to understand what exactly they're paying for their maintenance costs and to make sure it makes sense on both sides. Because taking into consideration prevailing wage and assessment costs, we want to make sure it balances out and it's something that works for them as well. So, there's a lot of analysis that still has to be completed.
[01:45:34] Councilmember: Sounds like a lot of education is going to be needed for everyone. So, how much is the city able to provide aesthetic guidelines in these? Because what you just said, Randy, about some of this where on Deep Canyon it started looking really bad, they were complaining, and yet it was theirs. So, how much influence do we have on the aesthetics?
[01:46:07] Staff: That is a good question. If I could defer to our Public Works...
[01:46:09] Staff (Public Works): Yeah. So, we pretty much 100%, with the exception, for example, of the Grove development on Deep Canyon where they have turf. We did approach them a couple of years ago to see if they wanted to convert to desert landscape. So, when it's something that drastic, we reach out, we survey the residents. They like the turf look, so we left it alone. However, some of the smaller ones like we're talking about here, a lot of it is native. So, couple that with the landscape master plan we're working on. So, we do want to provide an updated, refreshed, low-water-use landscape, but a lot of it is up to the city's discretion to incorporate.
[01:46:55] Councilmember: And you had mentioned the one HOA that organically reached out, and that sounds like that's going to be somebody who's going to have a higher aesthetic requirement. They sound like they're looking for something real nice, but we also talk about the consistency. So, how can we guarantee the consistency if, just what you said, we had an issue where we weren't able to really change the way they were doing it? How do we guarantee any consistency throughout the city?
[01:47:31] Staff: Mayor Harnik, from a maintenance perspective, so at that point, if they were interested in opting into an LLD, our city contractors would, our city maintenance contractors would absorb that within their work. So, they would be held to a standard as the city would hold them to.
[01:47:51] Mayor Harnik: Okay. All right. Thank you. Are there any other questions?
[01:47:54] Councilmember Quintanilla: I want to clarify on that. So, if they're saying, 'We're open to this, here's what we currently have, and not only are we willing to now vote to participate,' where would that amount say, 'This is what you're going to get and we're not going to change it,' or in the future, if we change our aesthetic requirements to say, 'Now you have to pay more because this is the citywide palette or preference now,' or is it locked in to say, 'Here's what you're paying. We may reduce it, but we're not going to come and overhaul.' What are the parameters again with that balance of what's best for them and what we think is pretty?
[01:48:39] Staff: Councilmember Quintanilla...
[01:48:42] Staff: Um...
[01:48:49] Councilmember Quintanilla: I know that's asking for kind of a crystal ball. I just, in trying to see again what's most beneficial for them, because we're looking at how it looks to us and trying to see what works for them so we can come to that happy middle. But I am concerned that in the future, if we change our aesthetic preferences, would we absorb that cost, or would we at a certain point say, 'Now we're going to put it to a cost again?' Because if I'm understanding, when you mentioned that in some of these we could just say, 'Well, we'll just cut back our services or we'll cut back the landscape,' I would just hate again to all of a sudden they're left with only milkweed.
[01:49:34] Staff: No, and if I can answer that, Chris. So, we have been working with the, or speaking with the residents of Corte Placas. They're aware, they actually came to us because they like what we're doing to the adjacent properties. So, they want to be a part of it. So, they're aware that we're doing a good job with their neighbors. So, that's what we would bring to them, a desert-type landscape to make it...
[01:50:01] City Staff: ...consistent with the rest of Hovley Lane West. Also, to answer your question, there is a capital improvement component to this. So, let's say if a tree dies or plant material dies, there will be reserve funds to replace it at their cost. So, we also factor that in with their levies as well, if they choose to go that route. But the intent is to make it uniform with their neighbors and not really just pull the rug from under their feet, so to speak.
[01:50:38] Mayor Herman: Okay. Comments?
[01:50:42] Councilmember Gina: Thank you, Mayor. I fully support LLDs and having the city assume responsibility for new LLDs. I think it's so important that we have our city look as beautiful as possible, and LLDs will promote higher aesthetics. We take pride in our city, and I believe this is an excellent way to keep and improve our city's beauty. The upfront rehabilitation cost, I believe it would be prudent to seek property owner assessments, but not written in stone, black and white. I don't want to put undue financial burden on any HOA either, but I very much support doing this.
[01:51:37] Mayor Herman: Okay. Any other comments, please?
[01:51:41] Mayor Pro Tem: Just out of curiosity, I agree with my colleague Gina's sentiments. I'm in favor of uniformity and a standard that's kept throughout the city. Theoretically, could the HOA not rescind any of their fees and just tack on this LLD? In other words, then the residents have the LLD fee and no change in their HOA, so it's kind of a double whammy. In other words, is part of the agreement that the HOA fees would be reduced for these residents in lieu, and in exchange they pay the higher fees through assessments? It's a way of the HOA increasing their bottom line, if they...
[01:52:17] City Staff: Mayor Pro Tem, in theory, that's how it would go, and that's how we would see it chronologically unfolding. As we unwind one agreement, they would be unwinding some of their fees as well.
[01:52:27] Mayor Pro Tem: But the HOA agreements between the HOA and the residents have nothing to do with the city. So, in theory, an HOA board could say, 'Hey, you know, we're just going to keep our HOA fees the same and reduce services provided, and then have the city take over landscaping.' That's a possibility. Is that not on the LLD? Am I blurring things right now? Wouldn't that be put on their property tax?
[01:52:51] City Staff: Mayor Herman, correct.
[01:52:52] Mayor Herman: Right.
[01:52:53] City Staff: So, we can get it from the property tax.
[01:52:54] Mayor Pro Tem: Right. Right. But what I need to say is I'm thinking from a resident's perspective. I'm a part of an HOA and they say, 'Hey, we're going to transfer the maintenance contract to the city. The city's going to handle all the maintenance.' And yet, I could still be burdened with the same. There's no requirement that the HOA reduce their HOA monthly fees for reducing their services. It's kind of up to them. It's like...
[01:53:19] City Staff: In this case, the HOA would be dissolved. So there would be no...
[01:53:24] Mayor Pro Tem: So the property managers would be the city. Okay. Okay. So in each case, each of these HOAs only exist to provide landscaping services.
[01:53:32] City Staff: Correct.
[01:53:34] Mayor Pro Tem: Got it. Okay. Because sometimes it includes paving streets and it involves... Okay. Got it.
[01:53:37] Mayor Pro Tem: So each of these is only for lighting and landscape.
[01:53:43] City Staff: Correct.
[01:53:44] Councilmember: Okay. Yeah. Okay. You know, when they purchased in that HOA, they knew they were responsible for lighting and landscape if they read their contract. So they need to be responsible for what they signed up for and what they signed on the dotted line on that contract. That's a contractual obligation that they are in for. So we need to make sure that they continue that. And again, it's for the uniformity in the city and the beauty of the city and for their property. I mean, we're maintaining their property and probably increasing their property value by doing this. So I do support the LLDs.
[01:54:30] Mayor Herman: Any other comments? Okay. Thank you very much. Did we leave any question unanswered?
[01:54:38] City Staff: No, you did not. Thank you.
[01:54:40] Mayor Herman: Great. Okay. The next one is provide an update on the city's marketing program. Mr. Petto, you can come back now.
[01:55:02] Speaker: He's napping.
[01:55:15] Speaker: Thank you.
[01:55:19] Thomas Soul: Good afternoon, Mayor and members of the City Council. I'm Thomas Soul, your Public Affairs Manager. I'm here to provide a brief update about how Palm Desert's marketing and communications function continues to evolve as a strategic system, one designed to strengthen resident trust and civic engagement while also driving economic return for the city.
[01:55:40] Thomas Soul: So our program operates on a dual strategy. On one side, we have resident-facing communications that includes Bright Side, social media, and digital newsletters. And these are designed to build understanding, transparency, and civic connection. And by and large, these functions are handled in-house by our public affairs team. On the other side, our tourism marketing program brings in high-value visitors whose spending sustains a significant portion of our general fund. For this program, staff works with a creative agency, Idea Peddler.
[01:56:12] Thomas Soul: This system supports both sides of the community experience: the people who live here and the revenue engine that funds the services that those people rely on.
[01:56:24] Thomas Soul: This balance is critical because Palm Desert's visitor economy now supports 53.7% of our general fund through transient occupancy tax (TOT) and sales tax. That level of revenue roughly offsets $7,800 per household every year. For residents, that translates into real value: public safety, parks, streets, services, and amenities that would otherwise require substantial local tax increases.
[01:56:53] Thomas Soul: And for reference, $7,800 is roughly equivalent to the amount of money that the average California household spends on groceries in a year.
[01:57:02] Thomas Soul: In this regard, our tourism marketing program, the way that we see it, is a core contributor to the city's long-term financial stability.
[01:57:12] Thomas Soul: And both sides of that program continue to perform. On the tourism side, our current campaigns are generating a 4.1 to one return on ad spend, or a 310% return on investment. This is a strong and reliable measure based on anonymized third-party attribution, which is the standard method of measurement in tourism marketing, and for reference, the industry average is about 2.1 to 3.1. At the same time, our communications with residents continue to grow and strengthen.
[01:57:42] Thomas Soul: The print version of Bright Side is delivered bimonthly to every address in Palm Desert, while the digital edition maintains a 61% open rate compared to an industry average of about 28%.
[01:57:54] Thomas Soul: So together, these results show that our messaging is reaching the right people in the right places and with measurable effect.
[01:58:03] Thomas Soul: But the marketing and communications environment is changing quickly. AI-driven trip planning tools are shifting how people are discovering destinations, and the evolution of slow travel is reshaping visitor motivations across the industry.
[01:58:18] Thomas Soul: Broader changes such as these are exactly why we're launching a research program now, and it's the first one we've done since 2018.
[01:58:27] Thomas Soul: So, for reference, the tourism economic report that I included in your staff report tells us the size and economic impact of our visitor economy, but it doesn't tell us who our current visitors are or why they choose Palm Desert. And our research program is designed to answer those questions for us moving forward.
[01:58:47] Thomas Soul: That way, we can fill the gap and ensure that our next phase of marketing is built on current traveler behavior and not outdated assumptions.
[01:58:56] Thomas Soul: That research leads us to our 18-month roadmap that carries us into fiscal year 2026-2027.
[01:59:03] Thomas Soul: So, we'll begin with qualitative research and stakeholder interviews, which we've already begun, followed by creative strategy development this summer, new asset production in the fall, and then a refined brand direction as we enter 2027.
[01:59:18] Thomas Soul: This positions us well for the next RFP cycle and ensures that our future campaigns are grounded in real data, aligned with city priorities, and responsive to changing traveler behavior.
[01:59:32] Thomas Soul: Before we finalize the research scope, I'm here to request council guidance on three areas. First, as we evaluate potential, as we do research with our current markets, we're wondering if council would like us to identify emerging opportunities beyond our current core markets. So, right now we're focused on LA, Orange County, San Francisco, and Seattle. So, the question...
[02:00:00] Thomas: is, do you have interest in us exploring other potential markets to market to? Second, are there particular themes or topics you would like to see included in the quantitative qualitative research? And third, are there long range communications or tourism priorities you would like us to consider as we build the next phase of this program? So, this concludes my presentation. Our goal is to ensure that Palm Desert remains competitive, well-informed, and deeply connected with its residents, delivering value through both trusted communication and strong economic performance. And I'm happy to answer any questions.
[02:00:34] Chairperson: Thank you. Okay, can we have questions? Yeah, we'll start here.
[02:00:39] Councilmember: How are you selecting the individuals for your research study?
[02:00:43] Thomas: So, we're using a, um, we're using a firm that does qualitative research and we'll create a screener in conjunction with them to help us identify travelers, um, in different age groups. So, we'll have different cohorts that we'll be, um, doing the focus groups with and they will be selected based on people who have visited Palm Desert in the past couple years and then others who have considered Palm Desert but chose not to come or chose a different destination to kind of explore what the difference was there, what drove them, what motivated them either way.
[02:01:19] Councilmember: So, would that pop up in an email as clickbait? What would that look like in terms of seeking out people that you said have either been here in the past, that could be a little easier, but as people were looking for it but chose not to? That seems a little pie in the sky or maybe it's entirely artificial intelligence. But could that be seen as clickbait and reduce a broad sector of the population that you would need in order to get proper methodology for a valid survey?
[02:01:51] Thomas: As you can imagine, there's a whole industry devoted to consumer research. So, we're taking advantage of professionals who conduct this on a regular basis who will be helping us identify, uh, the research participants so that we're not just sending out emails or running ads for people. We're using people that are involved in this industry, um, with established research centers.
[02:02:15] Councilmember: And another question that I had, um, some of the models that have been used by Idea Peddler have been mentioned in getting influencers to come out and highlight some of our features. What I'm looking at is in terms of the demographics of the average people that come to the Coachella Valley, that doesn't necessarily, um, compare with the age and demographics of the influencers. So, has there been a mismatch or an attempt to align them? And also, who pays for the influencers to come and attempt to influence?
[02:02:54] Thomas: So, as I mentioned in the memo that went out today, these aren't, um, they're primarily journalists that we're bringing out who also act as influencers. So, we're pulling people who are involved in writing articles for established publications, not primarily based on their influencer activity. So, a typical influencer, their whole brand is online. We're bringing people who do that but who are also writers, established writers who've been published in publications, and we choose them based on publications that we've already decided align with the people that we're trying to bring to Palm Desert. So, we look at, um, national publications like we've had Timeout, which is a national level publication that has a broad reach, uh, Westways, different magazines that align with the audience, the visitor profile that we get typically. So, anything that they do online on their own brand behalf as an influencer is just considered extra value add in that case. We're not choosing influencers first. They're journalists and writers.
[02:03:59] Councilmember: Thank you.
[02:04:01] Chairperson: Do you have any questions? Comments? Questions?
[02:04:07] Councilmember: All right. Thank you, Thomas. The, um, so the Convention and Visitors Bureau exists to promote tourism in the Coachella Valley. However, I think their mandate or their mission is really to cover all nine cities equally. So, there's no opportunity, and to me, they have a huge level of expertise in the demographics, who to attract, and what drives tourism in the Coachella Valley. This is just blue sky, you know, possibility. Does the possibility exist of using the CVB to promote Palm Desert as a separate destination, or would that be sort of a conflict, or does that violate their mandate or mission? I just, I would love to see more use made of that resource or asset.
[02:04:52] Thomas: So, the way that we look at this, and this is a great question because there's an ecosystem of travel marketing that we operate within. Um, at the very highest level, you have
[02:05:01] Staff Member: Brand USA, that's reaching out internationally to promote the United States. We also have Visit California that also reaches out internationally to bring visitors to California. On a smaller level, you've got Visit Greater Palm Springs, and their goal is to bring people to the Coachella Valley. Um, they they do focus on on promoting the valley as a whole. They have a lot more resources than we have, but it's rare that you'll find in their advertising the words 'Palm Desert' mentioned. And so this is where we feel our program comes in. Um, we've identified markets where we have established visitor visitor patterns. We know that we can help influence and bring more of those people here.
[02:05:43] Staff Member: We're focusing on Seattle because those are visitors. Um, the vast bulk of our visitors come from LA and Orange County. We get a lot of travelers from there, but they typically stay shorter and they spend far less than other visitors. So, we've expanded our program to reach Seattle because those people stay longer and they spend considerably more, and that market is more economical for us to advertise in and reach people.
[02:06:07] Councilmember 1: And okay. So, so we're trying to fit within that ecosystem of Visit Greater Palm Springs or Visit California to Visit Greater Palm Springs to help bring the name Palm Desert specifically to mind as they're examining the Coachella Valley. And there's no way to pressure or try to convince the CVB to promote Palm Desert more even though we're paying our fair share of TOT revenue just because...
[02:06:28] Staff Member: ...the way they're set up.
[02:06:29] Staff Member: I think that they they feel that they do promote Palm Desert. Um, they promote certainly they promote the JW Marriott, uh, the Living Desert. Um, the the key differentiation would be that they don't use the words 'Palm Desert'.
[02:06:42] Councilmember 1: Yeah. Right. Got it. And then one other question, uh, in your report or presentation that we had, I have what I thought at first was two conflicting pieces of data, but I just want to make sure I'm clear on this. So on the one, visitor economy anchors Palm Desert's financial stability, 53% portion of the general fund supported by visitor spending, which translates to an annual household value from visitor activity at $7,800. And I think what you're talking about is maybe a tax offset. In other words, what we don't have to pay in sales tax and whether we would have to pay to get the equivalent amount of service, about $1,800 per household that's being offset by tourism activity. And then on another page, it was the one results in context. There was a figure that was put in there. It's smaller writing. Sorry, here in print. Um, $278 million of direct personal income. This is the equivalent of more than 11,500 per household in the city on average. And I'm assuming the distinction there is that is the income...
[02:07:43] Staff Member: ...offset that you would otherwise not have tourist income.
[02:07:46] Staff Member: Right. And that that comes from the the Oxford study that I provided. Um, so according to their research, that's right. If you, um, there's a difference between how much revenue is coming in versus how much of it would support city services. And I think that's the distinction between.
[02:08:00] Councilmember 1: So, let's combine those two numbers to like 20,000. That's even more impressive. All right, that's all I have.
[02:08:06] Mayor: Thank you. And I just want to note that we did have, um, uh, closed session scheduled for 3:30, but if everyone is okay, let's just finish this up. We'll wrap it up and we'll start a little late. Is that acceptable? Okay. Comments, please.
[02:08:19] Councilmember 2: I wanted to say that, uh, in terms of market priorities, the one I would suggest is any direct flights that are coming into Palm Springs, those are areas we should look at targeting. Like there's direct from JFK into Palm Springs, perhaps we look at, or maybe that maybe New York's too big of a market. I don't know. But I do think targeting where we have direct flights coming into Palm Springs are...
[02:08:46] Staff Member: ...and that's part of the factoring that we uh looked at when we chose Seattle um because it's a good it's a good point that a direct flight makes it easier for people to get here and then there's the question of how expensive is it to advertise in that market. And of course New York is an expensive market and we want to make sure that the dollars that we're spending are working as hard as possible to reach people with a great greater percentage of the idea that they would come here. So we we always take a data-driven approach to that and so the question is whether council would like us to look at more opportunities like that.
[02:09:21] Councilmember 3: One of the things that I have brought up before in terms of are we getting our our true ROI with our packages and agencies. I was very surprised actually, no, not surprised, dismayed when we see the limited amount of postings, for example, on Instagram. And one of them, what was it, that there was 52 Instagram story posts for FYE26? How is it that, I mean, that averages out to once a week. How is it that this is the kind of thing that I'm sure can be done in-house? Uh, 200 Instagram feed...
[02:10:00] Speaker 1: ...posts. That's average. When we look at other cities locally, I see other cities doing a much better job at putting themselves out there. And one of the things you mentioned at the beginning was to also build community trust and transparency. When we see our posts and there's very limited engagement, sometimes I'll go look and it's either the same people or one of us that has shared it. And I'm very concerned again how we are not maximizing that as our in-house resources, on top of that what we're paying somebody else to not do adequately. And I would like to see part of what their research model is and how the questions are really going to look into the analytics of the spend—not the spending, but the behavior, as mentioned earlier, the behavior versus the spending.
[02:11:01] Speaker 2: Is there a question that you wanted him to answer?
[02:11:04] Speaker 1: Yeah. What's the analysis that you have on why it's so limited?
[02:11:10] Speaker 3: Well, I might dispute the characterization of that as limited. There are different thoughts about posting regularity and scheduling. We also use our Instagram reels that they produce. Those promote individual Palm Desert businesses and attractions for the most part. We use those as part of our advertising on social media, so they have reach beyond just that individual post. The whole ecosystem works together, and actually those posts have been pretty effective at reaching visitors and inspiring travel here.
[02:11:45] Speaker 1: For the next or for the follow-up, can you provide the statistics of the amount of time that someone has spent looking at the reel? Is it looking at it for one second, five seconds, the duration of the reel? Because I think that's just as important as saying someone looked at it versus the engagements. And yes, there will be a differing opinion on what's too much and what's enough, but I honestly think that 52 is ridiculously low.
[02:12:13] Speaker 3: So, the engagement rate on Instagram, they take three seconds as a standard, and if anybody watches longer than three seconds, that's considered a win for Instagram. And so our engagement rate of people who watch longer than three seconds is close to 40%. When you think of all the people that just scroll by compared to people who watch longer than three percent—even if I think of myself looking at Instagram, how many guys just scroll right by versus the people that watch it longer? The people that watch it longer are probably the people that it's going to hit more, resonate more with, and those are the ones we want. We don't necessarily need every eyeball; we want the right eyeballs of people who are ready to travel and interested in potentially coming to Palm Desert. So the strategy is a little bit different than reach as many people as possible. We're really focused on reaching the right people to then translate into visitation.
[02:13:09] Speaker 1: But wouldn't that increase also create and generate more traffic via algorithms within those individual people within their market and their circles? And then the other thing I didn't see is, in terms of the different platforms we're looking at our social media, is the activity level, for example, on Facebook versus Instagram, when you have the feature to publish in one and have it viewed in the other platform? Is that commonly practiced, or are they differentiated based on the topic?
[02:13:41] Speaker 3: They're differentiated. The two different platforms really have a different base and a different approach. And when you're thinking about the algorithm, the algorithm changes constantly, and so it's pretty much a losing game to rely on organic traffic for posts like that. That's not the best way to achieve an effect with social media. The platforms continually change the algorithm to kind of work against that, using them for business purposes that way. So the most effectiveness we found with that is using our social media advertising, using those videos to promote them through advertising and to get eyeballs that way. So it's a little bit different approach, and it kind of is an end run that we're forced to do because of the algorithm.
[02:14:30] Speaker 2: Any questions? Okay, comments please.
[02:14:34] Speaker 4: Thomas, you know, my thoughts on marketing have evolved since I've been on this council. I find that there's great utility in being able to tell our business community how we're supporting them with direct marketing dollars. It's hard to measure the impact for them to know that we're working to help to bring them customers. I'm sure there's ways we could do it more effectively and better, but when I...
[02:15:00] Councilmember: Explain to them that we're targeting specific enclaves of high-income travelers that have a high propensity to come, it's a justifiable expense of government money. And so, you know, I think I can't really offer much to help you do better. So, but I do want to say that I understand the value and perhaps we could do better, but certainly there is a lot of value that I've come to appreciate.
[02:15:32] Councilmember: Yeah, I agree with Joe. You know, you look at our budget with Idea Peddler last year, I think, was roughly about a million dollars—
[02:15:39] Thomas: Just under 900,000.
[02:15:40] Councilmember: Okay, great. But I do see the value in using... you can go to business owners and say, "We're promoting you directly." If you're looking for direction on maybe what angle to take or what to focus on in future years—
[02:15:54] Thomas: Yeah.
[02:15:54] Councilmember: And you may already... this is probably already self-evident and obvious. We've all been talking about it. But I think obviously we have to capitalize on the Desert Surf project, right? Promote the heck out of that. That's a world-class venue that's going to appear here. And even if a tourist isn't a surfer, it certainly gets your attention. If you're sitting there in New Jersey, where I grew up, and you see this beautiful sunny place where people are surfing in Palm Desert, it gets your attention. And then of course we can piggyback on that and promote other things to do in Palm Desert, hiking, etc., etc. So that would be my comment.
[02:16:24] Mayor: Thank you. Any other comments?
[02:16:27] Councilmember: Just that I've appreciated all your efforts all these years and you're doing a great job. Thank you, Thomas.
[02:16:34] Mayor: Any other comments? So I'm glad to hear you're doing a focus group again. I know the last time it was 2018 and there was so much information that came from that and we have used it to our advantage, and the 4.121 return on ad spend certainly reflects that. And I know you have a small team here in City Hall that is marketing-specific. The results are impressive and I thank you for that. And we have seen remarkable growth in the tourism and in the branding, and the name Palm Desert now is rising slowly but surely, and we're glad to see the marketing and branding making an impact. I do agree also, I think Gina makes a great point, those direct flights, but then we have to factor in all the things that you know of through your area of expertise and through those you draw on in that marketing and branding expertise. So any way we can get the name out there. I've been recently traveling and, of course, Coachella Valley also has a little cred now that it didn't have years ago. So to see that and to have people say, "Oh yeah, Palm Desert," it was a nice feeling, and in some pretty small Midwest towns. So the impact is going. I know it's a slow grow and you're doing every bit you can, and it's impressive to see. So, thank you for that. Now, did we answer all the questions you needed?
[02:18:17] Thomas: Yes.
[02:18:18] Mayor: Okay. All right. Thank you, and thank you for the report you sent today, and I'm sure many of us will spend more time on that. It is 3:43. We were scheduled to begin closed session at 3:30. Can we take about a seven-minute break and then meet for closed session? Do we need to come back for it?
[02:18:38] Staff: You don't. But there are no public comments for closed session.
[02:18:41] Mayor: Thank you very much. Okay, we will be back after closed session. Thank you.