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City Budget Sees $3 Million Mid-year Windfall

People are spending more in Laguna, adding to an unexpected $3 million bonus to city coffers, according to the city’s mid-year budget report to the City Council Tuesday.

The windfall to the city’s general fund is partly due to an increase in sales tax revenue, which means people are shopping and eating out more, specifically to the tune of $230,000 since last July. Sales are still far below the peak in 2008, the report stated, but five percent higher than in 2010-11. Hotel bed taxes are also slightly on the rise by $31,000, which is five percent over the previous year, according to the report.

The parking fund shows healthier stats as well, up $256,000, largely due to an increase in parking meter income, which jumped by $187,000 over city estimates. Building in the city is also starting to wiggle out of its slumber, according to the report, with permits and fees adding $130,000 to mid-year figures.

The coffers are copacetic due also to an unanticipated property tax return to the city. Last year, the city estimated no increase in property values, but received $372,000 from a 1.8 percent growth in assessments.

“Hopefully, it’s a sign the economy will recover,” commented City Manager John Pietig.

The two sides of the budget, thrift and spend, were represented by the only two residents to speak on the item. “If we don’t need it,” said Vic Opincar, “I recommend we don’t spend it. When I saw $25,000 for conference room A (improvements), it made my blood boil. We don’t need it; it works. Defer it.”

Charlotte Masarik countered, “If we’ve got the money, let’s spend it.  Certainly, it will help me and a lot of others.”

But the unexpected bonus isn’t about to hang around for long.

One of the first to ask for a break in paying what it owes to the city was the Laguna Beach Playhouse.  Playhouse executive director Karen Wood asked the city for an annual pass on the playhouse’s rent of $15,000.  The council agreed and charged the playhouse, which is in its 90th year, $1 to keep its rental agreement active.

Richard and Barbara Picheny from South Laguna made an on-the-spot contribution to the playhouse. “We want them to be successful,” said Mr. Picheny. Councilmember Elizabeth Pearson recused herself from voting on the rent reduction request because she was recently hired by the playhouse to raise funds.

This fiscal year started with a $718,000 deficit, meaning the city was spending more than it was taking in.  That redline grew to $934,000, partly due to litigation costs resulting from the December 2010 floods.

Also, retirement payments to city employees are expected to increase by $853,000, or about 1.1 percent but could go up to as much as $1.2 million annually, which is six percent of the city’s payroll. The increase depends on positive or negative investment returns to the California Public Employees Retirement System.

The city saw a one-time savings of $1.5 million in leaving certain positions vacant in the city manager, police and fire departments, and in eliminating a street-resurfacing crew.

Pietig said uncertainties with labor negotiations, the U.S. economy, and the European economy precipitated the hold on filling the city employee positions. “We’re seeing a bigger amount of savings this year than we can count on in the future,” he cautioned.

He recommended that the council agree to invest part of the one-time windfall to help mitigate future expenses.  He recommended putting $100,000 in the city’s insurance fund. He said the city is still sorting through claims associated with the flooding that occurred in Laguna Canyon and in the downtown business district in late 2010.

Another outcome of the flooding in Laguna Canyon was the uncovering of a buried hillside dumpsite where rubbish was burned and broken glass discarded decades ago. It will take $1 million to clear the site, said Pietig, some of which he hopes to fund with grant money. “It’s probably going to take several years to work through the regulatory process,” he said. “We’re working with five regulatory agencies just to come up with an interim solution.” Determining if there are unknown chemicals at the site adds to the expense, he stated during earlier reports.

The new lifeguard headquarters will receive $500,000 from the $3-million mid-year kitty to augment building expenses as it reaches above the $7-million mark in completion costs.

Councilmember Verna Rollinger suggested fixing equipment the city already has before purchasing replacements. “I understand the philosophy of maintaining what we have,” conceded Pietig. The council agreed to set aside $85,000 to replace an outdated document-scanning program from New Zealand to ensure easier access outside of city hall.

The city will also update additional software programs, computer equipment and telephones for $724,500 and replace a 1988 fire engine at a cost of $524,900, plus $20,000 for unforeseen related equipment needs.  Another $10,000 was earmarked to evaluate the condition of city-owned eucalyptus trees in Bluebird Canyon. Remaining money will be allocated to the city’s general fund.

 

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