In a two-hour workshop Tuesday devoted to the city’s proposed $47 million budget, the City Council added requests for $75,000 to hire a consultant to review historic homes, $5,000 for a citizens’ emergency response training program and an unspecified amount to ongoing bike and pedestrian path improvements.
City Manager John Pietig reported that the upcoming budget is $120,000 in the black, reversing last year’s nearly $1 million deficit.
Pietig said the proposed budget is almost balanced due to increases in revenue from property taxes of $315,000 and hotel and sales taxes of $590,000. Last year’s operating budget had a deficit of $934,000, which was covered by reserve funds.
Pietig said the proposed budget does not anticipate any demands for revenue from Sacramento to balance the state’s soaring deficits. It also lacks any pay raises for city employees, eliminates a vacant position and reclassifies other positions to save the city $126,000 a year, he said.
New appropriations will be included in another review of the city’s expected expenditures for fiscal year 2012-13 at the council’s June 7 meeting.
Questioning the necessity of the city’s proposed expenditure of $3 million appropriated to remodel City Hall in fiscal years 2014-15 and 2015-16, Chris Prelitz, chair of the city’s biped-friendly Complete Streets Task Force and board member of the sustainable resources group Transition Laguna, wondered about priority of projects that weren’t as urgent as conserving water.
“Placing those things before water is similar to New Orleans saying, ‘Let’s do city hall improvement instead of fixing the dike’,” Prelitz said. “We are really, really vulnerable toward water.”
Prelitz said the city’s Emergency Preparedness Task Force identified the city’s biggest threat as an earthquake and the critical weak link as water reserves to enable the city to be self-reliant for at least two weeks if a crisis occurs. “We spend a third of our budget on drainage so we’re not capturing one drop of rain water,” he said. “Our biggest financial suck of energy could be our biggest asset if we turn it around and capture that water on a citywide level.”
For the next fiscal year, Pietig said property taxes are expected to increase by 1 percent or $220,000 for a total of $26 million or 55 percent of the total revenue coming into the city. Sales and hotel taxes, the next most lucrative source of revenue amounting to 20 percent, are predicted to increase by 3 percent to $12.3 million (including $3 million from the Montage resort), compared to a 7 percent increase enjoyed last fiscal year. New retirement plans that require employees to contribute to their pensions will save about $243,000, he added. However, declining interest rates and less income from construction fees due to the slower economy are expected to decrease revenue by $176,000, he reported.
Aside from needed equipment purchases, the city’s revenue and operating expenses about equal out, Pietig said. “The picture is good.” Pietig said the annual expense to replace city equipment is estimated at $650,000 and is expected to be covered mid-year by city savings. He added that the bi-annual shopper’s permit will be sold this next year, adding $1 million to the parking fund. Of that, $700,000 will be transferred to the transit fund to subsidize the city’s free trolleys.
“We’re only about $300,000 down from where we were in ’08-09,” said Gavin Curran, the city’s finance director. “It took us about four years to get there but we’re slowly making our way back with the revenues.”
The council also agreed to include a one-time cost of $800,000 to connect with a countywide communications system particularly designed for emergency response and to continue paying for a grant lobbyist for an annual expense of $60,000.
Property taxes account for 55 percent of the city’s general fund revenue, while sales and hotel taxes contribute 20 percent. The county tax assessor predicted that property tax collections will rise 1 percent countywide, which translates to a $220,000 revenue gain in Laguna. The last time property tax collections remained nearly unmoved was in 1995-96, said Curran. In the peak year of 2004-05, property tax revenue escalated by 14 percent.
Curran predicted “more moderate” growth in hotel and sales taxes in the future, off the peak in 2007 and during the ensuing recession. “We’ve seen some pretty good increases in ‘10-11 and ‘11-12,” he said. Next year, he predicted hotel and sales tax revenue will increase by only 3 percent.