In a summary of Laguna Beach’s proposed nearly $80 million budgets for the next two years, City Manager John Pietig describes the city’s revenues as “meeting or exceeding levels experienced prior to the recession.”
Even so, Pietig advocates fiscal restraint and cautions against adding programs and services that might not be sustainable in the future.
While the proposed budget maintains current services and reserves, Pietig points out that paying down the unfunded pension liability for safety employees remains to be addressed and merits the injection of $1.4 million, which has not yet been included in the budget proposed for coming 2015-16 and 2016-17 fiscal years. Nor does the current budget include potential salary increases for employees in 2016-17, as labor agreements expire.
The proposed $53.4 million general fund budget for the year beginning July 1 amounts to a 1.3 percent increase over the previous fiscal year’s spending. And the general fund budget for 2016-17 is estimated at $54.2 million, an increase of 1.6 percent over 2015-16.
Economic expansion exacts its own costs on city economics. Community development revenues, for example, have increased more than 28 percent over the past three years due to a jump in building and remodeling. To be able to handle the increased activity, the city hired two new planners for the department.
Since development fees have not been significantly adjusted in 10 years, Pietig suggests reviewing fee levels to offset the department’s expenses.
Economic growth is evident elsewhere in the city’s spending plan. The proposed budget assumes 3 percent increases in property tax revenues, which account for 54 percent of general fund revenues, for each of the next two years. It also predicts 3.5 percent increases in the hotel tax revenues and 2 percent increases in sales tax revenues, which account for 11 percent and 10 percent of general fund revenues, respectively.
Last year, the City Council elected to offset rising pension costs by increasing the city’s contribution to unfunded pension liability by $1.4 million a year. The city also reduced pension benefits for future employees and negotiated with current employees to increase their contribution to their pension costs.
Current projections show the revenues outpacing spending by just over $1.3 million, which is nevertheless $76,600 short of the additional $1.4 million suggested to pay down the unfunded pension liability for safety employees. And there will surely be community members who have other ideas about how to spend that balance.
The City Council has steadily increased the size of the general fund reserve to 20 percent currently ($10.7 million), up from 18 percent in 2014 and 15 percent the year before.
The City Council will hold a budget workshop at 4 p.m. preceding their regular meeting Tuesday, May 19.