'Good news, bad news' on city budget situation
Here’s one of those classic good news-bad news situations: the City Council wisely has decided to return to preparing and adopting a two-year budget, but based on a first look at income and expenses, the city will operate with a deficit in each of the next two years.
For the past two fiscal years, the city has adopted single-year budgets “due to the recent economic uncertainty,” according to Finance Director Dave Christian. But now the city will plan for both 2011-12 and 2012-13, reverting to a prudent practice from prior years.
However, less pleasing is an initial budget overview offered at a June 7 council session, with expenses greater than income, leading to a deficit of $1.3 million for 2011-12 and $1.4 million for 2012-13, not including a previously proposed capital improvement tab totaling $3.5 million for 2011-12 and $2.9 million for 2012-13.
Of course, the elected council members are not likely to approve budgets with so much red ink and which would mean a 20 percent drop in the city’s reserve fund for 2011-12 and another 13 per cent dip in 2012-13, from this year’s expected $30.7 million closing.
Council will hold a special meeting on the budget July 12, at which time members are expected to slice deeply into expenses. But faced with a five percent increase in Brea police costs, to $12 million, the potential for a black-ink budget is uncertain.
The new fiscal year begins July 1 and runs through June 30, 2012. When the current fiscal year ends next week, the city will have spent $423,209 more than income, less than the predicted $504,529 deficit when the budget was adopted.
The most recent surplus year was 2009-10, but the $2 million was offset by transfers to other funds, including $2.1 million for fire and mud slide response, cutting $35 million in reserves to $32.5 million, plus $876,519 reserved for loan to Black Gold Golf Club.
Unless cuts are made to the “first look” budget overview, reserves would drop to $21.6 million, or 78 percent of budget by June 2013, again not including the Black Gold loan reserve or reserve for a Landscape Maintenance Assessment Districts contingency fund.
While expenses for the next two years are in limbo awaiting anticipated council cuts, the income side of the ledger is more predictable. Total revenues are expected to drop to the lowest level in several years, a bit more than $27 million for each of the next two years.
Major 2011-12 income will be $12.8 million in property taxes (up .6 percent from 2010-11), $5.4 million in sales taxes (the same as in 2010-11), $2.8 million in other taxes and franchise fees (down 1.6 percent) and $2.4 million in recreation fees (down 1.7 percent).
While property tax revenues have dipped some, dropping 2.5 percent for 2009-10 and 1 percent for 2010-11, sales taxes have increased $400,000 from 2009-10, up 7.7 percent.
Interestingly, 1,600 parcels or seven percent of the city’s total, still have values assessed at the 1975 base year established in Prop. 13, Christian said at an April meeting.
Christian noted in his June 7 report: “Although the reserve balances are still well above the 50 percent minimum [required by council policy], if the economy does not improve enough to cover [the] deficits, the council will need to consider significant reductions in services or capital improvement projects…to balance the budgets in future years.”
For the past two fiscal years, the city has adopted single-year budgets “due to the recent economic uncertainty,” according to Finance Director Dave Christian. But now the city will plan for both 2011-12 and 2012-13, reverting to a prudent practice from prior years.
However, less pleasing is an initial budget overview offered at a June 7 council session, with expenses greater than income, leading to a deficit of $1.3 million for 2011-12 and $1.4 million for 2012-13, not including a previously proposed capital improvement tab totaling $3.5 million for 2011-12 and $2.9 million for 2012-13.
Of course, the elected council members are not likely to approve budgets with so much red ink and which would mean a 20 percent drop in the city’s reserve fund for 2011-12 and another 13 per cent dip in 2012-13, from this year’s expected $30.7 million closing.
Council will hold a special meeting on the budget July 12, at which time members are expected to slice deeply into expenses. But faced with a five percent increase in Brea police costs, to $12 million, the potential for a black-ink budget is uncertain.
The new fiscal year begins July 1 and runs through June 30, 2012. When the current fiscal year ends next week, the city will have spent $423,209 more than income, less than the predicted $504,529 deficit when the budget was adopted.
The most recent surplus year was 2009-10, but the $2 million was offset by transfers to other funds, including $2.1 million for fire and mud slide response, cutting $35 million in reserves to $32.5 million, plus $876,519 reserved for loan to Black Gold Golf Club.
Unless cuts are made to the “first look” budget overview, reserves would drop to $21.6 million, or 78 percent of budget by June 2013, again not including the Black Gold loan reserve or reserve for a Landscape Maintenance Assessment Districts contingency fund.
While expenses for the next two years are in limbo awaiting anticipated council cuts, the income side of the ledger is more predictable. Total revenues are expected to drop to the lowest level in several years, a bit more than $27 million for each of the next two years.
Major 2011-12 income will be $12.8 million in property taxes (up .6 percent from 2010-11), $5.4 million in sales taxes (the same as in 2010-11), $2.8 million in other taxes and franchise fees (down 1.6 percent) and $2.4 million in recreation fees (down 1.7 percent).
While property tax revenues have dipped some, dropping 2.5 percent for 2009-10 and 1 percent for 2010-11, sales taxes have increased $400,000 from 2009-10, up 7.7 percent.
Interestingly, 1,600 parcels or seven percent of the city’s total, still have values assessed at the 1975 base year established in Prop. 13, Christian said at an April meeting.
Christian noted in his June 7 report: “Although the reserve balances are still well above the 50 percent minimum [required by council policy], if the economy does not improve enough to cover [the] deficits, the council will need to consider significant reductions in services or capital improvement projects…to balance the budgets in future years.”
posted by Jim Drummond at 12:00 PM
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