Yorba Linda's healthy reserve account allows council decisions for future financial stability

A healthy balance in Yorba Linda's reserve funds that continues to build as the city's revenues exceed expenditures has enabled City Council members to make some key decisions that will impact the city's future financial stability.

The most recent council action will continue a three-year-old policy to accelerate amortization of the city's unfunded employee pension liability and reduce the liability for medical payments for retired employees.

The speed-up plan is to fully amortize pension liability by the 2035-36 fiscal year – well ahead of a costlier 30-year payoff period – and contribute additional funds to the city's “other post-employment benefits” trust, with deposits to the state Public Employees Retirement System.

This fiscal year's extra payment for pension funding will be close to $300,000, in addition to a regular payment of nearly $1.6 million. Extra payments for the previous two years totaled just below $600,000, with regular payments totaling a bit under $2.5 million.

The money comes from the city's general fund and a separate library fund, with the amounts based on the proportion of city and library employees in the workforce. The library's property tax revenue from its status as a former independent district still funds its operations.

And this year's payment for retiree medical benefits from the city's general fund will be the same as each of the prior two years, $200,000. Library funds will add nearly $35,000 this year.

After these extra payments, some $2.2 million in excess operating funds remain in the city's reserves, with “excess” defined as the amount above 50 percent of one year's expenditures.

Council policy calls for the panel to review a spending plan for any excess above 60 percent.

At a meeting last month, city staff recommended council delay making decisions regarding use of the funds, since the sale of the city property along west Bastanchury Road is expected to be more than will be needed to build the arts center next to the new library on Lakeview Avenue.

A report outlining anticipated sizable additions to the city's reserve accounts will be presented at an upcoming council meeting by Scott Catlett, finance director and treasurer.

Catlett told council members: “This additional information will facilitate a more comprehensive discussion of the city's unfunded needs, with the goal of eliminating the remaining funding gap in the Town Center project, repaying in full the outstanding Town Center loan and replenishing special reserves.”

The city is in the second year of a two-year budget cycle, with first-quarter results recently reported to the council. Catlett noted the current projection for 2018-19 “remains positive.”

He estimated a budget surplus of $302,000 and stated “operating reserves are anticipated to remain safely above the City Council's minimum balance policy of 50 percent of general fund expenditures at approximately 57 percent.”