Yorba Linda city leaders decide on spending 'excess operating reserves' as surpluses mount

“Excess operating reserves” is a term that's become familiar to Yorba Linda's elected leaders in the years since the Great Recession put a pinch into the city's income from taxes and fees.

In the decade after the 2008-09 economic downturn, the city has reported sizable increases in the cash leftover after expenditures are deducted from revenues, which has resulted in a hefty reserve and a city policy to keep 50% of a year's expenses in “rainy day” accounts.

The city has close to $5.1 million more than the $18.5 million needed to maintain the 50% level for the current fiscal year, with the $5.1 million considered excess operating reserves, according to a recent report presented to the City Council by Finance Director Scott Catlett.

With reserves now standing at 64% of this year's operating budget, another city policy “requires” council to appropriate an amount close to $1.4 million to reduce the balance below a 60% level, Catlett's report to the council stated.

Of course, under the minimum 50% reserve policy, “any amount up to the full $5.1 million is available for the council's use at this time,” Catlett noted. But the council accepted Catlett's recommendation for four appropriations that would leave reserves at a 55% level.

Two of the recommendations would continue a multi-year practice of reducing the city's unfunded liabilities for employee pensions and retired employee medical payments with the state Public Employees Retirement System.

The city's goal is to reduce a 30-year amortization period to 20 years or less by making extra payments each year to the pension fund. This year's regular payment is close to $1.7 million, to which the city will add $264,074.

Over the past three years, the city has paid a total of about $4 million in regular contributions to the fund, plus nearly $900,000 in added contributions from excess reserves.

The city will contribute $230,718 to a trust set up with the pension fund to help cover the city's retired employee medical liability. A similar amount was paid in for each of the past two years.

Soil contaminant remediation costs on the city's West Bastanchury Road property once planned for the Friends Christian High School campus also will come from the reserves.

The total $1.1 million cost should be reimbursed from sale proceeds when the property closes escrow, probably this spring, although a previous developer who planned single-family homes on the acreage dropped out of a purchase proposal.

The city also will reduce a $4.6 million loan balance on the Town Center project by $2 million. The city hopes to pay the remaining $2.6 million during the next fiscal year, “should sufficient resources be available at year-end to do so,” Catlett stated.

The current projected budget surplus on June 30, 2020, is $163,000, but Catlett anticipates more savings will be realized during the next nine months “consistent with past fiscal years.”