“This was foreseen. We knew we were going to get into this fiscal year with a deficit,” Assistant City Manager Lisa Soghor told council members on Monday during a hearing to finalize the 2021-22 city budget, with the fiscal year (which begins July 1) deadline looming.
Soghor’s predictions were correct: The budget projects revenues at $84.9 million and expenses at $91.4 million for fiscal year 2021-22, meaning a shortfall is expected over the upcoming 12 months. The shortfall will be shored up with money set aside in the 2020-21 budget.
“To offset an expected decline in general fund revenues due to the COVID-19 pandemic, during fiscal year 2020-21, the council established a designated reserve for fiscal year 2021-22 operating expenditures in the amount of $6.5 million ... The proposed budget uses $3.79 million of the designated reserve to make up the general fund budget shortfall in fiscal year 2021-22,” according to the staff report prepared for the budget hearing. The remaining designated reserve funds will be saved for the 2022-23 budget.
Math whizzes note the shortfall of $3.79 million is only about half of the difference between the city’s projected revenues and expenses. Why isn’t the shortfall estimated at $6.6 million? Soghor is counting on two injections of cash: the FEMA reimbursement from the Woolsey Fire, which the city has been awaiting since 2019, and American Rescue Plan dollars—COVID-19 stimulus money.
The assistant city manager cited back-to-back-to-back expenses—the city’s large real estate purchases in 2018, the Woolsey Fire in 2018 and the COVID-19 pandemic from 2020-21—as reasoning for why the budget could not be balanced.
Now, council members are looking for a way to avoid further budget deficits in upcoming years.
Toward the end of a grueling budget hearing—the final in a series of budget talks that began in May—four council members voted to ask staff to prepare projections for the upcoming year’s budget early, around the “midyear” mark in late 2021 or early 2022. (Fiscal years go from July 1 to June 30.) The goal is to see upcoming predictions with enough time to make suggestions or change the city’s course going into the 2022-23 fiscal year.
“I would think at the midyear budget we should have a plan that addresses the deficit ... Whether we can pull it off or not this year, I don’t think is as important as having a plan that we can address,” Council Member Mikke Pierson said. “This year, I’m not as worried, but it’s having a plan.”
Mayor Paul Grisanti and Council Members Pierson, Karen Farrer and Steve Uhring voted to approve this year’s budget and request city staff present a budget forecast around the midyear mark for next year’s numbers; Council Member Bruce Silverstein voted against the action. Earlier in the meeting, Silverstein had suggested a more immediate action, requesting city staff come back following the first quarter of the fiscal year to present an update on the budget so council members could attempt to make further cuts where necessary. Only he and Uhring supported the motion, which other council members—and interim City Manager Steve McClary—said would be too difficult to enact once the budget has already been set in motion.
Major expenses in the 2021-22 budget include the hiring of several new staff members, including the equivalent of 7.5 full-time positions—a code enforcement officer, administrative assistant, associate civil engineer, grants analyst, planning technician, recreation coordinator, public safety liaison and part-time fire safety liaison—as well as the equivalent of 13.27 part-time employees.
According to Soghor, eight staff positions opened during the pandemic and, although the new hires are not one-to-one replacements for departed staff members, they are much needed additions to the city’s personnel.
Another area of concern in the budget was the sheriff’s beach team, which is expected to cost the city $893,396 this fiscal year. The team’s expenses continue to climb; back in the 2018-19 fiscal year, the beach team rang up a comparatively small price tag of $672,868.
Planning Commissioner John Mazza—the only member of the public to weigh in on the budget hearing on Monday—suggested the city “defund” the patrol, agreeing to pay only the amount of money the city earns back on the patrol’s citations. Though the idea did not gain traction, Farrer and other council members repeated requests made at earlier budget hearings that the city work to negotiate a way to cut the fee or gain back some revenue from citations.
Council made two small changes to the staff’s work plan for the upcoming year, adding an update to the Building Safety Department’s software to help streamline permitting and ending the Woolsey Fire rebuild fee waiver program at the end of the calendar year on Dec. 31. Those suggestions passed with unanimous approval.