By Sheryl Hamlin
City Manager Rock introduced the June 5, 2019 meeting saying that this was the first of several budget meetings for the FY 19/20 year. The law requires balanced budgets for all funds, he said.
Finance Director Report
Christy Ramirez, Finance Director, presented city wide budget items succinctly demonstrating knowledge of finance, pension accounting and personnel.
Shown were three high level categories of expenses: Capital Improvement Program, Salary & Benefits and Supplies & Services.
The chart below compares the proposed FY 19/20 budget to the adopted FY 19/18 budget:
The budget reflects a structural deficit where expenses are increasing at a higher rate than revenues.
The negotiated employee MOU between the city and the union resulted in $400,000 increase in salaries and a $78,000 decrease (savings) in city contributions to CalPERS; however the decrease in the CalPERS expected return on investment from 7.5% to 7% increased the city’s portion by $60,000. The unfunded pension liability increased by $285,000. The Finance Director said she would plan a meeting to discuss a CalPERS cost projection.
General Fund
The General Fund shows a deficit of $99,011.
Sewer and Water Funds
The Sewer and Water Funds show deficits of $2,708,552 and $3,997,788 respectively with $1.500,000 of the Sewer expenses results from engineering work on the chloride solution proposed earlier. Read about this solution here.
Two options to balance these funds are: use fund balances or raise rates. The rate committee will meet in November. The water fund has approximately $3.9 million in water bond proceeds.
Sales Tax
The budget assumptions for sales tax were as follows:
• Sales Tax – Kept sales tax consistent. See detailed data.
• Measure T Tax – Increased revenue by $200,000
With the above assumptions, the Measure T allocations using the new recommendations from the Measure T Commission are:
The City Manager said that he concurred with the allocations of the Measure T Commission.
Where Do Citizens Spend?
HDL, the city’s sales tax consultant, provided a two page article (in print) for the council which the Finance Director shared.
The chart below shows the top 25 Sales Tax producers alphabetically.
Highlights from the HDL report
Sales Tax receipts from the six county Sacramento region grew 7.9% over last year while the remainder of the state was generally flat or exhibited only minor growth.
Notable was the 0.09% rise in tax receipts from brick and mortar retailers which is the lowest holiday gain for that sector since 2009.
A recent survey identified U.S. closures of 102 million sq. ft. of retail space in 2017 and an additional 155 million sq. ft in 2018. Similar losses are ex pected in 2019 with 5,300 closures already announced.
Bog box retailers are responding by downsizing stores and subleasing excess space to compatible businesses to help draw traffic.
With more companies using the internet to sell directly to customers from their warehouses, the trend also provides jurisdictions whose populations aren’t adequate in size to support large scale retail to focus on industrial development for sales tax as well as jobs.
Next Steps
Council asked numerous questions which may indicate how they might suggest addressing the deficits.
The next budget meeting will occur on June 19, 2019 at 4:00 pm with the rest of the departmental presentations.
To watch this meeting, click here.
For more information on author click sherylhamlin dot com
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