City budget will be balanced, have surplus

By Barbara Diamond

May 8, 2008 12 AM PT

Laguna’s financial picture is not rosy, but it isn’t in the red.

Revenue will not be as robust as in the past few years, but the city has suffered no losses, according to City Manager Ken Frank, who presented the draft of the 2008-09 budget to the City Council at a public workshop Tuesday.

“We are in pretty good shape, particularly in comparison to the federal and state governments and to school districts that get state revenue and communities like San Clemente that depend on development revenue and developer fees,” Frank said.

Total general fund revenue for fiscal year 2008-09 is estimated at $45,699,000. Expenditures are estimated at $46,388,300.

A beginning balance of $7,275,914 will cover the shortfall, according to city documents. A revised draft budget will be presented to the council at the June 17 meeting, when it is expected to be adopted, well in advance of the June 30 deadline for adoption.

Frank’s presentation was a tad more bleak than his summary of the city overall finances in the draft budget, prepared two months ago.

“The draft included a $570,000 allocation for police retirement benefits to take effect July 1, then we learned just this week from PERS [Public Employee Retirement System] that the annual cost will be $610,000,” Frank said. “It’s just one more thing.

“But without the retirement benefit, we wouldn’t have any police officers — so we have no choice.

“Also the cost of fuel has gone up more than we estimated and we will have to find the money for it.”

Frank’s summary in the draft described the nation and the state in excruciating financial disarray, created by elected officials in Washington and Sacramento and exacerbated by plummeting residential real estate sales and construction, which presage a dip in property tax revenue.

“These factors are inimical to Laguna Beach,” Frank said.

About 50% of the city’s discretionary revenue comes from property taxes.

Despite an estimated 40% decline in real estate activity, City Finance Director Gavin Curren projected a 6% increase in property tax valuation.

“We think we have enough sales and construction activity in town to support a 6% increase estimate,” Frank said.

If the revenue doesn’t meet expectations, the city will fall back on the surplus left from the 2007-08 budget, according to Frank.

He is less concerned than in the past about state raids on the city’s share of property taxes, because of Proposition 213, which would require reimbursement, although he anticipates other cutbacks.

“The state is in a bad way and I expect to lose the $100,000 police grant,” Frank said.

Curren also predicted a slight 1% increase in sales tax revenue, although the figures were flat in the last quarter.

“The city has never seen a decrease in sales tax except for the two quarters right after 9/11,” Curren said.

Frank said the 6% estimate for property taxes and the 1% estimate for sales tax revenue was the only way he could balance the budget.

“We may be pushing it a little this year,” Frank said.

The city manager is required by the municipal code to submit a balanced budget to the council in May of each year.

Frank is notorious for underestimating income and overestimating expenses, which usually leaves a cushion to fund items on the council’s wish list, unexpected expenditures, such as landslide repairs, or public requests, which might or might not make it into the final budget.

On Tuesday:

The council instructed Frank to include an appropriation requested by the Design Review Task Force to pay for a survey of people who had completed projects since revisions to the process were implemented.

Cal State Fullerton Social Science Research Center will conduct the survey.

A council straw vote approved requests to allow late applications for Business Improvement District grants by CaDance and Laguna Beach Plein Air Painters Assn. to be referred to the Arts Commission for consideration.

Both groups were in turmoil when applications were due.

Repairs to the Third Street Hill, which have been in the capital campaign queue for about 10 years, were bumped up a year on the schedule, with work possible to begin in the next fiscal year.

The Chamber of Commerce was advised to approach the Visitor’s Bureau rather than the city with a request for $15,000 to add to the $35,000 the city allocates for the holiday lighting.

“I’d like to see the bureau partner with the chamber on the lighting,” Councilman Kelly Boyd said.

“The bureau gets $750,000 from us — I don’t think $15,000 will hurt them.”

The chamber also requested some financial support for its proposals to beautify the ends of streets that give access to city beaches.

Cross Cultural Council President David Peck asked the council to fully fund its $32,000 application, submitted for one of the community grants that are vetted by a council sub-committee and approved by the council.

Boyd and Schneider volunteered to serve on the 2008-09 sub-committee.

Frank recommended the position of Senior Citizen Coordinator’s job be upped to full-time.

The increase will come from savings in compensation to a recreational department supervisor who wanted to cut back on hours.

“That will be a wash,” Frank said.

His recommendations also included a $175,000, one-time expenditure to expand the wildfire fuel break around the city; $50,000 for a program that will let city departments directly post information on the city’s web site; $100,000 to upgrade the geographical information system and $35,000 for beach clean-ups after storms.

Frank noted that the council had previously authorized the rental of two more trams this year and their purchase next year.

Despite the challenges facing the city, Frank said he intends to keep the reserve fund at 15% of the estimated discretionary funds.

Projected revenues for fiscal year 2008-09

$74,188,000

Total revenues (includes all sources)

$45,699,000

General Fund Revenues

$6,870,000

Capital Improvement Fund

$4,756,000

Parking Authority Fund

$7,768,000