Tom McGreal | Stratford Court
On June 19, the City Council voted to reduce expenditures by $900,000 in the proposed Budget for Fiscal Year 2018 presented by City Manager Scott Huth and Finance Director Teresa McBroome. The proposed budget included $12.8 million in General Fund expenditures, a 7.6% increase over the $11.9 million expenditure level forecast for Fiscal Year 2017, but projected revenue growth of only 1.3%. The net effect is that total spending under the proposed budget—including Capital Improvement projects—would exceed revenue by $1.1 million, resulting in a decline in Contingency Reserves to $2.7 million.
|The new Financial Dashboard. Created by the Finance Committee.
Click on dashboard to enlarge.
While this level of funds in the City’s General Fund Contingency Reserves is well within the policy limits of 10% to 20%, the City’s Finance Committee expressed the view that increasing expenditures while revenues are soft is not a sustainable trend. As a result, the Finance Committee recommended that the proposed expenditures be cut by $900,000 to $11.9 million, which holds the level of expenditures for 2018 at the 2017 level. After considerable debate, Councilmembers unanimously voted to follow that recommendation, approving the budget with a cap of $11.9 million on expenditures, and directing staff to return in July with options for achieving the $900,000 reduction.
The City Council’s decision is an important vote, ensuring that conservative fiscal management of our City will continue. This is a critical time for Del Mar, as the City will be paying its first full year of debt service on the loan to build the new City Hall. The City will also be making a significant contribution to the Pension Reserve fund, to cover the unfunded pension liability. Del Mar stands alone among cities in the region by having a policy which will pay off this unfunded liability in 15 years, regardless of CalPERS performance.
This leaner budget means that there will be no increases in staffing, the current service levels to the community will be maintained, and some of the “Priority Projects” identified by the City Council will take longer to complete.
Importantly, the Measure Q revenues from the new sales tax increase, which are projected to be $1.8 million this year, will be held in a designated General Fund account for major projects that couldn’t otherwise be funded by the City. Proposed projects include utilities undergrounding, Shores Park development, and the Streetscape project. The Council has established a citizen’s committee to monitor Measure Q funds and will be conducting public outreach efforts in the coming months to get feedback from the community on priorities for these funds. Although Measure Q funds are legally part of the General Fund, they are not intended for normal operating expenditures. Thus, they were excluded from the Finance Committee’s budget analysis and treated as designated funds.
The Council expressed a unanimous preference to live with this tighter budget, adding back proposed expenditures only if revenues grow faster than the budget anticipates, with the knowledge that the revenue is actually available.
Given that City finances and management reporting are complex, the Finance Committee has borrowed a concept from the business community and compiled a Financial Dashboard. The Dashboard is intended to be a simple and clear display of the data that best highlights the City’s financial performance. The new Financial Dashboard shows expenditures from several past years, the forecast for the current year and an estimate for the leaner 2018 budget.