But increasing construction costs are among the challenges for city finances
Editor’s note: This article corrects an error in the print edition of the Sun. The next budget workshop will be held Tuesday, May 25. The regular City Council meeting will be held Monday, May 24.
Seal Beach staff is projecting more revenues than expenses for the Fiscal Year 2021-22. The budget has not yet been approved. Staff introduced a draft of the budget to the City Council last week. There will be one more budget workshop and a town hall before the council approves the budget at the end of June.
According to Treasurer/Finance Director Kelly Telford, revenues are generally recovering from the pandemic, though the transient occupancy (hotel bed) tax may not recover for some time.
City Manager Jill Ingram said that, for the first time, the budget would fund improvement projects without using reserves. (The Sun reported on this change in early April. See “City Council looks at financial sustainability,” at sunnews.org.)
The new budget, according to Telford’s presentation to the Thursday, May 13, online budget workshop, included:
• Money for a grant writer
• A new Information Technology Replacement Reserve fund to pay for all IT projects
• The city will pay its own utility costs
• Included in the budgets for the City Manager and Police departments is the International Peer Support program, which will provide counseling to city employees.
• Telford said the city would like to bring in a purchasing expert.
In related news, Ingram proposed a council study session on the city’s budget policies. The council unanimously agreed. Ingram said the study session would most likely take place after the budget process is complete.
The proposed budget includes $37 million in estimated revenues and $36.8 million in estimated expenses, according to Telford. The numbers are rounded.
(You can find the exact numbers on pages 7 and 8, respectively, on her slide presentation.)
Telford expressed cautious optimism during the workshop. Telford presented the council with the draft of the proposed budget (which must be approved in June), and provided the council with an overview of the city’s finances.
She said the Finance Department anticipated an 8% increase in revenues, though some revenue sources are still below pre-pandemic levels.
Telford said sales tax was expected to increase by about $600,000. The relevant table in her slide presentation put the figure at $601,500.
She said Measure BB revenue was expected to increase by approximately $800,000.
“Much of this is from our residents supporting local businesses and tourism from residents of our surrounding communities, who enjoy what Seal Beach has to offer,” Telford said.
According to Telford, staff expects those revenue streams to continue improving.
She said the Utility Users tax saw a slight increase, partially due to residents and businesses subscribing to online services.
Telford apparently expects a slow recovery for the hotel bed tax. “It’s just the hotels have been really struggling,” Telford said.
According to Treasurer/Finance Director Telford, staff was anticipating a slight decline in business license revenue, but city staff was basically being conservative.
Telford said the city had a number of businesses that didn’t renew their licenses last year, but didn’t file paperwork for closing.
Telford said a lot of businesses probably did not know what would happen.
“Our community really has come out in support of our local businesses,” Telford said later in the meeting.
“I think we’re doing very well,” she said.
She didn’t know how long it would take the transient occupancy tax to return to normal.
Telford also discussed some of the challenges facing Seal Beach. Construction costs, for example, have increased—sometimes 50% or more. A related issue, brought up by District Three Councilman Mike Varipapa, is that money set aside in reserves for specific purposes loses its buying power over time.
For example, about $5 million was set aside roughly a decade ago for a community swimming pool project. No pool has yet been built. District Four Councilwoman Schelly Sustarsic and District One Councilman/Mayor Joe Kalmick agreed with him.
The city’s unassigned fund balance, sometimes referred to as reserves, has declined in recent years to $2.8 million at this time.
“But we do expect this to stop,” Telford said.
She said a big part of the decline was caused by the city paying for improvement projects from reserves, according to Telford.
Early in her presentation, Telford talked about unavoidable costs in the budget:
• a 2% increase in base salaries for already negotiated employee contracts (according to her slide presentation).
• a 14% increase in CalPERS costs.
• a 17% insurance increase
• increases in contracts that were negotiated before the pandemic
“Have you thought about pension reform? asked District Two Councilman Thomas Moore later in the meeting.
Telford anticipated bringing a pension funding plan for to the council in the near future.
According to Telford, city fees have not kept up with the cost of providing services.
Telford said staff will bring back fee studies every three to five years, as is done with sewer, water, and solid waste fees.
Moore asked about park improvements.
Telford confirmed that the city plans to replace one park playground a year, but said the city might have to skip a year. She said the cost of installing playgrounds is going up.
It is not known how many individuals watched the May 13 workshop. No members of the public called in live during the meeting. Telford reported that 144 individuals had participated in the city’s online budget survey. (This is the first year that the city has taken an online survey of the community’s budget priorities. As reported in late April, there are 57 questions, most of them multiple choice.)
The next budget workshop will be held Tuesday, May 25 (not to be confused with the regular City Council meeting on Monday, May 24). It will focus on the city’s five-year improvement program.
A budget Town Hall will be held Tuesday, June 1, in a webinar format.
• For more information about the city’s budget, visit the Finance Department page on www.sealbeachca.gov/Departments/Finance and click on “budget” on the left side of the page.
Note: the budget for FY 2020/21 refers to the current fiscal (financial) year. The new fiscal year starts July 1.