Budget workshop set for Saturday

Barbara Diamond

The city’s previously rosy financial picture has some thorny problems

this year.

“After enjoying several years of a booming economy, which allowed

the city to augment its services and staffing, we are approaching the

2003-04 fiscal year in a relatively austere condition,” City Manager

Ken Frank said.

The City Council will hold a public workshop at 9 a.m. Saturday in

the City Council chambers to clarify, justify and discuss the

proposed budget.

Copies of the 206-page, $55.5-million budget -- more than half of

it spent at the council’s discretion -- are available for review at

City Hall, the public library and on the city’s Web site.

A second budget hearing will be held at the June 17 council

meeting, at which time the budget could be approved. The city must

adopt a budget by June 30.

Factors that contributed to Frank’s “astringent fiscal projection”

include state cuts in revenue, an “ominous” escalation in retirement

costs because of losses in the state investments, soaring employee

health and workers compensation and a decline in the return on city

investments due to “abnormally depressed” interest rates.

“Departmental requests for capital outlay have been slashed to

balance the budget,” Frank said.

And that is the good news.

The bad news is Frank’s prognostication of possible staff

reductions and diminished services in the 2004-05 budget, which

prompted him to eliminate any new staff positions or projects that

require funding from the 2003-04 budget -- except for sewers, now

part of the new Water Quality Department.

Sewer improvements, debt service for treatment facilities, sewage

treatment and collection system operations are estimated to cost $9.9

million, not including $715,000 in salaries.

Expenditures are partially funded by fees of $32.67 per month for

single-family homes, commercial rates that will increase by 10% in

July, grants and by a state loan that enables the city to accelerate

capital projects.

General fund revenue is expected to be $31,550,300, bumped up to

$32,250,300 if $700,000 is transferred from the city’s Parking Fund,

as has been the practice for the past decade.

Expenditures are projected to be $32,246,500, about $3,800 less

than the anticipated revenue.

However, the fiscal year will begin with a general fund starting

balance of $3,705,298, substantially higher than forecast and

$480,000 above the 10% reserve required by the municipal code.

Estimated funding for the cost of all operations, capital

projects, insurance, and vehicle replacement totals $50,515,600, with

only general fund spending at the discretion of the council.

The biggest slice of the general fund pie is allocated to the

Police Department. The Public Works Department narrowly aces out the

Fire Department for the second largest allocation. The Community

Development Department is a distant fourth and is expected to

increase fees to stay solvent.

“Fees are anticipated to rise substantially to ensure full cost

recovery where legally feasible,” Frank said. “If the fee increases

are not approved, approximately $130,000 will need to be excised from

the preliminary budget,” Frank said.

The city’s major source of revenue for the general fund is

property taxes, accounting for 42.3%.

Permanent declines in the taxes would present a major set back for

the city, but that is not likely to happen, City Councilman Steven

Dicterow said.

Frank based the 2003-04 general fund-revenue expectations and

allocations on several indicators.

* Property taxes are expected to rise by 7%.

* Sales and hotel taxes are projected to be stable, although a

slight increase in sales tax revenue is expected from Montage Resort

and Spa.

* A $1.3 million allocation from the Motor Vehicle In-lieu Fund,

which assumes the state will honor its commitment to local

governments (not something that Frank is counting on. A reduction in

the revenue would force the city to make substantial revisions to the

budget that would reduce staffing and decrease services, he said.)

* Fee increases for building, planning and zoning services, as

mentioned above.

* Festival of Arts revenue will diminish as a result of the new

lease terms, now $174,000 a year, all of which is allocated to

community agencies.

* State plans to pare about $300,000 in revenue from the city next

year.

* A decline in city investments of $300,000.

* Increased employee health and workers compensation estimated at

$3.3 million -- almost 10% of the city’s general fund and almost

equal to the predicted bed tax from Montage, which was supposed to be

a windfall.

Estimated general fund expenditures are about 2.4 percent higher

that this year.

Copies of the proposed budget can be reviewed at

www.lagunabeachcity.net, the front counter at City Hall and at the

Laguna Beach Library, 363 Glenneyre St.