Budget update sounds positive

Barbara Diamond

Laguna’s financial picture may not be completely rosy, but it’s at

least pink and definitely not in the red.

“The news is generally good,” City Manager Ken Frank said.

Frank reported better-than-expected revenue from property and

sales taxes and substantial savings in city spending added up to a

general fund balance about $2 million higher than expected at

mid-fiscal year.

The City Council voted unanimously to accept 11 modifications to

the 2004-05 budget recommended by Frank. Councilwoman Cheryl Kinsman

recused herself from voting on a transfer of funds to the proposed

senior/community center project on Third Street because she owns

property within 500 feet of the project, the state conflict of

interest boundary.

Newly elected Councilwoman Jane Egly, who blasted the council

during the election campaign for its handling of the city’s pension

plan, was assured that her concerns were groundless. Frank reported

that the city was fully funded and would continue to be, without

floating a bond to make the ballooning payments, as some other

communities have been forced to do.

“Our city manager is known for his frugality,” Kinsman said.

The most significant modification Frank recommended was

eliminating the transfer of $700,000 from the parking fund to pump up

the general fund, as the council has voted to do for the past several

years.

He also recommended transferring $2 million from the general fund

to the Capital Improvement Fund, which will accelerate the

construction of the new Lifeguard Headquarters on Main Beach and

improvements to Fire Station 4 in South Laguna.

Frank said the fire station improvements were essential because

new engines that will be ordered next year wouldn’t be able to park

inside the station as it is.

However, another benefit is the ripple effect the acceleration

will have on projects lower on the priority list, Frank said.

The city has absorbed the emergency state cutback in revenue with

no employee layoffs, service reductions or increased taxes.

Under State Proposition 1A, approved by the voters in November,

the state is scheduled to repay the $417,000 of Laguna’s property

taxes it kept to balance its budget. Because of the state’s

precarious financial situation, city Administrative Department

Director Rich Swanson recommended participation in a gap loan

financing program, which would guarantee a payment of 90% due from

the state ($375,00) in March. The bondholders, not the city, would

need to collect from the state. The city would incur no liability.

“I can’t believe anybody would buy the bonds, but I am told they

will,” Egly said.

Frank said he had already figured how to spend the money.

At the suggestion of Pearson Schneider the council also approved a

$500,000 loan to the Open Space Fund, which she said would allow the

city to take advantage of opportunities to purchase infill open space

parcels that could not be purchased with Coastal Conservancy funding.

Pearson Schneider and Councilman Steve Dicterow will look for

opportunities.

“While there is substantial good news, there is some downside,”

Frank said.

Dramatic increases in retirement costs are at the top of his list.

The costs will go up by $585,000 next fiscal year and starting in

2006, when the firefighters new contract goes into effect, the costs

will skyrocket. The increases will be offset by the restoration of

the revenues temporarily usurped by the state.

In 2008, the new police contract will go into effect, but the

Montage bed tax will kick in that year.

“We are very pleased,” Pearson Schneider said.