City plans budget workshop

The city’s economic outlook and a draft budget prepared by City Manager John Pietig will be reviewed by the council and open to public comment at a 3 p.m. workshop Tuesday at City Council chambers, 505 Forest Ave.

“Laguna is experiencing some economic recovery,” Pietig wrote in his conservative summation of the city’s economy for fiscal year 2011-12 and projections for 2012-13.

Pietig cautioned that the projected percentage of increases in sales, bed and property tax revenue for the current fiscal year are not expected to continue. However, Laguna is keeping its head above the choppy financial waters thanks to reductions in spending over the past few years and the improving revenues from taxes.

The proposed budget is balanced with revenue and net transfers to the General Fund totaling $47,133,000 and expenditures of $47,062,000. Revenue for the beginning of the 2012-13 fiscal year, including dedicated funds, is estimated at $7.7 million, with estimated expenditures of $7.1 million.

Property taxes are the city’s major source of income, accounting for 55% of the revenue in the General Fund.

The county tax assessor is predicting a modest 1% increase in property taxes in the 2012-13 fiscal year for the county, each percent valued at about $220,000 in revenue.

Historically, the city pulls in higher increases than the assessors’ estimate. Pietig, who prefers to err on the side of caution, is using the county yardstick in his projection.

Indeed, if the taxes don’t hit the mark expected, expenditures will have to be reduced, he advised the council in his summation.

Transient lodging taxes, commonly referred to as bed taxes, are the city’s second largest source of revenue. The tax is expected to increase by 7% in the 2011-12 fiscal year, with each percent valued at $46,000.

In the 2012-13 proposed budget, Pietig has cut that percentage to 3%.

More robust consumer spending in 2011-12 is expected to bump up city revenue by 9.5%, but is not anticipated to continue. Pietig is reducing his estimate by more than one-third for 2012-13. Each percentage point is valued at $30,000 in revenue.

Financial reserves remain untouched. The Disaster Contingency Fund has a balance of about $6 million, set aside in case the Federal Emergency Management Agency doesn’t approve funds spent by the city on disaster-related projects. The Revenue Smoothing Account, a financial parachute approved by the council in 2008 to weather the economic downdraft, is also intact.

Laguna has also reaped the benefits of agreements made with the police and fire department employee associations, which reduced costs of retirement benefits by $200,000 for 2011-12.

Conversely, the proposed budget only allots $109,000 for capital equipment replacement (actual city equipment such as city cars, tools etc.), which, in better economic times, would have been closer to $750,000, according to Pietig. And funding will be delayed to mid-year.

The continuing and rising drain on the city’s finances to fund its transit system also is a concern. Subsidies have decreased, as usage has increased dramatically, with consequent forays into the Parking Fund. Opponents of the annual transfer of $700,000 from the Parking Fund object to the loss of revenue intended for construction of parking spaces.

Revenue for capital improvements is stable and improvements in bed taxes have offset a decrease of about $480,000 in parking fines, due to the city’s more “compassionate” policies, according to the draft budget.

“Overall, Laguna continues to remain in sound financial position,” Pietig wrote.

City budgets are available for review in the City Clerk’s office, Laguna Beach library and on the city’s website, https://www.lagunabeachcity.net.

coastlinepilot@latimes.com

Twitter: @CoastlinePilot