The Signal Hill City Council passed a balanced budget for Fiscal Year 2013-2014 during its June 18 meeting, approving capital-improvement projects and a long list of “decision packages,” or one-time expenditures, for various city departments.
But city management remains cautious about revenue forecasts going forward and added that labor costs and expenses for new State-mandated environmental programs are expected to rise in coming years.
The City estimates a General Fund budget surplus of $20,179 when fund transfers and one-time revenues are added to the budget. The City anticipates total General Fund revenues of more than $18 million and expenditures of more than $17.9 million.
When combining all funds, the City’s entire budget for next fiscal year that starts July 1 includes $35.8 million in operating expenses.
No comments were made during the public-comment portion of the Council item, which Mayor Michael Noll said was “a first.”
City Manager Ken Farfsing said the budget reflects a “continuing slow improvement of the local, statewide and national economy,” adding that the budget has been “slowly returning to pre-Great Recession levels after five years of reduced expenditures and reduced revenues.”
He added that it’s the fourth year in a row the City has balanced the budget without relying on the City’s rainy-day fund. Both the General Fund reserve and the Economic Uncertainties Reserve Fund are expected to remain at healthy levels, totaling $11.3 million, which remains above the Council’s threshold for keeping reserves at 50 percent of projected expenditures, Farfsing said.
Still, he said economic performance is expected to be “uneven,” adding that the City conservatively estimates total sales-tax revenue at about $11.5 million, which is a nearly 1-percent decrease from the performance during the current fiscal year.
Though auto dealers continue to see an improvement in vehicle sales, which is expected to bring a boost in sales-tax revenue for the City, Farfsing said staff remains cautious about a possible “auto sales bubble.” Home Depot and other construction-related retailers have seen more business, but other retailers, such as Best Buy and Target, have reported losses, he said.
On the plus side, the new EDCO transfer station is expected to bring in about $130,000 in new revenues to the City, Farfsing said. The City has not budgeted in sales-tax revenue from the proposed new Costco gas station.
At the same time, he said the City’s department heads have been asked to maintain lean budgets going forward, without “significant increases over their existing expenditures,” which he said is “a difficult task” since merit and step increases were granted that automatically increased each department’s budget.
The City is also planning for increases in California Public Employees’ Retirement System (CalPERS) rates that are expected to start in 2015. While the City has already prepared for the CalPERS rate increases by setting aside funds, Farfsing said the new rates are expected to increase labor costs by more than $600,000 annually.
The City is also expected to pay for a retrospective deposit for city workers’ compensation costs through the California joint powers insurance authority (JPIA). The deposit is similar to a pension program’s unfunded liability and reflects system losses in the JPIA’s investment portfolio and increases in insurance costs. A portion of the new costs will be picked up by Prop 1A revenues, which the State borrowed several years ago. However, Farfsing said the City has not received the revenues yet, because of an error by the State Controller.
Another major expense going forward will be startup costs for complying with new environmental regulatory programs implemented by the Los Angeles County regional water board for storm-water permits.
New expenses for next fiscal year also include $75,000 for the June 5, 2014 special election associated with the “Taxpayer’s Right to Know and Vote” initiative and nearly $161,000 for shifting full-time personnel from the now defunct Signal Hill Redevelopment Agency to city departments.
Farfsing said the City is also budgeting a $5-an-hour increase in attorney fees proposed by City Attorney David Aleshire. The fee increase, which is the first increase in attorney fees in nearly six years, is expected to go into effect in January 2014 and January 2015.
However, Farfsing said the overall budget for the city attorney will remain the same since there’s been a decrease in development activity.
He said staff completed a survey of similar cities with contract city attorneys and concluded that Signal Hill is paying the lowest attorney rate. The survey also found that many cities are considering similar rate increases.
For the fourth year in a row, the City is keeping its water rates flat but anticipates proposing an increase in water rates next fiscal year due to recent increases in water-replenishment assessments and rates for purchasing imported water.
Farfsing said $392,200 worth of one-time expenditures is being paid for by Prop 1A revenues and funds received from a legal settlement in which the City and 40 other cities prevailed in a lawsuit against Los Angeles County for illegally charging administrative fees.
The one-time monies will pay for upgrading the City’s accounting system, purchasing new electronic-citation devices for the police department, adding additional park-patrol hours and additional restroom cleaning during the summer, unfreezing a park-maintenance position in public works, and a study to upgrade cable-TV equipment, among other items.
Farfsing said it’s the first time in nearly two years the City Council has been able to approve decision-package expenditures, but he added that the Council has to be “realistic,” while maintaining key services and adequately anticipating future budget challenges. “It’s not an easy assignment,” he said.
Mayor Noll noted that many of the expenditures will go a long way toward making departments run more cost-effectively. “Most of those are how we can be more efficient and improve our operations to save money down the line,” he said.
Finance Director Terri Marsh said purchasing new software and a server to upgrade the City’s antiquated accounting system, which currently operates using DOS from the 1980s, is expected to pay for itself over the next three years. She said maintenance costs would be reduced from about $45,000 to about $9,000 per year.
The City is also allotting funds for a $14.9-million capital-improvement project budget mostly being paid for through grants and development fees.
Introductions and presentations
The Council approved a new ordinance that imposes rainwater low-impact development (LID) strategies on certain projects that require building, grading and encroachment permits. The new LID systems are required as part of new municipal separate storm sewer system (MS4) permits adopted by the Los Angeles Regional Water Quality Control Board.
Children’s health services
The Council authorized the city manager to enter into a contract services agreement between the City and Miller Children’s Hospital and The Children’s Clinic to provide partial funding for uninsured children of low income Signal Hill families who are facing serious illnesses to access health and hospitalization care.
Funds, not to exceed $5,000 for each hospital, are to be utilized for hospital and specialty visits. The funds requested for The Children’s Clinic are expected to support up to 100 clinic visits by Signal Hill children throughout the fiscal year. The two programs are funded through the General Fund.
The Council authorized the city manager to sign letters of intent to participate in watershed-management programs and monitoring plans for both the Lower Los Angeles River and the Los Cerritos Channel. Signal Hill’s total share of the costs for development of watershed-management programs and coordinated monitoring plans is expected to total $62,300, according to a city staff report.
The programs are required as part of the new MS4 adopted by the California Regional Water Quality Control Board.
The next Signal Hill Council meeting will take place Tuesday, July 2 at 7pm in the City’s Council Chamber.