CLEARLAKE, Calif. – The city of Clearlake is looking at having a balanced budget for both the city and redevelopment agency that will develop a small surplus and be ready for adoption this month.

During a May 31 workshop that ran more than two hours interim City Administrator Steve Albright presented the proposed 2011-12 budget.

He said the budget will go back to the council for further discussion and possible adoption on Thursday, June 9.

Over the last few years, city budgets had been getting adopted later. In 2009, the budget was adopted in July, and last year, the council approved the 2010-11 budget in October. That's despite a state constitutional requirement that cities accept their budgets by June 30.

Breaking that rule usually only earns a city a slap on the hand and not much more, Albright said.

This year, however, Albright – who has been with the city since February – has a document that's ready to be considered for approval by June 30.

The proposed budget is balanced, offers modest cost of living increases for employees who have received no raises and taken on additional job duties over the last few years, and will begin to rebuild the city's depleted reserves, hit hard in the economic downturn.

“We still have a tight budget,” Albright cautioned, but the city can now start doing things that haven't been done in several years, including tackling deferred maintenance and equipment replacement.

The proposed budget's general fund expenditures for 2011-12 are $4,029,000, with projected revenues at $4,049,000, for a small surplus of $20,900.

That $20,900 difference, coupled with the $388,410 surplus Albright projects the city will realize at the end of the 2010-11 fiscal year, will add up to a two-year surplus of $409,310.

Albright said the money to improve the city's situation has always been there. “The city has had, on its balance sheet, a substantial amount of money that is owed to it for quite a while,” creating somewhat of a logjam, he said.

Some of that logjam was on the redevelopment side, where a new strategy Albright proposed will help the city redevelopment agency satisfy the Clearlake Housing Now lawsuit settlement from 1998 – with an amended settlement in 2008 – by the end of the 2011-12 budget year.

As of June 30, 2010, approximately $1,579,139 was still owed to the agency's low and moderate income house fund as part of the settlement, which had resulted from the city borrowing redevelopment housing funds for other uses in the late 1990s.

Albright said the city had previously sold bonds to create a revenue fund of $8 million. In an effort to get the lawsuit settlement paid off, those bond proceeds were used to repay debt service on the redevelopment agency bonds themselves.

That, he said, freed tax increment revenue – the increased property tax value realized in a redevelopment area – for other purposes, such as repaying the low and moderate income housing fund to satisfy the lawsuit.

That's an acceptable use of the bond money, he emphasized, noting the city reviewed the bond documents and checked with the city's attorney to make sure they were complying with the rules.

One payment of $1,199,242 this year and $389,732 by June 30, 2012, will satisfy the settlement repayment, Albright said. Then an audit will be done.

Previously, the city was paying off the settlement as it was able to, Albright said. At that rate, it was going to take the city 30 years to pay off the debt.

Once they kicked the logjam loose and freed up tax increment revenue – which provides the city with “a substantial amount of money” every year, he said – the city's finances started to look better.

Albright, who will act as interim redevelopment agency executive director through year's end, said the agency also must repay a loan it took from the city.

He said the agency still owes the city $2,377,176 at a 10 percent interest rate as of this June 30. The agency will make an interest-only payment of $241,489 in the coming fiscal year.

With there now being money available from the agency to pay back the city, “Suddenly the city's revenues look better,” Albright said.

The improvements to the city's balance sheets means the redevelopment agency will have about $5.5 million available for low and moderate income housing projects.

“We need to start doing projects,” he said.

As part of the budget, Albright proposed a 2.5-percent cost of living increase increase for all noncontract employees, the first such increase since July 1, 2007.

He also is proposing the realignment of management salaries, which will set salaries lower for the city administrator, police chief and finance director, while increasing the lowest management salary.

Other suggestions include adding a land use/transportation planner and a clerical position to enable code enforcement, rehiring a laid off maintenance worker and hiring four part-time seasonal public works staffers.

Vice Mayor Joey Luiz told Lake County News that he would rather have the money proposed for the public works positions be spent on restoring a police officer position.

By taking that money and rolling the proposed 2.5-percent cost of living increase back to 1.5 percent, Luiz suggested it's possible that as many as two police officer jobs could be added if some changes were made to the budget.

Council member Judy Thein came out against the cost of living increase at the May 31 budget workshop. She has since written a letter to the editor (Thein: Public safety is in jeopardy) advocating for restoring police officer positions instead off offering staff the increase.

Even so, Albright said the cost of living increase is still included in the budget and will be up for consideration this week.

Albright's budget also tackles deferred maintenance projects, and includes $25,000 for badly needed repairs for city hall's leaking roof. He's recounted at council meetings needing to keep buckets in the city offices to catch rainwater.

There is also $50,000 included for a new public works vehicle, $25,000 for a new animal control vehicle; two new police cars covered under a grant, plus a third new car that's funded by insurance after the recent totaling of a patrol vehicle; and proposed renewal of the city's code enforcement functions.

He said staff will have a resolution for adopting the budget ready for Thursday's meeting.

“Is any document ever perfect? No,” said Albright. However, he feels the proposed budget is strong and the city can proceed with it.

If the council has serious concerns or can't agree on the document, they could still adopt the budget resolution at the June 23 meeting and meet the state deadline, Albright said.

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