- Elizabeth Larson
- Posted On
Lakeport City Council approves working budget document for new fiscal year
The council approved the budget following a presentation by Finance Director Nick Walker.
Due to the COVID-19 pandemic, Walker explained that the city’s budgeting process was “disrupted slightly.”
As a result, he said staff has been challenged to figure out the new fiscal year budget.
Normally staff has planning meetings with the council in March, but they were delayed. Meetings with department heads also were crammed into the end of May after staff had conducted planning and research.
In her budget message, which introduces the document, City Manager Margaret Silveira had noted, “The fiscal year 2019-20 started out very promising. Goals were set, projects were moving, new events were being scheduled, more public art was developing, plans were being made for a new park, and then COVID-19 hit. The community did its part by sheltering in place. Due to the swift action of our community, sheltering in place has lessened the health crisis, but negatively affected our economy. The extent of the losses are unknown at the time of this budget adoption.”
Walker said the budget process is a collaborative one and also is research-driven.
In the 2020-21 budget year, budget revenues are projected to be $15.4 million while expenditures will be $18.3 million. Walker said the difference will be covered by funds that already have been collected – such as state funds for road repairs – from previous years to complete projects.
The city’s projected expenditures for the 2020-21 fiscal year include $5.7 million for personnel, $6 million for operations, $1.9 million for debt service and $4.7 million in capital improvement projects, Walker said.
Walker said the capital improvement projects include $1.25 million for repairs necessitated by the 2017 storms.
Walker said 84 percent of the total city revenues this year are coming from taxes, including sales and property tax.
The general fund is being impacted by a 15 percent increase in health insurance premiums. Other types of insurance have increased by nearly 50 percent over last year for a total cost of $250,000, of which $140,000 is coming out of the general fund, Walker said.
Walker said the main reason for the $718,000 surplus that is projected for the 2019-20 budget is because of some projects that are being carried over.
He said adding those projects into the 2020-21 budget actually reduces the estimated budget deficit from $851,630 to $113,630, which means the budget is almost balanced.
For the new year, Walker said staff is recommending halting discretionary funding and projects, and some road improvement and maintenance.
Regarding important city revenue sources, he said sales tax is down 11 percent over 2019, and that drop in sales tax accounts for 40 percent of the projected $1 million decrease in city revenues, Walker said.
The remaining 60 percent of the drop in city revenue comes from decreases in transient occupancy tax, business licenses, and permits and franchises, according to Walker’s report.
Walker said the economy had been ticking up by about 2 percent annually over the last several years before the pandemic hit.
He said there are several capital improvement projects still to go forward, including the new lakefront park, which is being funded through a state grant, as well as the outstanding 2017 flood repairs, the Hartley Street Safe Routes to Schools project, a water well study, water main replacements, pump replacements and other needed equipment and paving work.
The city’s total number of full-time positions so far hasn’t changed but positions are being adjusted, he said.
The city’s budgeting projections offer several scenarios for potential deficits over the coming year.
If the city’s current plans are able to go forward, the budget anticipates a deficit of $362,000. However, it also includes the possibility of a COVID-19-related shelter in place order in the fall which, if it were to be a prolonged event, could see the city’s deficit swell to $1.7 million.
On top of that, the city has increased retirement liabilities through the CalPERS system, not just for past losses during the Great Recession but for the impacts of the pandemic, which could see the city’s projected retirement costs climb until 2025. Those costs wouldn’t begin to taper off until 2035. Walker said that’s without knowing fully how the pandemic will ultimately affect CalPERS.
One of the slides in Walker’s presentation showed that the city’s fund balance could drop by millions of dollars through 2031 if total expenditures outpace revenues.
“It has required us to really look at this long term future, long term being 10 years,” he said.
The city will have to either find revenue or cut expenses. “I have no doubt that this management team will be able to do that,” Walker said.
Silveira noted that insurance costs in California “went crazy this year” because of the state’s many disasters.
Mayor George Spurr asked Walker if he expects to see a loss in property tax revenue. Walker said he didn’t.
That revenue source is based on prior-year assessments and usually is two years behind, Walker explained. He said they’re not seeing an impact so far on the housing market, which appears steady.
Councilwoman Stacey Mattina thanked the management team for detailed and thoughtful work in goal setting. “We got so much done in the last year.”
Councilwoman Mireya Turner moved to approve the budget, with Councilman Kenny Parlet seconding and the council approving the document 5-0.
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