The proposed budget for next year has reduced services. City Manager Jill Ingram delivered this news at the start of the first of two budget workshops held last week. A third was held at 4:30 p.m., Monday, May 20. (For the first of a two-part report on the May 20 meeting, see the May 23 print edition of the Sun.)
The Finance Department director said the proposed budget was balanced with one-time revenue of $354,207.
Finance Director Barbara Arenado reported there was a structural deficit.
Arenado explained the term in a Friday, May 17, email.
“A budget deficit occurs when a City’s total expenditures exceed its total revenue in a specific fiscal period. A structural deficit, on the other hand, indicates an ongoing imbalance where recurring revenues are consistently insufficient to meet recurring expenditures,” Arenado wrote.
In related news, the five-year forecast continues to project deficits in the coming years. (See page 15 of the May 20 issue of the Sun.)
No members of the public spoke at the Tuesday, May 14, workshop.
Only one person spoke at the Wednesday, May 15, workshop.
Limits of physical space make it impossible to transcribe almost seven hours of budget discussions held last week, so this article is going to aim for the highlights.
Speaking of highlights, city staff projected $44 million in General Fund revenues for 2024-25.
City staff also projected $44.3 million in General Fund expenditures for 2024-25.
Background
“Through our individual budget briefings with you over the past few weeks you’re undoubtedly aware of the significant financial challenges the city’s currently facing beginning with the proposed um budget for next year,” said City Manager Jill Ingram, addressing the council on Tuesday, May 14.
“We’ve unfortunately had to reduce service levels across all departments,” Ingram said.
Ingram said the city had reduced salaries and benefits by $1 million. She reported that the city had deferred hiring and had reduced more than $3 million in maintenance and operations.
She said the reductions do not address long-term liabilities
Ingram said Seal Beach was facing a series of challenges that included: increasing pension costs, health care costs, and contract expenses.
“Ongoing expenditure reductions are no longer no longer sustainable long term and we must
take action immediately to find and implement and generate new sources of revenue to this end,” Ingram said.
“It is incumbent upon city staff and the City Council working together side by side to seriously and diligently explore and generate new revenue-producing opportunities,” Ingram said.
Ingram said when the budget process began, the city initially faced a nearly $6 million deficit.
According to Finance Director Arenado, one-time funding sources would be needed to balance the budget.
According to Ingram, the financial situation was the result of the cost of services continued to outpace revenue.
“And yet every year we have continued to provide the same level of services and programs
to our community with a very lean staffing model and this is just no longer sustainable,” Ingram said.
Ingram said the city cannot reduce staffing and maintenance operations any further.
“New revenue sources are critical to the long-term financial stability of our organization,” Ingram said.
Finance Director Barbara Arenado told the council that the proposed budget is typically completed in April, but this year the budget remained “fluid.”
There was some positive news.
Arenado said the city “continues to see growth mostly in property tax sales tax utility users tax
and the revenue sources were discussed at length during the midyear budget.”
She said staff saw revenue growth of 4.3%.
[MONDAY NIGHT MEETING.]
Other issues
- District Three Councilwoman Lisa Landau asked if there was a difference between last year’s overtime and this year.
“The overtime budget for them for that last year is there actual overtime from events that have occurred in actuality,” Arenado said.
According to Arenado, they were asking the chef to maintain the standard hours of overtime they know the city is going to face.
She said staff would come back at mid-year and give the police any additional money for overtime if they have an emergency event.
“We may have contentious events in Huntington Beach and that may overflow into our city,” Arenado said.
“We’re asking the city to utilize the budget of known causes today,” Arenado said. For anything unknown, staff would have to come back to the council at mid-year.
- According to Community Development Director Smittle, Seal Beach has one building inspector doing 12 to 13 inspections a day. Later, Smittle described her department as the one that handles all land use.
“We are basically over capacity,” Smittle said.
She said the Main Street Specific Plan Amendment represented 10 months of staff time.
Smittle said staff was managing a second EIR for the Old Ranch Specific Plan proposal that she described as well under way.
She said the city obtained a $350,000 grant for the North Seal Beach Community Center. However, she said the California Coastal Commission has not yet issued a coastal development permit for the project.
According to Smittle, the city had received word that the California Finance Department has frozen a Coastal Commission grant program that would have paid for Seal Beach to complete the Local Coastal Program.
Smittle explained that if the Coastal Commission approved a Local Coastal Program, the city would be able to handle more development permitting in-house so every application would not have to be referred to the Coastal Commission for their direct approval.
Landau asked if the CCC would hold Seal Beach to any consequences because the city wasn’t finishing the program.
Smittle said she didn’t think so.
(Not mentioned was the fact that the Coastal Commission rejected Seal Beach’s LCP in July 1983.)
District One Council Member Joe Kalmick aside if the LCP effect the city’s ability to change beach parking rates or would Seal Beach still have to go to the Coastal Commission.
Smittle said she couldn’t answer that.
She said the city was still in the queue for beach parking lot rates.
Smittle said her department had begun using artificial intelligence.
District Five Councilman Nathan Steele asked about the cost of developing the state-mandated Housing Element of the Seal Beach General Plan.
Smittle estimated it cost about $1 million.
Landau asked about the short term rental program.
According to Smittle, Coastal Commission staff had not yet brought the city’s development permit for the short term rental program before the state commission.
Smittle said if you have a license for a short term rental, you are allowed to advertise.
- Marine Safety Chief Joe Bailey said one of the ways the Marine Safety Department saves money is do most of their training in-house. He also said they do a lot of free and inexpensive training, but
According to Bailey, Lifeguards talked to 250,000 people during the last calendar year.
He also praised the Police Department’s in-house animal control program. However, he said he would eventually need to send his new marine safety officer to courses that cost money.
Bailey’s own department has four full-time Lifeguards and 70 part time Lifeguards.
Bailey called for more pay for Seal Beach Lifeguards.
“We’re the lowest paid agency in Orange County or LA County,” Bailey said.
He said pay was the bottom line. He said Long Beach was paying $26 an hour to start; Seal Beach $19.
Bailey said the Junior Lifeguard program is bringing in $231,000 in revenue. He said they were looking to spend $162,000. That cost didn’t include staff time.
- Smittle, while discussing the Community Services (recreation) program, said staff proposed larger Tennis and Pickleball Center fees as well as the existing membership structure.
She said staff may return to the council to discuss changes to the senior Dial A Ride service.
- Public Works Director Iris Lee, summarizing some of the city’s challenges, said Seal Beach had an aging infrastructure, Lifeguard Headquarters, and City Hall needed upgrades. (For more on Lifeguard Headquarters, see “Seal Beach Lifeguard Headquarters: falling apart, expensive to replace” at sunnews.org.)
She said the city’s last production well is important water and Seal Beach is importing water. She said imported water is double the cost of producing our own.
Lee said the cost of PVC piping increased by 27% over last year.
Lee said the Public Works Department made reductions totaling $1.5 million.
“We’re proposing a reduction to the landscape maintenance budget,” Lee said.
Lee said several city vehicles need to be replaced. “However, we do not have a budget for it,” Lee said.
Lee said staff is not proposing any new improvement projects this year, even though they were needed.
Council comments during meeting
“How do we message these necessary changes to our public rather than having to respond
to individual emails or complaints or Letters to the Editor,” Kalmick asked.
Lee said staff would work on a marketing plan on that.
The decision to hold a third budget workshop came on Wednesday, May 15. While the council did not take a formal vote, the council was clearly split. Those cuts included eliminating Main Street pressure washing.
Landau asked if Seal Beach had ever thought of building a sea wall rather than building the sand berms.
“I think from a regulatory standpoint we will not be permitted to put a seawall fronting our beach and I think that many coastal development permits that we have applied for in the past have actually indicated that we will not be able to put any permanent mitigation infrastructure along the beach for that purpose,” Lee said.
Landau suggested having another budget meeting to come up with ideas. Apparently reading from a list, Landau suggested a hiring freeze, council approval for emergency hiring, freeze travel except for the police, freeze hiring of consultants without council approval regardless of contract amounts, and freezing executive management salaries. Landau said the percentage given to executive management exceeded anything given to the rest of the employees.
(The Sun asked Landau where the reportedly higher salaries for executive management could be found in the budget. “I’ve asked the question of the city staff and I’m waiting for the answer! I’ll let you know when I receive it,” Landau wrote in a May 20 text.)
According to District Four Council Member/Mayor Schelly Sustarsic, the public hearing on the budget was noticed for June 10. (As of May 20, the Sun has not published a legal notice about the June 10 budget.)
Landau suggested some sort of special meeting.
“As Councilman Kalmick said, how do we let the public know what you guys are sacrificing?” Landau asked.
Ingram said the council members would need to help staff with that messaging.
“You’re looking at before the June 10th meeting,” Sustarsic said to Landau.
Ingram said if the council was going to schedule another meeting, it had to be done quickly in order to make it happen.
Sustarsic suggested making it part of the May 28 council meeting.
District Two Council Member Tom Moore said it was a lot to ingest. “I need some time to look at all this,” Moore said.
“We’ve got a list right here,” Steele said.
He said he was probably going to look at the video of the workshops.
“I don’t know if a special meeting is going to anything,” Steele said.
Sustarsic suggested a study session as part of the next council meeting.
Moore suggested a short council meeting.
Ingram said the next regular council meeting was on Tuesday, May 28.
She said an option would be a study session prior to the regular meeting.
Ingram said the city was already at the bare minimum. “I don’t know where we would cut from,” Ingram said.
Landau asked for her thoughts on freezing executive management salaries.
“You just proposed this to us tonight,” Ingram said.
“I think that’s a discussion that you need to have amongst yourselves,” Ingram said.
“We can’t discuss except at a meeting,” Sustarsic said.
“I’m kind of surprised that so many people have been critical of our city’s finances have not appeared here at all,” Kalmick said.
Sustarsic said it would allow the paper (apparently meaning the Sun) to tell people what the city was looking at.
“Who comes to a budget meeting? Obviously, no one,” Sustarsic said.
Ultimately, the notice for the special meeting appeared on the city website. The special meeting was scheduled for 4:30 p.m., Monday, May 10.
Council takeaways after the meeting
Following the Wednesday workshop, the Sun asked all five council members for their number-one takeaways from the first two workshops. The following comments had been received by editorial deadline.
- On Thursday, May 16, District Five Councilman Nathan Steele wrote:
“I was impressed with the outstanding work each department did putting together their budgets. The work that went in to producing this budget is tremendous and the sacrifices and cuts were a lot. I especially appreciated the work that Finance Director Barb Arenado and her team did. They worked very hard to bring it all together.
“The budget is a ‘working document’ that guides departments on how to responsibly handle taxpayer money. As the year goes on, reality will change the working document into an actual, spent budget. Things will change, revenues will exceed expectations or come in short of expectations. Prices for the necessary materials will exceed expectations or perhaps, savings will be realized.
“The budget has a structural deficit of $300,000 at this point in time. I am perfectly fine with the idea of passing a budget with a structural deficit, because we will have to deal with the differences between budget and reality any way, as the year goes on and especially at the mid-year budget review.
“In my opinion, the people running our city and our departments are top-flight professionals, trained and experienced in municipal management.”
- On Friday, May 17, District Two Council Member Tom Moore wrote:
“My main takeaway is the city has a tight budget this year due to increased costs over time combined with a large increase in CALPERS costs. Each department has reduced expenses to the best of their ability and I believe the city is looking for some council direction after expenses have been reduced as much as they are comfortable doing.
“I agree with Mayor Sustarsic’s request to have another budget meeting to further discuss some of these details.”
