The Seal Beach City Council voted unanimously to approve the 2023-24 budget on Monday, May 22. The vote came after a public hearing. The hearing was brief as no members of the public spoke during the hearing. The budget was the next-to-last item considered at the meeting, which was roughly 2 hours 56 minutes long.
The council also adopted the fiscal recovery schedule for 2023-24.
“The Proposed Fiscal Year 2023-24 Operating and Capital Improvement Budget includes estimated revenues of $77.6 million compared to operating appropriations and transfers out of $75.7 million and capital improvement program appropriations of $26.4 million,” wrote Finance Director/Treasurer Barbara Arenado in her staff report.
Arenado told the council Monday night that the General Fund Operating budget was balanced at $42.1 million in revenues and $42.1 million in expenditures with a surplus of approximately $20,000.
“The city continues to be in a healthy position and revenues are growing at approximately
3.4% or approximately $1.4 million over the prior year’s budget,” Arenado said.
She encouraged the community to continue shopping in Seal Beach.
Arenado told the council that the city has 155.52 full time equivalent employees. That figure, according to Arenado, included part time staff and the five council members.
“We’re lean compared to other cities,” Arenado said. “We’re very lean.”
Background
“The City Charter requires that the City Council hold a public hearing prior to the adoption of the budget and that a budget be adopted by June 30th each year,” Arenado wrote.
“The proposed budget includes the addition of one full-time position in the Community Development Department,” Arenado wrote.
“An Assistant Planner in Community Development is included in the budget to support high volumes of planning applications the Department has experienced the last several years, as well as the numerous advanced planning projects underway including the Housing Element, Zoning Code update, several General Plan amendments, and development of a Local Coastal Plan,” Arenado wrote.
“Local economic conditions continue to improve at a slow yet steady pace,” Arenado wrote.
“Encouraging signs of the City’s resilience include growth in property tax revenue and transient occupancy tax, reflecting the strength of local real estate values and the attraction of the City as a destination for visitors,” Arenado wrote.
“However, the City is contending with challenges such as unfunded mandates, increasing health care, personnel and retirement costs, and rising contract expenses, all of which are placing significant strain on the budget,” Arenado wrote.
“Ongoing expenditure reductions are no longer sustainable long-term, and the City must explore and generate new revenue-producing opportunities,” Arenado wrote.
(City Manager Jill Ingram wrote in her “City Manager’s Message” at the beginning of the 2023-24 budget that “Ongoing expenditure reductions are no longer sustainable long-term, and we must take action to find new sources of revenue. To this end, it is incumbent upon City staff and the City Council to explore and generate new revenue-producing opportunities.”)
During the meeting, Arenado said in October the council set one-time expenses above apparently referred to how the city would spend $3.1 million in Federal American Recover Plan Act money.
“At the May 2, 2023, Budget Workshop, the City Council directed staff to move forward with the following fund allocations to address critical unfunded one-time needs in the City and includes:
“• An additional $250,000 in discretionary payments to CalPERS, which will result in future savings of approximately $75,000 based on updated assumptions, while reducing yearly costs;
“• $400,000 is earmarked for fiber phone connectivity to ensure consistent communication between the Lifeguard station and PD substation, as there is currently no direct connectivity;
“• To address water intrusion repairs at the Lifeguard Substation, an additional $100,000 is proposed, prioritizing the completion of these repairs in the upcoming fiscal year;
“• Set aside $700,000 for the West End Pump Station;
“• $350,000 is allocated for fleet purposes, with ongoing analysis planned to determine the feasibility of continuing the leasing program;
“• Considering the importance of grant funding, $150,000 is designated to provide multi-year grant writing assistance;
“• $100,000 is included for a citywide organizational/operational assessment to evaluate staffing levels and staffing distribution;
“• Furthermore, $50,000 is allocated for conducting a resident survey to determine support for potential revenue options; and
“• Lastly, $850,000 will be set aside for future critical needs and the City Council requested staff to return with potential park enhancement options,” Arenado wrote.
“Subsequent to the budget workshops, one adjustment was made to the proposed budget and includes Special Fund 103: Special Projects. The update to revenues and expenditures of $700,000 is for the collection and remittance of permitting activities to ensure the City is in compliance with GASB 84,” Arenado wrote.
(“GASB Statement No. 84, Fiduciary Activities, establishes criteria for identifying fiduciary activities of all state and local governments. The criteria generally focus on: whether a government is controlling the assets of the fiduciary activity, and the beneficiaries with whom a fiduciary relationship exists,” according to the Governmental Accounting Standards Board website.)
“The adjustment ensures audit compliance and establishes funding/expending for and identifying and properly accounting for how those activities should be reported. There is no impact to the General Fund,” Arenado wrote.
“The Proposed FY 2023-24 General Fund Budget includes estimated revenues of $42.2 million, operating expenditures of $42.1 million and capital project expenditures of $13.3 million,” Arenado wrote.
“Article XIII B [of the California Constitution] provides that the appropriations limit for the Fiscal Year 2023-24 shall not exceed the appropriations limit for the prior year adjusted for the change in the cost of living and the change in population. The appropriations limit for Fiscal Year 2023-24 is $37,835,918,” Arenado wrote.
Turning to the five-year forecast, Arenado told the council that the city has strong financial resources. She showed the council a slide with revenues depicted as vertical green bars and expenditures as vertical red bars. The red bars on the right side of the chart climbed above the green bars.
She said that revenues are relatively flat while expenditures grow on a continuous basis.
Arenado then emphasized that the 2023-24 budget was balanced.
She also said it was essential that the city look ahead.
Turning to revenue opportunities, she said the budget include funding for a resident survey to gauge support for increasing revenue. Those opportunities included:
• Increasing the hotel tax (transient occupancy tax).
Arenado said many coastal areas have a higher rate.
• Business licenses.
“The city basically charges a one-time flat fee,” Arenado said. According to Arenado, options for charging businesses would include gross receipts, number of employees, or a potential tiered system.
• Increasing the barrel tax.
• Increasing the level for street lighting. Arenado said the levy is subsidized by the General Fund.
• Cannabis.
Arenado listed options such as issuing permits for cultivation, manufacturing, or sales.
• Parking revenue. (The council received a presentation on parking earlier in the evening and the Sun will look at parking next week.)
According to Arenado, reserves are 25% of operating expenditures.
Council discussion
The council discussed the budget after the public hearing.
“I heartily approve the budget as it is now,” said District Five Councilman Nathan Steele.
“I have a tinge of panic when I look out five years, but I know that Seal Beach is not alone in that tinge,” Steele said. He said he knew it was not because the city was being irresponsible with money.
He said Seal Beach was 97% built-out and the city’s revenue sources are essentially limited.
Steele said he hoped they could begin to look forward three to five years and imagine ways to enhance revenues and contain costs.
District Four Councilwoman Schelly Sustarsic said she agreed with Steele.
Sustarsic said she was happy the budget was balanced but concerned about the future and the city’s sustainability.
District Three Councilwoman Lisa Landau said she thought “they summed it up rather nicely.”
District Two Councilman/Mayor Tom Moore said that the council understood that as the years progress it would be more difficult to balance the budget with city costs outpacing revenue.
Moore said that unfortunately, a lot of those costs are related to CalPERS, medical benefits, fire services, and contracts that were negotiated previously.
“We all understand that we need additional revenue,” Moore said.
He proposed freezing new employee positions beyond the 2023-24 budget. He later said he was talking about newly allocated positions.
Moore asked for council consensus.
Steele said he would agree in principle with keeping the organizational chart as it stands. He said additions to the organizational chart should come before the council.
“I think we already have that authority, do we not?”
City Manager Jill Ingram said adding new positions would require staff to come back separately and request that. “We’d obviously have to have funding for that,” she said.
Moore said he understood that, but he wanted the council to additionally agree not to have more allocated positions.
City Attorney Nicholas Ghirelli said that page 20 of the budget said that all full-time positions of the city must be approved by the City Council.
Moore also suggested one item out of the warrants each year and look at how the council could optimize that item. “For example, telecommunications,” Moore said.
He suggested the council look at ways to reduce expenses for that one item.
“Maybe get a look at that at the mid-term budget review,” he said.
