The city treasurer is cautiously optimistic about Seal Beach’s financial situation. The city took in more money than expected and city departments spent less.
Finance Director/Treasurer Kelly Telford recently told the City Council that staff expects a surplus at the end of the 2020-21 fiscal year.
Telford concluded the presentation by reviewing what she described as “a savings” of $7.6 million.
However, the savings came from in delays in improvement projects, cost reductions for COVD-19, insurance money covering the pier fire, and CARES Act money.
Telford told the council she expected improvement in the city’s revenue sources, with the exception of the transient occupancy (short term rental) tax. She expressed the opinion that Seal Beach had begun its recovery from the economic impact of the pandemic. District Three Councilman Mike Varipapa asked Telford if she expected a rougher fiscal year next year.
Telford said she thought Seal Beach would fare well, but there would be some budget challenges in the 2021-22 budget.
Takeaways
“The FY 2020-21 midyear budget review is indicating the City has started recovering but is still experiencing financial impacts from COVID-19,” Telford wrote.
“While there are some unknowns related to the most recent business closures, we are cautiously optimistic that the City will continue on a positive path and get through this very difficult time,” Telford wrote.
Asked his number one take away from the budget review, Varipapa wrote, “That the fund balance is expected to close out higher than expected.”
Mayor Joe Kalmick wrote in a Feb. 24 email that his number one takeaway was that Seal Beach was holding its own through the pandemic.
“There were no tragic surprises, as those areas that fell below projections could be attributed to the second shutdown and stay at home order,” Kalmick wrote.
“I’m very pleased that our finance director is providing us with these updates in between our annual budgets,” Kalmick wrote.
He wasn’t the only council member who was pleased.
“I was pleased to hear that our city was doing better than expected, according to the mid-year Budget Review,” wrote District Four Councilwoman Schelly Sustarsic.
“I applaud our City Departments for being conservative with their spending, during this time of COVID,” Sustarsic wrote.
District Five Councilwoman Sandra Massa-Lavitt praised Telford’s management and City Manager Jill Ingram’s leadership.
“We all know how quickly things can change, especially in smaller cities,” Massa-Lavitt wrote.
“I’m proud of the staff efforts to keep our expenses under control. In some cases we are starting the budget for 2021-22 with positive numbers. Much better than the reverse,” she wrote.
District Two Councilman Thomas Moore said the financial director was doing an outstanding job. He wrote that that while Seal Beach had a large surplus last year, outliers carried over from prior years, insurance reimbursements and unexpected revenue caused the surplus.
“This is good to point out these items so we can see that if they did not happen the budget would be close to being balanced,” Moore wrote.
“It is important to realize that we may have more difficult years ahead as well as getting through this difficult time and we should be fiscally cautious to keep our budget balanced going forward,” Moore wrote.
Budget review
At the Feb. 22 council meeting, Telford went over the details of the projected income and expenses for the 2020-21 fiscal year.
• Property taxes came in $400,000 higher than originally expected.
According to Telford, if the pandemic impacted property taxes, the impacts would likely be felt in 2021-22. She said staff would keep an eye on this.
• Normal sales tax revenue came in 7% under budget, according to Telford. However, that was offset by an increase in Measure BB money (which Telford called a transaction tax).
“It was almost a wash,” Telford said.
That said, Telford put an expected surplus in sales tax revenue at $3.8 million.
She also said Seal Beach was recovering well, apparently referring to sales tax revenues.
According to Telford, another round of closures in December would impact the next round of sales tax revenue.
The Utility Users Tax, the Transient Occupancy (short term rental) Tax and Franchise taxes were all down.
According to Telford, Seal Beach relies on local tourism, rather than from other states or countries. She said that would help Seal Beach recover.
“This is part of what will help Seal Beach fare well, not only now during the pandemic, but when we start seeing recovery from the pandemic.,” she said.
According to Telford, planning fees did not see “a dip,” as planning fee income stayed about the same.
“Really where we saw a dip was in the Recreation fees,” Telford said.
However, according to Telford, the decrease appeared to be the result of a timing difference. A lot of residents would have paid their recreation fees before June 30. She said the program was delayed because of the pandemic. Telford said there was a pretty big boost in fees between July and August instead.
Telford said that all but one city department came in with a positive budget “variance.” She said all the departments pulled back on expenses as much as possible. That meant deferring consulting contracts.
She said a number of projects had to be put on hold as the Public Works Department had to respond to the pandemic.
She said the money would be spent in the future.
According to Telford, staff has already begun calculating projections for the next fiscal year.
