Part one of two.
The Seal Beach City Council on Monday, April 8, received and filed the mid-year budget review. The bad news: The staff report described the economy as slowing, the city’s tax consultant has reduced projections, and expenditures are increasing faster than revenue. The good news: The staff report said one-time revenues are keeping the General Fund positive.
At the same time, the council also approved an amendment to the 2023-24 budget.
The vote was unanimous.
Due to limitations of space, the discussion between staff and the City Council will be covered in detail in next week’s Sun.
The following are highlights from the staff report to this week’s council meeting.
Background
Finance Director/City Treasurer Barbara Arenado, in her staff report, described the mid-year budget review as the city’s best estimates based on current information.
“The economy is experiencing slower growth, higher inflation, and higher interest rates than had been projected in the City’s FY 2023-2024 Budget,” Arenado wrote.
“However, even though economic conditions continue to be volatile, one-time revenue keeps the overall General Fund revenue positive,” Arenado wrote.
“With expenditures consistently surpassing revenues, it is expected that the upcoming budget will face further adverse effects,” Arenado wrote.
(“An expense is the reduction in value of an asset as it is used to generate revenue,” according to accountingtools.com. “An expenditure is a payment or the incurrence of a liability in exchange for goods or services.”)
“Property Tax continues to be a consistent revenue source and is estimated to meet budget expectations. Sales tax performance remained positive through December, although the City’s sales tax consultant, HdL, has reduced revenues and flattened projections,” Arenado wrote.
“Utility Users Tax (UUT) and Transient Occupancy Tax (TOT) continue to outperform budget expectations; however, these revenues are completely offset by $500,000 in reductions in citation revenue due to greater compliance, rain, implementation of animal control, unfilled positions, as well as unrealized parking meter revenue of $269,100 Mid-Year Budget Update Summary,” Arenado wrote.
“These adverse effects will hinder programing and services in the future budget,” Arenado wrote.
“As of the second quarter, General Fund non-personnel expenditures (maintenance and operations) are trending higher than prior years and are offset by the salary savings from ongoing vacant positions throughout the City,” Arenado wrote.
“The City is currently in negotiations with bargaining units and further adjustments may be necessary in the FY 2023-2024 Budget,” Arenado wrote.
“The City paid the last payment of Fire Station 48 Bond in January 2024, and the City received the reserve funds of $637,167 that were established to meet the debt covenant. Including the residual balance in Fund 402, $659,500 will close the Fire Station Bond Fund 402 and the balance will transfer to the General Fund,” Arenado wrote.
The report then turned to the insurance from the 2016 pier fire.
According to Arenado’s report, the insurance carrier reimbursed Seal Beach based on a negotiated contribution “except for a hold back to re-establish utility connections for the future pier restaurant.”
“As the pier restaurant’s scope of work has yet to be determined, the City’s insurance carrier has now opted to issue the City $397,000 as final insurance reimbursement and is anticipated to be received by the end of the fiscal year,” Arenado wrote.
The fire wasn’t the only cause of damage to the pier.
“From December 23, 2022, through and including January 16, 2023, the City and surrounding areas were hit by repeated ‘Atmospheric River’ major storm events,” Arenado wrote.
“The Seal Beach pier was damaged by the tide and wave activity. The City received Emergency Pier Repair reimbursements of $1,146,218,” Arenado wrote.
“The filming of the ‘On Call’ police drama at the Police Station was an unforeseen opportunity that arose outside of our standard budgeting process; thus, it was not allocated for in our initial budget,” Arenado wrote.
“Despite not being a pre-scheduled event, the film brought $100,916 in increased revenue to the City, showcasing a positive collaboration between the Police Department and the entertainment industry,” Arenado wrote.
“Importantly, all the expenses incurred during this detail were covered by the production company, making this a revenue-positive event,” Arenado wrote.
“Given these circumstances, a request for reimbursement of $65,608 is included to cover the costs associated with this overtime detail, recognizing the benefit it brought to the City and the department without prior budget allocation. The remaining balance will go the General Fund,” Arenado wrote.
“Legal fees from the City’s labor and employment counsel at Liebert Cassidy Whitmore (LCW) have increased $81,000, primarily due to a higher volume of personnel-related issues, including complex matters concerning worker’s compensation and industrial disability retirements,” Arenado wrote.
“litigation. Additionally, the City has enlisted a labor consultant from LCW to aid in labor negotiations with its four labor associations,” Arenado wrote.
Turning to law enforcement, Arenado looked at the cost of body cameras and tasers for Seal Beach Police Officers. According to Arenado, the equipment was provided by Axon but was not included in the original budget at the start of the program. “Although the Police Department has absorbed most of the cost in their current budget, $54,315 is necessary from the General Fund for this essential expenditure,” Arenado wrote.
“An additional $30,000 appropriation from fund balance in the SLESF budget is driven by the need to cover unexpected overtime costs that have arisen due to intensified efforts against organized retail theft,” Arenado wrote. (SLESF stands for Supplemental Law Enforcement Services Fund.) “McGaugh Pool programing has increased during the last year and $38,000 is requested to fund the program. The amount of pool use has surpassed pre-pandemic levels,” Arenado wrote.
“During the 2024 winter season, the City was faced with high-intensity storms compounded with king tides. As a result of these unforeseen events, the Public Works Department expenditures exceeded the budgeted amounts,” Arenado wrote. Her report said the combined costs “amounted to $200,000”.
“As inflation continues to impact labor and material prices, the City has observed significant increases in contract costs, particularly in the landscape maintenance contract,” Arenado wrote. According to her report, the contract with Brightview Landscape “amounted to approximately $260,000 more than the previous legacy contracts for similar services.”
The report said the Public Works Department accommodated most of that cost within their budget. However, staff was requesting $49,000 to ensure maintenance of city landscaping.
Staff also recommended a budget amendment to take $70,000 from the General Fund to support the Seal Beach Cable Communications Foundation. “Based on a review of the Foundation’s budget, the Foundation has incurred greater than expected operational expenses, largely based on the Foundation’s expanded role in managing SBTV-3 following Robin Fort-Lincke’s tragic passing last year,” Arenado wrote.
Council directives
During the city’s January 2024 Strategic Planning meeting, the council gave staff direction on. priorities for 2024-25. Arenado listed the following items in her report:
“•$75,000 for the Citywide Information technology (IT) Master Plan
“• $325,000 for the License Plate Reader System Upgrade
“• $230,000 for the Locally Controlled Gas Tax Measure and Potential Transaction Use Tax
“• $236,312 for Repaving of the 8th/10th Parking lots with American with Disabilities Act (ADA) Upgrades, with the remaining portion of $563,688 from the Pool BG0904, totaling $800,000
“• $200,000 for the Gas Line Heater and McGaugh Pool
“• $3,632,136 to move the Pool Funding to Lifeguard and Police Substation Headquarters capital improvement project.”
