A resident’s analysis of the Seal Beach city budget
Over the last nine years the general operations budget for the city of Seal Beach has increased 3 percent per year. Taxes collected from properties have increased at a similar rate and represent one-third of the budget. Thus any difference between total revenue and expenses must be viewed through one of two lenses (or a combination of the two): (a) Government has failed to control expense growth knowing that other revenue sources were not keeping pace, or (b) failed to actively grow revenues (acknowledging that collecting taxes is a passive solution).
Forty-five percent of the $30 million operations budget is allocated to police and fire services. Those line items are up +8.1 percent and +5.5 percent year-over-year respectively. Unrelated pension costs account for almost 10 percent more of the budget ($1.5 million to the Successor Redevelopment Agency retirement fund and $1.2 million to the Pension obligation bond). Not reflected in the budget is the unfunded liability of CalPERS pensions, which was last reported by Seal Beach with data as of 6/30/2016. At that time the City had an unfunded liability of $31.5 million to the pension funds of employees, an increase of $13 million over 2 years alone.
Sales tax increases are commonly used to fund new projects which can have segregated funds and finite terms. For example Orange County increased sales taxes by 1/2 percent to fund Measure M2 (an increase that will last through 2041).
However, it is unclear whether the use of sales tax increases can effectively address systemic budget challenges. Some of the clear questions that need addressing by Seal Beach’s government before voters should even be asked to consider a sales tax increase are as follows:
(1) Seal Beach’s budget does not provide a multi-year revenue and expense projection. It only provides a 2018-2019 forecast. In the private sector a 5-year forecast is the norm. Without a multi-year forecast it is impossible to see if a sales tax increase is a long-term solution.
(2) The proposed budget states revenues are “conservatively estimated to reflect the current state of the economy.” The City needs to elaborate. Have “neutral” and “optimistic” budgets been generated and what do they illustrate? What do our leaders think the current state of the economy is and how did this influence the assumptions?
(3) Sales tax revenue did not increase from the 2017 to 2018 budget, yet the US Commerce Department reported in July that consumer spending has increased 4 percent year over year. Is Seal Beach seeing no increase or is the zero revenue change forecast inaccurate? What is the City doing to organically increase local sales tax revenue by growing volume this year and in the years ahead?
(4) What is the Seal Beach’s plan to address the ballooning pension problem and what will be the impact on the city if it is unaddressed 5-10 years from now? The annual increase is this liability alone is greater than the potential revenue from a sales tax increase of 1 percent.
(5) A focused effort to view paired revenue and expense items is needed. For example, there is no proposed solution to the Tidelands Beach Fund problem, which pays for lifeguard and other beach services. The City states the fund consistently has revenues that fall short of costs by $500,000 to $1 million each year. Another paired example would be parking enforcement whose costs have grown $500,000 in the last two years and now consume two-thirds of the revenue generated from operations. Citizens of Seal Beach deserve transparent answers to questions such as these before any solutions are presented that would need voter approvals.
David Morris
Seal Beach
