There are no cuts to Seal Beach services or cuts to city staff in the proposed budget for 2020-21, according to Finance Director Kelly Telford’s presentation to the May 28 workshop. There will be no furloughs, no pay-cuts, no layoffs. (In related news, there will be a second virtual workshop on the budget at 6:30 p.m., tonight, Thursday, June 4.)
Telford said the biggest challenge of this year was balancing the budget without reducing the city’s reserves.
She also told the council that without money from Measure BB (the local 1 cent transaction tax), Seal Beach would have needed to reduce its reserves.
The figures presented during the almost three-hour long budget workshop did not include money the city is expected to receive from the County of Orange. The proposed budget also did not include the long-proposed construction of a community swimming pool on the grounds of Naval Weapons Station Seal Beach. The future of that project is expected to be discussed in the near future.
City Manager Jill Ingram told the City Council that 10 days after staff presented the mid-year budget review in March, the COVID-19 pandemic became the new reality.
According to Ingram, the proposed budget preserved city services without touching the city’s reserves. Finance Director/Treasurer Telford said essentially the same thing during her presentation.
The workshop, like all city meetings since the governor issued the stay at home order, was a virtual meeting. There were brief technical problems a couple of times during the meeting.
“You’re fading in and out,” said District Five Councilwoman Sandra Massa-Lavitt. She was addressing Finance Director Telford.
“My microphone is very temperamental,” Telford said.
Massa-Lavitt said the council was only getting half a sentence, or no sentence, of what Telford was saying.
“A good argument for an IT budget,” said District Two Councilman Thomas Moore.
Mayor/District Four Councilwoman Schelly Sustarsic laughed.
The problem was fixed and Telford gave her presentation.
Telford explained that the budget process began in January. She said Seal Beach uses a “zero-based” system, which means each department must justify every expense proposed.
This year, Telford said, the city used a “tier” system to look at the budget. Tier 1 included reducing overtime, supplies, training and using restricted funds before using the General Fund. Tier 2 included deferring vehicle replacement and deferring payments to reduce “other” employee benefits. Tier 3, which wasn’t implemented for the proposed budget, would include staff cuts and/or hiring freezes, and using the city’s reserves.
(You won’t find a fund labeled “reserve” or “rainy day” in the proposed budget document. During a Tuesday, March 26, interview with the Sun, Telford referred to the Economic Contingency classification in the General Fund of $1.75 million rounded and a Fiscal Policy classification of $8.68 million. “But that is our last option,” Telford said on Tuesday. She gave rounded figures during the interview. They were confirmed by page 33 of the proposed budget, which is available on the city website.)
Telford told the council it was no small feat that the budget was balanced without using reserves or furloughs.
She said the pre-COVID-19 revenues had been expected to grow more slowly.
Page 7 of her slide presentation shows pre-COVID revenue projected to increase by 1% while expenses were expected to increase by 5%.
She said the COVD-19 closures had triggered an economic decline that she said some were calling a recession.
Telford said General Fund revenues were expected to decline 3% due to COVID-19.
She also said projections for the budget had to be revised four times.
She said sales tax revenue was projected to decrease 13%.
However, page 11 of her slide reported that Measure BB revenues were expected to increase 2%.
Telford said the city wasn’t expecting a big impact on Measure BB. (The local “transaction” tax, as it is called in the budget, went into effect in April 2019.)
Telford said without Measure BB, Seal Beach would have had to reduce reserves.
Telford said Seal Beach was fortunate in that the current fiscal year had a budgeted surplus.
According to Telford, part of the budgeted surplus was absorbed by contracts and the impact of COVID-19.
She said City Manager Ingram did not want to reserve service levels or staff if possible.
Among the cost reductions staff worked on, Finance Director Telford said staff looked at alternatives to buying new vehicles for the city.
She described the Community Development budget as relatively flat. She said there was a reduction in the Marine Safety budget, due largely to the cancelation of the 2020 Junior Lifeguard program.
Telford said the General Fund balance was a measure of the money available to pay Seal Beach’s upcoming costs. She put the projected General Fund balance at $16.7 million. (The figure she gave during the virtual presentation was rounded. Page 16 of her slide presentation gave the figure $16,686,530.)
Public Works Director Steve Myrter also provided the council with an overview of the capital improvement program budget. (That will be the subject of the June 4 meeting.)
Ongoing projects will include replacing the City Hall HVAC system, which Myrter described as 20 years old.
New projects will include replacing the exterior staircase at City Hall and replacing the Lifeguard Headquarters and police substation.
According to Myrter, those structures would be difficult to repair considering their age and the way they were built. He also said the Tennis Center locker room building is in poor condition.
Myrter said the Main Street improvements had to be put on hold due to COVID-19.
Ingram told the council she had given a directive to the city’s department heads to preserve levels of service. She said it was important to keep the marathon mindset.
Asked for her number one takeaway from the workshop, District Five Councilwoman Sandra Massa-Lavitt wrote, “First, it’s important to note the effort that went into preparation of this budget.” She pointed out that staff worked “countless hours” to compensate for moving a large amount of money because of the pandemic.
“We are fortunate to have dedicated staff to get this accomplished in a timely manner. Given all that is changing with public financing resources ‘it ain’t over til it’s over,’” she wrote.
“Lots of information, a good opportunity to see just how many projects the city plans for and develops the funding to accomplish those projects. It’s a very complicated effort. As of this point the staff has prioritized projects, and dropped off some projects (reluctantly) to keep the budget balanced. Keep in mind this is only part of the total document. More to come next week. So many projects….so little money,” Massa-Lavitt wrote.
To see or download the proposed budget for the upcoming fiscal year, visit https://www.sealbeachca.gov/Portals/0/Documents/Proposed%20Fiscal%20Year%202020-21%20Budget.pdf?ver=2020-05-22-173016-533
