Part two of two.
The City Council looked at a variety of additional cuts to the proposed 2024-2025 budget during the May 20 budget workshop. (For part one of this series, visit “Council looking at budget cuts,” at sunnews.org.) The council’s discretionary funds and the council iPads were considered for additional cuts. The council discussed eliminating having a consultant lead the strategic planning session, but in the end they decided to reduce the budget for that item.
The May 20 workshop was the third of three budget meetings. That meeting was almost three and a half hours long. So were the May 14 and May 15 workshops. Because of limits of time and space, the following are highlights of some of the matters discussed at the meeting.
Background
The new fiscal year starts on July 1. Seal Beach have regular meetings scheduled for June 10 and June 24.
Staff projects $44 million in General Fund revenue for the coming fiscal year of 2024-25. During the May 20 workshop, Finance Director/Treasurer Barbara Arenado said the entire process has not been easy.
She went over the city’s financial history. She said 2018-19 was the year that Measure BB came in. Arenado said it was budgeted for $500,000 and actually generated $1.8 million.
She said without Measure BB, there would have been a structural deficit that year.
(In a recent email, Arenado explained: “A budget deficit occurs when a City’s total expenditures exceed its total revenue in a specific fiscal period. A structural deficit, on the other hand, indicates an ongoing imbalance where recurring revenues are consistently insufficient to meet recurring expenditures.”)
According to Arenado, in 2019-2020, there was still uncertainty. That year, according to Arenado, Measure BB revenue brought in about $1 million. Arenado said Seal Beach also received a $2.8 million insurance reimbursement for the pier fire. (She was apparently referring to the 2016 pier fire.)
“Remember, those are one-time revenues,” Arenado said. “Those aren’t revenues that we should plan our budgets on.”
In 2020, the pandemic began.
In 2020-21, Seal Beach received another $3 million reimbursement.
She said Seal Beach saw a positive balance of $1.3 million because expenditures were down again during 2019-20, -21, and -22.
Arenado said in 2021-22, the city received $5.7 million in one-time American Rescue Plan Act revenue. According to Arenado, without that money Seal Beach would have again faced a structural deficit.
There were 14 vacant positions in fiscal year 2022-23, according to Arenado.
“We’re just starting to fill those now and they have historically been vacant for some time,” Arenado said.
During the 2023-2024 mid-year budget review, Arenado said expenditures were increasing faster than revenues. (See “Council receives mid-year budget review,” at sunnews.org.)
She said the city has seen increased revenue from the utility users tax.
According to Arenado, staff budgets revenues and expenditures conservatively.
She said Seal Beach has no revenue to fund improvement projects.
“We have $250 million in unfunded projects,” Arenado said.
In positive news, Arenado said Seal Beach hotels are at capacity.
According to Arenado, there are two vacant positions for officers in the Police Department.
Cuts considered
The council discussed additional cuts beyond those staff had already planned for the budget. On May 14, City Manager Jill Ingram reported salary and benefit cuts of $1 million and $3 million in maintenance and operations.
Among the proposed cuts was reducing $100,000 from the City Council’s budget. Each council member gets $20,000 in discretionary funds. Staff also suggested cutting $3,000 from the $25,000 budget for memberships and dues to various organizations.
Later in the meeting, District Five Councilman Nathan Steele said his next year’s discretionary money was already spoken for.
Another $3,000 was budgeted for shirts and badges. Staff proposed leaving $500 for mandatory badges.
Still another budget cut was eliminating the fiber phone connectivity for Lifeguard headquarters. Marine Safety Chief Joe Bailey reluctantly accepted that proposal.
Other proposed cuts included Breakfast with Santa and $5,000 budgeted for the ribbon cutting and the Tennis and Pickleball Center.
District Five Councilman Nathan Steele said he wouldn’t be upset if the city didn’t do a ribbon cutting. District Two Council Member Tom Moore agreed.
Senior transportation services would be cut from seven to three days a week. Community Development Director Alexa Smittle said that was the circulating bus for seniors. She put the estimated savings at $40,000.
Steele wanted more information about rider usage.
About an hour into the May 20 workshop, Steele read from a prepared statement. “For city staff to create a budget that comes with a structural deficit of $300,000 is an impressive feat,” Steele said.
“The issue to me is that council members have had one-on-one meetings with senior staff concerning the current budget and current budget cycle,” Steele said.
“Every council member was fully briefed and we have all had ample time and opportunity to bring ideas to the table,” Steele said.
He said for council members to bring up their cost cutting ideas at the end of nine hours of presentations was not appropriate. “It is also ironic that the people on this council who are asking for more cuts to close a $300,000 deficit are the very same people who have wasted nearly $2 million of taxpayer money with ad hoc committees, special meetings, and other parliamentary maneuvers,” Steele said.
He said the long term fiscal viability of Seal Beach is in jeopardy.
We did ask the city to come back with suggestions and that’s what they did today,” said District Two Council Member Tom Moore.
“They did propose some reductions so it was a good thing we had another meeting,” Moore said.
Moore described the budget as decent and revenue as healthy.
Finance Director Arenado said the city is not going to continue seeing the growth Seal Beach has seen over the last five or even 10 years.
She said Seal Beach would not see growth in property tax, which Arenado said brings in 35% of the city’s revenues.
She said Seal Beach would not see growth in sales tax.
“I’m just talking this year’s budget,” Moore said.
Moore argued that retirement, medical insurance, and fire services are putting pressure on each department to come up with a balanced budget.
He said staff did try to narrow the budget gap as much as possible from what he could see.
He said it was difficult to have a council meeting and two budget meetings the two nights after the council meeting.
“I think that’s why I think we wanted one more meeting to discuss it as a council,” Moore said.
Moore wondered if the city could include a town hall in the future as part of the budget process.
He said the council needed time to digest and review the information from two nights of budget workshops.
In response to his question about the city’s electric bill, Public Works Director Iris Lee said every year it increases between $80,000 and $100,000.
Lee said the tariffs are set by the California Public Utilities Commission and not something staff has any say over.
Arenado said Southern California Edison and the gas companies were increasing their rates exponentially.
Moore also asked about the Lifeguard Headquarters project.
The proposed 2024-5 budget included more than $3.8 million for the Lifeguard Headquarters.
“Those are the funds,” Arenado said.
She said the money would be set aside for the complete renovation of Lifeguard Headquarters.
“A needs assessment was conducted in 2020 that determined the facility has reached its useful life,” according to the proposed budget.
In March 2021, then-Public Works Director Steve Myrter put the cost of a new Lifeguard/Police substation building at $9.5 million.)
To balance the budget, Moore suggested:
• Renegotiating the contract to clean the restrooms on First Street.
Lee said that had been included in the budget as one of Moore’s balancing measures.
• Cancel the shuttle.
• Reduce police overtime to 2022 levels.
The combined cuts would be about $313,000.
Police Chief Michael Henderson said that appeared to be the aggregate number of all overtime budgets, which included grant overtime. “We apply for and receive overtime grants from the state,” Henderson said.
The police chief said he didn’t want to absorb the impact of eliminating the grant overtime.
According to Henderson, the grants pay for patrols on the Fourth of July and St. Patrick’s Day as well as DUI checkpoints. Henderson said Seal Beach was at the limit if the city experiences significant civil unrest in the coming year.
District Three Councilwoman Lisa Landau, who in the past was a Seal Beach police volunteer, said she would like to see staff report on using a reserve officer program. Landau previously brought up the subject during the previous budget workshops. She wanted to see the cost to initiate the program and the savings that could be realized.
According to Police Chief Henderson, the Police Department did not see a reserve program as a cost cutting measure, as reserve officers can work when they please and can’t be compelled to work during specific events.
“I hope you know my priority is the PD,” Landau said. She said she knew how hard the officers work and some of them were overworked.
“Is it possible to get a staff report on the result of hiring over-hires in place of those you anticipate will not be returning to active duty,” Landau said.
According to Landau, the benefits would be Seal Beach would have more officers on the street and they would help lower overtime. She said possibly by hiring a first-year officer the city could save money on both salary and retirement.
Henderson said in order to over-hire, he has to take a full time equivalent, and close that position someplace else. He said hiring two more officers would bring the department back to their table of organization.
Landau asked if that would reduce overtime spending. Henderson suggested a more in-depth discussion of overtime with all the council members.
Landau suggested hiring a civilian to serve as EOC. Henderson argued it was more cost effective to staff the position with a gun-carrying police officer. Henderson said adding police officers would be a council decision.
Steele asked if the council could adopt a budget that was “structurally $300,000” underwater.
City Manager Ingram had put the figure at $350,000.
City Attorney Nicholas Ghirelli said the council has a duty to adopt a budget that is balanced.
Arenado said the city can use one-time funds to bring forth a balanced budget.
Ghirelli said they were both saying the same thing.
Near the end of the meeting, Ingram said the city needs to have new, ongoing revenue opportunities.
“We have to have that discussion,” Ingram said.
