The South Pasadena City Council Wednesday night unanimously passed, 5-0, its 2018-19 fiscal year balanced budget of $27.5 million with one consideration posed by the mayor.
Mayor Dr. Richard D. Schneider asked the council to review annually the designated reserve accounts. Those are funds set aside for specific items. Dr. Schneider, as an example, wanted to increase the account set aside for trees to $150,000. The council agreed to undertake an annual review of the designated reserves.
The budget also includes more than $2 million for the water treatment equipment that is being touted as the permanent solution for discolored, murky water found in some residences’ homes. Some of that $2 million cost will be defrayed with a funding assist from an outside source. The equipment is scheduled to be installed by the end of the year, according to city officials.
Prior to the budget process, the city spent $18,000 on a community survey to gauge the satisfaction or dissatisfaction regarding South Pasadena. City officials said they used the survey as a guide for the budget. The survey came back with a whopping approval rating of 95 percent saying the city was a great place to live.
Moreover, the city is staring down a November ballot measure that could eliminate the Utility User Tax, which represents about 12 percent or $3.5 million of the budget. The tax includes cell phone bills, cable, electricity and gas, among other utilities. Although South Pasadena City Manager Stephanie De Wolfe said the UUT would not be included in the budget deliberations, officials say it’s clear that if the city loses that revenue, significant cuts would be forthcoming.
“I’m very pleased to present a balanced, fiscally conservative budget that aligns with the priorities of our residents,” Stephanie Wolfe, South Pasadena city manager, said in an email prior to Wednesday night’s unanimous approval. “Our revenue and expenses are balanced at about 3 percent growth, and the budget maintains a strong reserve fund. And we are able to continue our investments in infrastructure and street repair while boosting spending on emergency preparedness, economic development and other priorities identified by residents in a recent community survey.”
The city is prohibited from advocating for the UUT but can educate the public as to the consequences of losing that revenue. Officials have indicated that a citizens committee, separate from the City Council, is in the process of being formed to advocate for the UUT.
The UUT repeal is on the November ballot and is being pushed by a Tea party faction known as the California Tax Limitation Committee. If a person wants to keep the utility tax, they vote “no.” If they want to repeal the tax, they vote “yes.”
The community survey had a break-out section for the UUT, which indicated about 70 percent of residents were in favor of keeping it. The poll/survey had a margin of error of about 5 percent.
DeWolfe also said the UUT would be a topic of council discussion in July.
“The potential loss of the utility users tax (UUT) is our top concern, as it would force significant and immediate cuts in city services,” DeWolfe said.
Meanwhile, the general fund revenues in the budget are projected to be $27.5 million. That’s a three percent increase over last year because of sustained increases in property taxes, which is the city’s largest revenue source. Over the past five years, total revenue has increased at about one to two percent annually.
The revenue breakdown is as follows: property tax, 51 percent; UUT, 12 percent; sales tax, 11 percent; and user fees, 4 percent.
On the expenditure side, the total comes in at $27.4 million. Personnel represents 72 percent of the budget, while 22 percent represents operations and maintenance. The city’s reserve fund is about 25 percent of the budget.
The Police Department’s budget is the largest part of the fiscal plan coming in at $8,815,924. Of that, personnel is $7,905,897 and operations and maintenance at $910,027.
Councilmembers are encouraged by the budget but look to the future with caution because of pension requirements, which keep growing exponentially over the next few years.
In fact, city officials estimate CalPERS obligations will produce a deficit to the city in fiscal year 2020-2021. DeWolfe has said the city is working with CalPERS and with independent actuarial consultants to refine the impacts in future years and to develop plans to offset the costs.
The City Council also approved the first-ever, five-year Capital Improvement Plan, which contains 33 projects at a total cost of $104,635,692. Of that figure, $43,896,534 is unfunded.
Mayor Pro Tem Dr. Marina Khubesrian explained the budget and the five-year capital improvement plan this way: “We have a new five-year capital improvement plan initiative which is an important planning tool as we face fiscal challenges in the next few years from CalPERS and increasing retirement costs along with all other cities. The five-year CIP is critical for an older city like ours with many public amenities and infrastructure needing maintenance for continued use by our residents. The city is currently in the process of developing long range financial sustainability plans to offset these PERS costs. I’m particularity glad that this year we can focus our energies and more resources on the financial and economic needs of the city without the time, energy, and resource consuming albatross of the 710-tunnel looming over the city. It’s a good time to be beyond the 710 and moving forward to address these challenges and opportunities for our wonderful little City.”