So Pas Officials Approve Mid-Year Financial Plan

City Council approves mid-year fiscal plan with a $32,000 withdrawal from the city’s reserves. Photo by Steve Whitmore

The South Pasadena City Council unanimously approved the mid-year 2018-19 fiscal report that contained pulling $32,000 from the city’s reserves to pay for clean power.

The city’s commitment to the Clean Power Alliance (CPA) is resulting in the appropriation of $32,000 from the reserve fund because officials want all city facilities to run on 100 percent renewable energy, according to a city officials.

“General Fund revenues and expenditures are currently in line with budget projections and are not expected to deviate significantly during the second half of the fiscal year,” states a staff report by City Manager Stephanie DeWolfe and prepared by Finance Director Craig Koehler. “One request is being presented for mid-year appropriations from the General Fund Reserves to cover the increased costs of the City’s choice to select 100 percent renewable energy for all city facilities.”

The $32,000 is just part of the cost for the city to convert to 100 percent renewable for an entire year, which puts the cost at closer to $100,000. City officials, however, are committed to providing clean power and they unanimously approved pulling the needed money from the general fund reserves, which represents about 25 percent of the city’s approximate $27 million budget.

“Ultimately, over the long term, over a year, it would be about $100,000 additional,” Councilmember Michael Cacciotti said during the Feb. 20 council meeting.

Koehler, who presented the mid-year fiscal plan report to the council, agreed that it would add about $100,000 to the budget.

The CPA is the new energy program the city has adopted that provides renewable, sustainable energy from clean sources such as wind and solar. The program can cost about 7 to 9 percent more than Southern California Edison. The city made 100 percent renewable energy the default position for So Pas customers.

The CPA has three choices. Lean Power offers 36 percent renewable content, Clean Power offers 50 percent and Green Power offers 100 percent.

“As of February 1, 2019, the City’s residents have the option of purchasing power through the new Clean Power Alliance,” the DeWolfe report states. “Each resident has the option to select a percentage of clean power or to remain with Southern California Edison. On October 17, 2018, the City Council voted to adopt 100 percent clean power as the default option for residents who do not make a choice. At the same time, the council directed staff to return with a recommendation in the mid-year budget report to move to 100 percent renewable energy mix for all City facilities. This choice will result in an approximate increase of 7-9 percent over Southern California Edison rates. Of this, approximately $28,000-$36,000 will impact the water enterprise funds, while an estimated increase of$25,000- $32,000 will impact the General Fund. “

General Fund revenues are anticipated to be $27,049,618, using a methodology based on history and known adjustments, according to city officials.

“Revenue projections are prepared using a conservative methodology based primarily on historical trends and adjustments for known or anticipated factors that affect the City’s General Fund,” DeWolfe’s report states. “Fiscal Year 2018-19, year-end revenues are not expected to differ significantly from budgeted estimates. The General Fund anticipated revenues includes a three percent increase over last year due to sustained increases in property taxes, the City’s largest revenue source. The City’s top revenue sources include Property Tax (51 percent), Utility User Tax (12 percent), Sales Tax (11 percent), and User Fees (4 percent).” The city’s fiscal year runs from July 1 to June 30.

The report also breaks down the dollar amount for each category. As an example, the projected property tax revenues will be about $13.9 million.

Councilmember Bob Joe was concerned that the property taxes were lower than anticipated and therefore could adversely affect the year-end budget projections. Koehler attributed that to the timing of receipts rather than an actual loss of revenue.

“It’s based on timing,” Koehler said. “We’ll hit the budget.”

The report explained it this way: “Property taxes are less than 50 percent at mid-year since the majority of this revenue is received in the second half of the fiscal year; current revenues are 1.75 percent higher than at this same point last year. These revenues continue to grow along with assessed valuations, which increased by 5.0 percent over the prior fiscal year.”

Sales tax revenues are up, however, and have been increasing over the past five years, according to data provided by the city.

“The most recent quarterly adjusted sales tax receipts for the City were 3.5 percent higher than the same quarter one year ago, due primarily to an increase in fuel and service stations,” according to the report. “Gasoline service stations, restaurants and supermarkets make up the majority of the top 25 sales tax producing businesses in the City, but it should be noted that fewer than 15 businesses within the City generate 50 percent of the City’s total sales tax revenues. As with property taxes, the majority of sales taxes are received after mid- year, and current revenues are higher than at this point last year.”

The report also examines the mid-year revenues from the utility users tax, which was approved by the voters on the ballot last November. Some residents brought forth a measure to try and abolish the UUT but it was soundly defeated by nearly 80 percent. The UUT goes directly to South Pasadena from cell phone bills, cable, electricity and gas.

“Utility user taxes are not expected to exceed projections as increased conservation efforts, and changes in the way customers manage their telephone plans are limiting the amount of growth in this revenue source,” the report states. “The amount of taxes received by the end of December only represent the first five months of the year since these taxes are not paid until the following month. Overall, UUT revenues make up 13 percent of total General Fund revenues.”

The City Council received the mid-year fiscal report, approved it and filed it. The  report will now go to the Finance Commission for its review.