The South Pasadena City Council Wednesday night was poised to adopt its 2018-19 fiscal year balanced budget of about $27.4 million as it strains under the increasing fiscal yoke of future pension requirements.
Moreover, the other fiscal elephant in the room is the possibility of losing the Utility User Tax, which represents about 12 percent or $3.5 million of the budget. 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 DeWolfe, South Pasadena city manager, said in an email to The Review this week. “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.”
DeWolfe said the UUT would be a topic of council discussion in July.
“We will bring a separate report to council in July that will discuss the fiscal impacts of the initiative … and outline the specific cuts that will be made if the repeal is successful,” DeWolfe said.
The city is prohibited from advocating for the UUT, but 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 tax includes cell phone bills, cable, electricity and gas, among other utilities.
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.”
A recent community survey, costing the city about $18,000, had a separate section for the UUT. The poll indicated most South Pasadena residents are in favor of the tax, about 70 percent, according to the survey. The poll/survey had a margin of error of about 5 percent.
“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 this week in the email to the Review.
Meanwhile, the general fund revenues in the budget are projected to be $27.5 million, according to city officials. That’s a three percent increase over last year because of sustained increases in property taxes, which is the city’s largest revenue source, according to a staff report presented to the council during one of the budget hearings. Over the past five years, the report continues, 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, according to the staff report. The city’s reserve fund is about 25 percent of the budget.
“This budget hits all of our goals – it’s balanced, prudent and maintains a reserve that will give us some cushion in future years,” Councilman Robert Joe said in an email to The Review Tuesday. “We know we have some work to do in closing future budget gaps, and we will work closely with our community. Our residents have told us that they value the level of service provided by the City.”
During the last council meeting that lasted until midnight, each department head presented their respective budgets, including where the money is spent and goals for the upcoming year. As an example, the police budget came in at $8,815,924, with personnel bearing the greater burden of costs at $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 last few years.
In fact, city officials estimate CalPERS obligations will produce a deficit to the city in fiscal year 2020-2021. DeWolfe 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 council also is expected to approve the city’s first-ever, five-year Capital Improvement Plan, which was presented to the council on May 2.