Budget highlights flexibility, new services; councilmembers focus on housing fund, facilities, committee work
By SARA HALL
City Council last week gave feedback on the proposed budget for the upcoming fiscal year and focused on creating an ongoing funding source for a housing fund, working on a plan for facilities and some interesting ideas for committee work.
On May 16, councilmembers heard the proposed budget for FY 2023-24 and provided specific direction to city staff during the meeting. The budget will return for final review and adoption on June 13.
Over the last several years, the council’s financial decisions have positioned the city to manage the uncertainty of a pandemic, rising inflation, a possible recession and the impact of global events on the local economy, City Manager Shohreh Dupuis said during the meeting. However, despite the continued economic growth, any uncertainty makes long-term financial planning difficult, she noted. Therefore, they proposed a one-year budget for the upcoming fiscal year.
“This approach would allow us to remain flexible and responsive to changes in the local and global economy while maintaining our commitment to financial responsibility and sustainability,” Dupuis said.
In a note included in the draft document, Dupuis said the economic outlook for the city is cautious, considering the possible recession looming. Revenues are performing slightly better than budget estimates, but projected to experience minimal increases between 3%-5%. The fallout from record inflation, higher interest rates, higher construction costs, and continued struggles within the labor market for key positions will continue to impact revenues and expenditures for the upcoming year, Dupuis explained.
Councilmembers commended staff for their work on the budget.
“It’s a lot of work and it’s obvious that you’ve been spending a lot of time working on this,” said Councilmember Mark Orgill.
Most of the councilmembers suggested direction was regarding a housing fund, the facilities master plan and a proposed emergency operations center, acquiring or utilizing a parcel in South Laguna for a dog park, and work from the Heritage and Beautification committees.
Mayor Bob Whalen and Councilmember George Weiss mentioned the housing fund during last year’s budget discussion but it didn’t quite translate the way he remembered it, Whalen said. He suggested directing staff to develop an ongoing revenue stream for a housing fund. They have a housing element and they know they need to generate housing, he said.
“I think that’s the only way we’re going to get money set aside,” Whalen said. “I want it to be crystal clear that it needs to be something you develop in going forward with budgets.”
Weiss supported Whalen’s suggestion, and reiterated his proposal from last year’s budget meeting to redirect all or a portion of Transient Occupancy Tax from short-term lodging to an affordable housing program.
“We’ve all been talking about housing for many, many (years) – a long time – so I of course support that,” Orgill agreed.
Mayor Pro Tem Sue Kempf agreed with the focus on housing. As she has at previous meetings, Kempf again suggested looking into converting second-story office buildings into housing. It’s an easy way to start to get some traction on tackling the issue, she said.
“We don’t have to build a thing, we just have to change our zoning,” Kempf said. “I’d really like to get going on that.”
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Photos by Mary Hurlbut
A recent budget workshop focused on new services and a facilities master plan, both of which include the recently acquired Laguna Beach Community and Recreation Center (the former St. Catherine of Siena School campus)
Regarding the facilities master plan, Whalen noted that while the idea was to fund the emergency operations center at the mid-year modifications, he suggested they fund a portion of it now and get an EOC plan in place.
“I think we really need to emphasize the importance of moving forward with that plan quickly,” Whalen noted.
They should definitely fast-track the plan for the EOC, Orgill agreed.
Staff doesn’t have a complete plan for it yet, but they’re working on it, Dupuis noted. There is also an issue at the location, she added, since there is no backup generator at the site. They need to look at the generator for the facility closely, she said, which will likely be $1 million or more of an investment. They are already assessing the other equipment to see what they can use, she added, so they should have a complete plan by mid-year.
Councilmember Alex Rounaghi suggested that a portion of the $750,000 earmarked for the facilities master plan, which was not only to develop the plan but also to be used on the actual facilities, could be used as a downpayment on the EOC project.
They are going to have to invest a lot of money into the city facilities, including the aging infrastructure and the recently acquired Laguna Beach Community and Recreation Center (formerly the former St. Catherine of Siena School campus), Kempf said.
“I want to be very thoughtful in terms of what monies we have available and how we spend it going forward,” she said.
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Following up on several public comments to acquire the parcel, Weiss asked if the property across from the Village Green Park in South Laguna could be leased at a reasonable rate for a dog park. He asked staff to look into the feasibility of the idea.
Other councilmembers agreed with studying the suggestion.
It would be worth considering if there is a way to acquire the South Laguna property, whether it’s through a lease option or another creative solution, Orgill agreed.
“It would be worth looking into,” he said.
Kempf was ok with Weiss’ idea to lease the property, but in terms of making capital commitments now they already have a lot of things on their plate.
As staff works to finesse the budget before returning in June, Orgill asked if some funds could be set aside for a Heritage Committee project. Following an ordinance several years ago, they lost momentum when it came to civic pride having to do with the city’s heritage, he said. As the liaison to the Heritage Committee, Orgill commented that they’re interested in re-branding and public outreach to help rebuild the group. There are also a few missing plaques on some buildings that he’d like to see resolved. The committee will come back to council with a complete plan, he noted, but in the meantime Orgill asked if some funds could be set aside, although nothing would be distributed until the plan was finalized and approved by council.
“To really do everything that they can to encourage and work on the new ordinance, which is voluntary, so in order to make this work it’s going to take some effort,” Orgill said.
Orgill also noted that the Beautification Committee is interested in doing work on some of the city’s existing planters. Considering the current project underway to design a permanent Promenade on Forest, it’s a good opportunity for the city to experiment with what some of the planters could look like, Orgill said. For a total of $10,000, some of it can get folded into the plans for other areas in the city.
“I think it’d be interesting to see a little bit of local flavor,” he said. “I do think that some of these planters do need a little bit of attention anyway, so I think there might be a little bit of crossover in the budget as far as what dollars are already allocated to some of those planters versus having them work on it.”
Kempf agreed with both of Orgill’s suggestions for the Beautification and Heritage committees.
“I think those are both really good ideas,” she said.
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The proposed budget reflects councilmember priorities and provides flexibility for the city considering the future economic uncertainty
The proposed budget is balanced and reflects council goals and priorities, said Assistant City Manager/Chief Financial Officer Gavin Curran. The proposed budget for fiscal year 2023-24 total revenues from major funds is approximately $118.6 million. It’s a 4% increase over the current year, he noted. The total expenditures by major funds is approximately $117.2 million for FY 2023-24.
Curran also noted the three major revenue sources (property tax, sales tax and transient occupancy tax). The proposed revenue from property tax is the single largest source of revenue for the city, accounting for about 55% of the general fund, Curran pointed out. For FY 2023-24, they are projecting a total of $48 million, which represents a 3% growth over this year.
Next fiscal year, TOT is estimated to come in at about $10.4 million, approximately 4% increase over the current year.
“Over the past few years, with an improving economy, sales tax has experienced a significant rebound,” Curran said.
Coming back from the pandemic period, sales tax jumped from $5.6 million in FY 2020-21 to $7.5 million in 2021-22, an estimated $7.8 million for the current year, and a projected 2% increase at $7.9 million for the upcoming fiscal year. Restaurants and food sales attribute for about 52% of that revenue, Curran pointed out.
The city also has seen a steady level of building activity through the pandemic and revenue from community development fees has increased over the past few years. Next year’s is projected to bring in $5.2 million.
He also noted that the budget also adds new services to employ quality of life for residents, including operations at South Laguna beaches, programs at the Laguna Beach Community and Recreation Center (formerly the former St. Catherine of Siena School campus), the second year of the in-house ambulance program and an additional sergeant position leading the new traffic team at the Laguna Beach Police Department. All of this was done and they were still able to maintain the 20% general fund reserve intact, Curran pointed out.
Some of the projects or investments Curran highlighted: $4.2 million for new services/capital improvements for South Laguna beaches and the Laguna Beach Community and Recreation Center; investment in core services, including public safety services; continued implementation of workforce initiatives; funding for technology projects and infrastructure enhancement through capital improvement projects.
Curran also highlighted some of the major changes in the general fund budget, including: Two new positions to support enhancements in cybersecurity and financial tracking and reporting, and converting one part-time position to full time to support digital/public communications; $450,000 for software and network infrastructure to enhance cybersecurity and replace critical infrastructure; $670,000 for ongoing increases in pension costs; $200,000 for funding increased recreation services, youth camps and other programs; $700,000 for an increase for solid waste organics program and new capital improvement funding.
There were quite a few requests from city departments that could not be included in the budget, Curran noted. The revenue projections weren’t nearly what they had seen in previous years, he added.
“When you’re coming up against, I think, some of the more challenging revenue years with that potential of a recession,” Curran said, “we’re kind of seeing…a settling, at least we think, in those revenues.”
Some key capital improvement projects that were included in the budget: Moss Street beach access improvements; fire station #1 restroom renovation; Glenneyre parking structure rehabilitation; Moulton Meadows dog play area and the Forest Lane trash enclosure. Staff is also recommending adding $100,000 to the CIP for a cost/benefit analysis on relinquishing Coast Highway to the city. Some notable projects that will begin design in fiscal year 2023-24 include: Fire station #4 replacement; Thousand Steps beach restroom; Aliso Beach parking lot rehabilitation; Village Green Park playground renovation and Diver’s Cove beach access improvements.
There are a number of key projects breaking ground in FY 2023-24, noted Public Works Director Mark McAvoy, including Moss Street Beach access improvements, Bluebird Canyon outfall renovation, Park Avenue utility undergrounding, fire station #1 restroom renovation, Glenneyre parking structure rehabilitation, Anita Street Beach access improvements and sewer lift station replacement, Moulton Meadows dog play area and the Forest Lane trash enclosure. Staff also recommended adding $100,000 to the CIP for cost/benefit analysis of the potential relinquishment of Coast Highway to the city.
McAvoy also pointed out several key projects that will begin the design phase during the upcoming fiscal year, including: Fire station #4 replacement, Thousand Steps beach restroom, Aliso Beach parking lot rehabilitation, Village Green Park playground renovation, Victoria II lift station reconstruction, Wendt Terrace retaining wall repairs, Diver’s Cove beach access improvements, Lower Alta Vista retaining wall replacement, Ceanothus to Aliso Creek storm drain improvements and Agate Street storm drain improvements.
The proposed CIP for fiscal year 2023-24 totals $17.97 million. Breaking down the 2023-24 CIP projects into categories, the biggest investment is going into wastewater projects. Of the nearly $18 million total, about $3.6 million will go into improvements in that category. Other work includes about $2.95 million will be aimed at parking facilities, $2.5 million into the fire station #4 project, $1.87 million for street improvements and rehabilitation and $1.85 million for beach access improvements.
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Sara Hall covers City Hall and is a regular contributor to Stu News Laguna.