City Council Explores 5-Year Budget Forecast

See Also: Delinquent Parking Ticket Costs May Go Up 35%

Parking ticket costs may go up and the city may explore ways to use reserves for investment as part of strategies to keep Imperial Beach in the black, city officials said at a May 1 meeting to present the 2013-15 budget.

City staff presented the City Council with the proposed budget and a five-year forecast at the meeting. Discussion of city finances is expected to continue at a May 15 meeting before a final budget is approved.

Kristen VonAchen, director of the administrative services, led the compilation of the 135-page budget document that focuses on the city's economic outlook.

During an initial budget proposal presented to City Council in March, funding for the Sports Park was cut entirely.

Instead, on Wednesday the budget called for funding to be reduced from $130,000 to about $92,000 until the end of the year.

"By January the assumption is that council will have decided to have the Y, after looking at the details, have the Y or some other agency take over the operations," said City Manager Gary Brown. "And if you didn't do that it would take approximately another $100,000 per year to run it."

The Sports Park makes up less than 1 percent of the city's overall budget but has been a source of much controversy and discussion since last fall.

Funding for individual city departments will be roughly the same in the coming fiscal year that starts July 1.

"Overall minor adjustments but relatively speaking we're talking about the status quo," VonAchen said.

To reduce costs last year roughly 10 full-time staff positions were eliminated.

City staff suggest $105,000 be spent on ecotourism marketing and to establish an Economic Development Division to increase tourism and investment in Imperial Beach.

The proposed budget states city revenue will continue to rise slightly from $17.8 million in revenue in fiscal year 2014 to $18 million in fiscal year 2015, VonAchen said.

However, city staff believe the city will have a $151,900 deficit by 2016 and $590,200 deficit by 2018.

"We have sources coming into our city that are either out of our control or very limited in terms of the potential for growth, at least in the coming year," VonAchen said of revenues.

The largest area for expected revenue growth is transient occupancy tax (TOT).

Due to the new Pier South hotel, TOT is expected to increase from $231,000 to $430,000 by 2015. Estimates are based on market studies and occupancy rates Pacifica Companies anticipates in the hotel's first years of operation.

Pier South has no scheduled opening date but the company is aiming for July, Director of Planning Allison Rolfe told IB Patch Monday.

One source of revenue not included in the proposed budget is an increase in fees to collect delinquent parking tickets, said Public Safety Director Tom Clark.

"We have a backlog of tickets that go back eight years in the neighborhood of $600,000. Some of those old aged out tickets will not be successful but we anticipate possibly getting $100,000," Clark said.

To collect old tickets and keep a backlog from accumulating in the future, under a revised parking ticket fee structure, each ticket 30 days past due will have a 35 percent cost recovery fee.

The Imperial Beach City Council will consider the change in parking ticket fees at its May 15 meeting.

The largest anticipated cost increase over the next five years is sheriff's law enforcement fees, which are expected to increase $1.38 million from the 2013 fiscal year to the 2018 fiscal year.

The second largest cost increase in the five-year forecast assumes an increase in city employees' salaries and benefits from $6.36 to $6.89 million, or more than $500,000.

Despite potential budget shortfalls in the coming years, Mayor Jim Janney again emphasized a need to give city employees a pay raise. Janney first mentioned a need for a pay raise at a city workshop in January.

The Great Recession of 2008 has been used to justify a lot but IB "can't live off that for the next 10 years." If an increase isn't agreed upon soon, the city could lose good staff it has been able to retain up until now.

"Eventually, over a period of time, it's going to catch us," he said. "It's hard for staff to put together a budget until we've cleared labor negotiations but it's something that comes very hard and we haven't been able to to do that."

Negotiations between employee unions and other city employees are ongoing.

Assumed employee salary increases are included in the proposed budget, VonAchen told IB Patch Monday, but the specific amounts will not be made public until the city and its employees come to an agreement.

"We're not telling anybody how much that is, just that it's there and it may be more or less depending on negotiations," she said.

Based on evaluation by county and state consultants, the five-year economic forecast takes a conservative approach and assumes no change in property value, VonAchen said.

"Property tax and VLF (vehicle license fee) estimates are basically prudent for the entire forecast period," she said.

Imperial Beach's property value increased six percent in 2012, according to the San Diego Association of Realtors. Property tax increased from $2.3 million in fiscal year 2011-12 to $2.9 million in fiscal year 2012-13.

"Even though IB has the lowest assessed value in San Diego County, the growth is fifth among all cities, so there is some promise we are coming out of that housing bubble," she said. "We're not out of the woods just yet. That's why our property tax consultants suggest we keep it flat over the next year."

At $860,000, sales tax is expected to account for less than 5 percent of city revenue in fiscal year 2013 and $880,000 by 2015.

"We're lousy when it comes to per capita. It's embarrassing," Janney said.

"The IB average is only $17 per capita per resident compared to the state average of $218 per capita," VonAchen said.

To increase city revenue, Imperial Beach should focus on improving assessed property value, Janney said. Property value is expected to make up 17 percent of city revenue in the coming fiscal year.

The city is expected to have reserves of about $10 million at the start of fiscal year 2013-14.

Reserves may be established with the new budget to save money for specific purposes including economic uncertainties, vehicle and equipment replacement and maintenance of city facilities.

Money can be aside for things like information technology, facility maintenance and risk management, but particularly in the wake of redevelopment agencies, the city needs to set aside money for streets, sidewalks, to build a park or other capital improvements in order to have a positive impact on the city's assessed property value.

"The things that make our city a more livable place and perhaps will contribute to what is about the only revenue source that has a chance at helping us, which is property and vehicle in lieu fee taxes," he said.

Assessed property value can also impact vehicle license or vehicle in lieu fees, which accounts for near 12 percent of city revenue, VonAchen said.

Councilman Ed Spriggs agreed that the city should save more for capital improvements not just for streets and sidewalks, but also in order to spark joint ventures with investors. In order to avoid cuts and maintain city services and sheriff costs, the City of IB needs to "be more aggressive than we've ever been before with a development strategy that's going to fill in those vacant lots."

"We just can't have it both ways," Spriggs said. "We're talking about more intense uses than we've already agreed to as a community, but we've got to get those developers in and investors in to support our needs."

The purpose of reserve funds should be better defined before taxes and city funds are set aside for specific purposes, Spriggs said. People who give the city their tax dollars expect the money to be spent on important projects today.

"So I think we owe it to the public to make the case that we've got some plans for enhancing the community and balancing the budget in the long term," Spriggs said.

Some unknown factors that could influence the city's budget in coming years include:

• Federal and state budgets
• Affordable Care Act (Obamacare)
• Outstanding grant applications
• CalPERS payment rate
• Lawsuits
• Global economic trends

One undefined but potentially important expenditure is CalPERS pension payments, VonAchen said.

The city may pay $875,000 in CalPERS costs next year, a number that could change hundreds of thousands of dollars based on potential lower rates of return on investments and a variety of other factors, VonAchen said.

She suggested the city set aside $2 million to anticipate changes in CalPERS payments. By using the money to reduce the city's $4.4 million unfunded liability, annual payments could be reduced approximately $117,000 a year for the next 30 years, she said.

Janney suggested the city explore the idea of leaving CalPERS or offering retirement plans by other means.

"We can't keep doing this," Janney said. "The fact is our budget get hurts because of how much we keep putting into pensions. If we didn't have to put so much into pensions we could do a little bit more."

City Manager Gary Brown said the city could consider other options in the future but warned that withdrawing from the retirement pension plan could be expensive.

"When we look at leaving CalPERS for another system, it's the type of thing, to get serious, we can probably come back with you all to hire a firm that specializes in this thing. cause you're talking about huge liabilities over many, many years," he said.

See the entire proposed budget attached here in PDF form.