A $6 million budget oversight has sent the city into a $2.3 million deficit for the current 2016-17 fiscal year.
That oversight appeared to have been addressed by Contract Finance Director Misty Cheng, who presented the city’s annual mid-year budget review to the San Marino City Council on Wed., Feb. 8.
Cheng and Contract Deputy Finance Director Ken Pun began at the City of San Marino following the departure of former Finance Director Lisa Bailey, who prepared the city’s 2016-17 budget.
The 2016-17 budget was adopted by the city council in June, 2016 and showed the balance of all city funds to be $19.2 million. However, an audit of the city’s 2015-16 and 2016-17 budgets revealed that the balance should have been $24.85 million.
“In the 2015-16 fiscal year there was $4.6 million in Capital Improvement Projects, [or CIPs], that was budgeted,” Cheng explained. But because those CIP projects were not all completed by the end of that fiscal year, which was June 30, 2016, then they should have been carried over into 2016-17, but were not included in the budget book.”
Cheng stated that the council appropriated the $4.6 million of capital improvement project funds in Sept., 2016, in addition to $613,161 of approved amendments to the city’s expenditures.
She told the council that the city will make sure to carry over future capital improvement project dollars when it budgets for future years.
Next year, according to Parks and Public Works Director Dan Wall, that amount is expected to be roughly $150,000, which has been appropriated for the rehabilitation of the Lacy Park Rose Arbor and renovation of the Lacy Park restrooms.
“The majority of those projects have either been completed or are underway right now,” Wall said.
Cheng, in response to a question from Council Member Steve Talt, added that aside from the CIP fund, the city is not in a deficit.
She continued, “We could very easily do a separate CIP budget that then wouldn’t skew the numbers as you see it here. Because those CIPs are year after year multi year projects.”
The CIP addition and other amendments increased the city’s total expenditure budget to $31.7 million, though the city projected to expend $30.52 million of that amount by the end of the fiscal year in June 2017.
Cheng added that a portion of unspent funds would be transferred to the equipment allocation fund, which has been set aside for purchases of vehicles, large machinery and other equipment.
On the revenue side, the city expected to receive $27.7 million, but projected to receive $28.24 million by the end of June, 2017.
The additional revenue is due in large part to an increase in property tax revenue, which is projected to be $13.9 million.
“That’s a three percent increase from what was budgeted. And originally when we budgeted that that was a four percent increase from the prior year. So altogether that’s really a 7 percent increase,” Cheng stated, attributing the increase to “sky high” home prices.
In a department-by-department analysis of the budget, Cheng highlighted vacancies in the city’s administration, fire, police, and park and public works departments, which have resulted in personnel cost savings, but increased overtime expenses for police and fire.
According to Cheng’s presentation, the administration department is expected to spend $128,580 more than its originally budgeted $2.98 million due to increased legal and other contracted services.
The planning and building department is expected to cost the city $15,245 more than anticipated, despite projections to end the year $82,000 under budget.
Instead, a decrease in revenue – which was attributed to a 50 percent decrease in major construction projects and 10 percent decrease in permits issued – was cited as the cause.
“During the last mid-year budget, which was during the last fiscal year, we had six major projects. Those were infill projects: replacing of single-family homes with larger projects. This year during mid year we only had three,” Planning and Building Director Aldo Cervantes told the council.
“We did see a reduction in permits issued during the same time frame,” he added, noting that both declines appear to be unforeseen market trends.
Next, San Marino Police Department net expenses were found to be $379,424 less than budgeted due to police officer and dispatcher vacancies. However, the department did go $88,000 over its overtime budget as a result of the vacancies.
At the San Marino Fire Department, firefighters generated an additional $126,700 in revenue thanks to their strike team support and paramedic service fees.
Similar to the police department, the fire department personnel account appeared to be $77,315 under budget. The fire department’s overtime budget showed $220,000 over the budgeted amount due to vacancy and shift coverage and the Shared Fire Command agreement between San Marino, South Pasadena and San Gabriel.
The Parks and Public Works Department also generated additional revenue. A total of $28,904 more came into the department’s coffers as a result of Lacy Park admissions and street permits.
The department’s personnel account was also under budget due to vacancies and a limited use of overtime.
The San Marino Recreation Department is projected to have $44,244 more in net expenses. The discrepancy was attributed largely to a revenue miscalculation of $106,000 for the department’s preschool program.
“Nothing is being collected less. It was simply a budgeting error,” Cheng explained. Assistant City Manager Lucy Garcia added that the program would still recover approximately 100 percent of its costs despite the error.
Garcia also stated, in response to a question from Talt, she does believe that changes and Americans with Disabilities Act, or ADA, compliant improvements to Stoneman School – where the city’s preschool is held – will increase revenue to the program.
Additionally, the report noted a decrease in rental activity at the San Marino Center due to the condition of the facility. Personnel costs were also under budget due to vacancies and a reduction of part time staff hours.
At Crowell Public Library, the passport program is projected to bring in 47 percent of the department’s revenue.
“We have a number of different revenue sources for the library. I will tell you that from our projected amount of the $336,000, $160,000 of that amount will come from passport revenue alone,” said Garcia, who oversees the city’s library and recreation departments.
However, the library is projected to spend $12,000 more than its budgeted amount of $1.648 million due to increased supply costs and a one-time retirement payment to a longtime library employee.
Lastly, the Old Mill received $25,000 for improvements to the cottage, ramada and trash enclosures. It will not receive that amount next year. The Old Mill’s expenses total $117,362.