After months of prepping and discussion, the San Marino City Council adopted the fiscal year 2024-25 operating and capital budget on May 31.
City Manager Philippe Eskandar presented a balanced budget to council members, which they unanimously approved. Prior to getting to this point, the city thought it might need to move funding from the general fund balance to address an expected deficit this coming year. Staff went back to the drawing board and made recalculations, retooled some programs and took things off the work plan at the direction of council to keep the bottom line balanced.
“With the operating budget, we were looking at an approximately just under $1.4 million shortage/deficit that we needed to overcome, which we would have overcome with our reserves,” Eskandar said of past discussions on the budget.
“This council has worked well over the past several years with staff to save money, put funds away and have a healthy general fund reserve,” he added. “That general fund reserve can be used for years like this. But what council directed staff to do was to go back, look for areas where we can trim things, not adjust programs, and make those operational efficiencies so we didn’t have to use our general fund reserves but make those cuts from areas of the operational budget. Staff did exactly that. It was a difficult few weeks, I must say, but the staff really stepped up to the task and owned this.”
With expenditure reductions and adjustments landing at just under $1 million, Eskandar credits his team for its efforts.
“There are probably close to about 100 line-by-line-item reductions staff has made to account for the nearly $1 million,” said Eskandar, who added that staff also highlighted cut items that could be added back later down the road.
As a result, the fiscal 2024-25 operating budget now consists of $35.6 million in unrestricted revenues and $36.8 million in operating expenditures.
To fund day-to-day operating expenditures, the city plans to use $1.7 million in special revenue fund reserves, which provides it with a balanced budget that nets $500,000 in income. The operating budget is funded almost entirely from the general fund, with some additional funding from restricted transportation and public safety funds.
The general fund’s unassigned balance is projected to grow by $500,000, to $17.8 million, by June 30, 2025. This equals 50% of estimated general fund revenues for fiscal 2024-25, exceeding the 40% threshold mandated by the city’s financial policies.
On the other hand, the capital budget includes $5.6 million for new projects, $11.8 million for continuing prior year projects and $800,000 for new equipment. Capital equipment is funded from the general fund, and capital improvements largely draw from capital projects fund reserves along with some external sources.
The council authorized transferring excess general fund reserves to the capital projects fund to finance an “aggressive” five-year capital projects campaign. The conservative $55 million spending plan also includes $18.2 million for capital projects, funded partly by transferring excess general fund reserves.
With the local economy gradually recovering from COVID-19’s impacts, the conservative budget forecasts modest revenue growth. Total revenues are projected at $39.5 million against $55 million in expenditures, with $36.8 million for operations and $18.2 million for capital.
Estimated revenues for the city’s general fund group total $35.6 million in the fiscal 2024-25 budget, a $600,000, or 1.7%, decrease from the $36.2 million amended figure for the current fiscal year.
However, revenues for the city’s restricted funds total $3.9 million and are projected to rise $388,917, or 11.1%, which is largely driven by an increase in Community Development Block Grant monies.
General fund group revenues will account for 90.1% of the city’s total projected $39.5 million in revenues next fiscal year.
The largest revenue increase stems from higher property tax collections, offsetting a falloff from the one-time expenditure of federal American Rescue Plan Act funds received during the pandemic.
The operating expenditures budget of $36.8 million is $2.3 million, or 6.8%, higher than the fiscal 2023-24 amended operating expenditures budget of $34.4 million. Of total operating expenditures, $35.3 million is earmarked under the general fund expenditures umbrella. The $1.5 million balance of the adopted operating budget comes from restricted funds — Proposition A transit fund, Community Development Block Grant, Measure W clean water fund, and citizens’ option for public safety (COPS) funds.
The 6.8% increase in the adopted operating budget increase is primarily due to personnel and staffing, services and supplies, debt service, and departmental budgets.
San Marino’s budget assumptions for projected revenues in years past has relied on property taxes in the area between 5% and 6%, said Eskandar, who noted that though this range is historically the case, it did not materialize for this budget.
“We are projecting a 4% property tax increase for this upcoming year, so that is a little more modest, a little more conservative than this past year,” Eskandar said. “We’re trying to take a more conservative approach, and this is based on information we are getting from our experts, our consultants, what our finance staff has been working on with our cities. And what we are seeing is houses turning over in the community.”
Eskandar said that interest and mortgage rates are significantly affecting the high-value property taxes in San Marino, with homes not turning over to new ownership. Instead, he said homes are being inherited more than they are being sold, and property taxes are just not growing at the same rate as in other cities.
For the utility user tax, which involves gas, electric and similar services to help fund operations, the city is projecting that to fall by about 1.5%, while inflation for services is at 11.6%, and insurance rates, liability and other rates are going up in the double digits to about 20% across different areas, including liability and worker’s compensation.
“Things are going up astronomically,” Eskandar said. “Those are things we can’t control. What we can control is putting in best practices with our staff, additional training, those types of things, but the insurance rates are really going up as much for our own residents as they are for us.”
Although there are uncertainties that lie ahead, Eskandar said the city is financially stable.
“A small excess of general fund revenues over expenditures in the coming year should help with future capital obligations,” said Eskandar, who added that the general fund reserve level is expected to reach 50.1% by the end of fiscal 2024-25.
The budget is a “living, breathing document” that staff fine-tunes throughout the year, Eskandar added.
“We, myself and all of our staff, thank the council for your hard work, the months and months of meetings, the community’s participation and engagement in this process,” he said. “My hat’s off to every member of this team. I’ll be here almost 11 months to the day, and I could not be more impressed with what you all, as a council, have directed, what the staff has done, what this community prides itself on.”
First published in the June 13 issue of the San Marino Tribune
