Preplanning may lessen need for immediate cuts
While Del Mar's property taxes are holding strong, sales and transient occupancy taxes have declined significantly, forcing the city to reduce its revenue expectations for the 2008-2009 fiscal year by $600,000.
With an almost $10 million general fund, that represents about a 5.7 percent cut.
"For us that's big," said Teresa McBroome, the city's accounting manager and treasurer. "But we're fortunate because of past planning and prudent financial decisions we are able to do things through expenditures to offset that."
The city made some small cuts and identified money that would not be spent this year to maintain a balanced budget, unlike other cities in the region that have made cuts across the board or layoffs to close crippling budget gaps.
For example, the city did not fill a vacant staff position, is not pursuing the downtown specific plan that was budgeted for this fiscal year, and is using money saved from infrastructure projects.
However, from September 2007 to September 2008, Del Mar's sales tax dropped 11.5 percent. In the same time period, sales tax decreased 3.1 percent for the region and 3.7 for the state. The city anticipated a large reduction, so most of the revenue loss was already budgeted for, McBroome said.
However, the biggest shock came from transient occupancy tax paid by visitors staying in hotels and vacation rentals, which dropped 13 percent in the first half of the fiscal year (June through December).
City planners are lowering their expectations even further for the rest of the fiscal year (January through June). Instead of generating $1.75 million for the city, this source of revenue has now been budgeted to bring in $1.42 million for the entire fiscal year - a 19 percent cut. The $330,000 loss brings that income level down to 2003 levels.
"Del Mar is very much geared towards tourists, and people are not traveling because of the global and national economy," McBroome said.
Del Mar has more than $900,000 socked away in general fund reserves, and another $500,000 earmarked for "revenue loss" should things really head south.
Further adjustments may very well be needed because the sales tax revenue cities collect is delayed six months. That means the tax revenue collected in December 2008 was based on transactions during last summer - before the financial market meltdown in the fall and the less-than-stellar holiday shopping season.
Another indicator of the times: the city had to reduce the revenue projections for business license renewals. More than 300 business licenses were not renewed in 2009. That includes all businesses operating within the city, not just businesses with Del Mar storefronts, such as a cleaning or pool services.
The city continues to monitor the situation, and officials are being very cautious even with budgeted expenditures, McBroome said. So far, the city has spent less general funds this year than in any prior year.