Budget workshops bring cuts; services, reserves maintained
Facing dramatic revenue losses, Del Mar city officials have made significant cuts to maintain a balanced budget for the next two years. Yet, the city is finding ways to provide city services and maintain its reserve funds.
"We are well positioned to ride out the storm," said Councilman Carl Hilliard, during the council's budget workshops May 20 and 21. "Looking around the county, Del Mar is much better situated than any other city."
The city is reducing expenditures to $9.1 million in fiscal year 2009-2010 (which begins July 1), and $9 million in fiscal year 2010-2011 for government operations and community services. This represents a 6.2 percent cut in general fund expenditures from the 2008-2009 budget before the recession hit.
During the past year, the city lost almost $1 million in anticipated revenues, including sales taxes and transient occupancy taxes, which are two of city's primary revenue sources for its general fund. With only minimal growth anticipated during the next two years, these revenue sources are back to 2005 and 2006 levels.
"Thank goodness for property taxes," said Mark Delin, assistant city manager, about the city's largest revenue source.
Assessed property values remain stable and are expected to grow 4 percent per year, Delin said.
To maintain a balanced budget, the city is not filling several vacant positions and freezing cost-of-living salary increases. The city is also taking advantage of experienced retirees who are willing to work part-time at a more affordable rate than expensive consultants, said City Manager Karen Brust.
These cuts mean the city is able to build its reserves back to the 10 percent minimum the council requires and still come under the Finnell Plan expenditure cap. The Finnell Plan, developed by former Councilman Jerry Finnell, requires expenditures be capped at 1.4 percent below revenue growth and the remainder be used for capital improvement projects.
However, with revenues barely growing, there is little funding available for infrastructure projects. Basic street maintenance will be about it for the next couple years, except for the Torrey Pines bridge and 21st Street sewer pump station, which are funded by grants and bonds.
While the cutbacks should enable the city to get through the recession, Del Mar needs to find other revenue sources.
"With such a large drop in sales tax and TOT we've experienced, we can't support programs without new revenue sources," Delin said.
The council approved several revenue enhancement measures including:
-Increasing the transient occupancy tax from 10.5 to 11.5 percent, as previously approved by Del Mar voters.
-Increasing parking meter fees from $2 to $3 an hour during the summer months.
-Implementing a voluntary parking permit program: The permit, good for one year, enables drivers to park in any metered spot, or twice the posted time in free spaces. Permits will start at $500 and gradually increase to $700.
-Increasing non-residential rental fee for Seagrove Park from $800 to $1,500.
The council and staff also discussed several other ideas that would require voter approval, including imposing the transient occupancy tax on short-term vacation rentals and issuing a general obligation bond that would help cover a number of city projects.
The city is also moving forward with developing (but not selling) the City Hall site by drafting a request for proposals, which many see as a way to increase the city's sales and property tax base.
"We're very excited to be thinking about doing this and meaning it," Mayor Crystal Crawford said.
Several residents commended the city staff and council for managing such a tight budget and encouraged the city to think big despite the economic downturn. However, Bettina Experton, chair of the city's finance committee, said the budget did not go far enough.
"The finance committee believes the minimum 10 percent reserve is not enough," Experton said. "We need further cuts in expenditures."
The committee recommended streamlining planning review processes to save money and to increase the transient occupancy tax by 2 percent, not just 1 percent.