Lemon Grove’s financial challenges are not as dire as initially thought, a financial consultant told the City Council last week, but a mid-year look at the city’s budget shows that some of the positives are just temporary fixes and not a panacea.
The city has built a reserve balance of about $5.4 million, but had projected a budget shortfall of $426,000 for the fiscal year ending June 30, $800,000 in the 2020-21 fiscal year and $1.2 million in 2021-22. But a mid-year look showed the shortfall for this fiscal year was $219,000, almost half of what was originally projected.
Rod Greek, the city’s interim finance manager, told the City Council that the city’s General Fund will actually increase during this fiscal year by nearly $452,000, but that money could not be counted on in the future.
Greek said the uptick is driven by several factors, including $190,000 more in property taxes because of rising property values, nearly $187,000 because of a one-time reimbursement from San Diego Gas & Electric Co. related to the Lemon Grove Avenue Realignment Project and $68,000 for permit fees related to increased activity in the city.
However, he said expenditures would also increase this fiscal year, by about $216,000, with $150,000 of that earmarked for the reorganization of Heartland Fire & Rescue. Lemon Grove’s fire services are with Heartland through a Joint Powers of Authority agreement with La Mesa and Lemon Grove.
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Greek also told the City Council about a $33,000 cost in Lemon Grove’s Public Works department for emergency repairs on vehicles, heating/ventilation/air conditioning needs, lighting and plumbing; and for additional workload related to storm response and the opening and closing of public facilities. A one-time $28,000 payment was also needed to cover election costs, because the city had to pay for a citizens’ sales tax initiative to be placed on the March 3 ballot.
Greek said that after the proposed mid-year budget adjustments, total General Fund resources total $14.6 million while total General Fund expenditures total $14.8 million, leaving the city more than $200,000 in the hole.
A report by Greek and City Manager Lydia Romero shared with the Council said the city had “made every effort to hold positions vacant (and) trim costs where absolutely necessary.”
“The increases we are requesting are necessary to continue to provide minimum service levels to the community,” the report said. “Fortunately, we were able to offset the increase in costs with projected increases in revenue which is closing the gap in our original budget deficit. This is an indicator that the city’s long-term structural deficit is continuing.”
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The report said “deferring investment in capital replacement and staff is not a long-term solution.”
It also said that general economic projections show a recession or slow-down coming in the next few years and warned that Lemon Grove will need to “continue to prioritize generating new sources of revenue.”
Revenue growth is projected to be between 1.5 percent and 2 percent if there is no recession, Greek told the City Council, while expenditures would grow between 3.5 percent and 4 percent “regardless of recession.”
He said, for example, that the city’s contract with the San Diego County Sheriff’s Department was going to increase by $325,000 this year because of a mandated 5.5 percent contract increase and that it would take a 5 percent growth in sales taxes during fiscal year 2020-21 to cover another similar public safety increase that year.
The City Council also approved transferring nearly $805,000 from its fiscal year 2018-19 fund balance to the city’s special trust fund that goes toward future pension obligations.
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February 26, 2020 at 02:56AM
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Lemon Grove looking at its budget halfway through the year - The San Diego Union-Tribune
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