It might not be much of a “Sharp Dressed Man,” as ZZ Top sings, but the City of Morro Bay is goin’ crazy, “’cause its wallet’s fat…”
The City Council recently approved the Fiscal Year 2022/23 City Budgets, and the record setting numbers paint quite a rosy immediate future, one that’s insulated pretty well against a “minor recession.”
The city administration team — City Manager Scott Collins, Assistant C.M. Sarah Johnson-Rios, and City Clerk Dana Swanson, all signed onto the first budget together, and delivered a bunch of good news.
Overall, including capital project costs and the new sewer project’s continued expenses, the City’s budget revenues top $69.8 million but expenses top $77.4M. “The difference,” reads the report, “comes from available fund balance to be used for one-time capital projects in the Water and Sewer Funds. The City maintains an operating surplus and strong reserve levels.”
The General Fund, out of which basic services like police and fire protection are paid, now top $17.7M and expenditures are $17.3M, which means the City will bank $400,000 — or possibly up to $900,000 — to add to its considerable reserves.
It should be noted that while expenses — chiefly staffing costs — are relatively easy to predict, the revenue projections can be subject to the whims of the economy, and unforeseen natural calamities, like wildfires in the Sierras, which in the past few summers have driven Central Valley dwellers in droves for the clean air on the coast.
A budget is in essence a snapshot of what the City believes its fortunes will be over the next 12 months, and in January, the staff will present a mid-year review, at that time asking for additional appropriations and accounting for any unexpected revenues or grant awards that might come down from the state or federal governments.
In any event, the City’s bank account is enviable. “The Revised Proposed Budget,” the report said, “projects that the City will have a total of over $13.5 million in reserves at the conclusion of the budget year, which equates to approximately 38% of the City-wide operating budget in FY 2022-23.”
With over seven distinct reserve funds, meant to pay for different needs, the General Fund Reserves top $8.6M. Add in another $4.9M in water, sewer, harbor, risk management and IT accounts, and you get the overall picture of the money City Hall has in its varied reserve funds, and a very healthy balance sheet.
According to the summary in the budget document, “This budget allows the City to fully restore service and staffing levels to pre-pandemic levels after having to make painful cuts at the onset of the pandemic.
“In addition, it allows the City to make critical investments in infrastructure improvements by allocating $18.7 million to 23 capital projects. In addition, this budget invests in current staffing through compensation [labor negotiations are currently ongoing at the time of budget development and placeholders have been included for the cost of compensation increases] and through organizational assessment, teambuilding, training, and classification and compensation analysis. Finally, this budget invests over $1 million in a pension trust reserve to help reduce the City’s unfunded liability over time and to be prepared to better weather potential future CalPERS cost increases.’
With a growing budget, one can expect a growing workforce. Morro Bay, which laid off more than 70 employees at the start of the coronavirus pandemic (Summer 2020), is refilling them. The City budgeted for 98 full time equivalent employees in the FY 2021-22, but at mid-year had 103 FTE. The budget this year raises that to 105.
It also budgets for some 29-part timers, mainly by bringing back the City recreation programs. Rec Services accounts for 16 of these positions, with the fire department getting five positions for reservists, and the harbor department three.
“The FY 2022-23 budget,” the budget summary reads, “adds a net total of 2.1 full-time positions and seven full-time equivalent part-time positions (in terms of the total number of hours budgeted), for a Citywide total of 105.1 full-time positions and part-time staffing that equates to 28.7 fulltime positions, in terms of the number of part-time hours budgeted.”
The staffing changes involve:
• Addition of a Community Services Officer — a non-sworn position in the police department to assist with “significant workload challenges;”
• Addition of a Building Inspector/Code Enforcement Officer in community development to enforce the vacation rentals ordinance and, “to address increased needs for building inspections and plan checks;
• An Administrative Technician in public works to help support departmental operations, financial administration, and capital project support.
Other changes include:
• Deletion of an Environmental Programs Manager in the public works department — duties to be covered by other positions (Damaris Hanson promoted out of this position to Utilities Manager);
• Addition of part-time staffing in the Recreation Services Division that equates to 4.6 additional full-time positions, continuing to restore services to pre-pandemic levels;
• Addition of part-time staffing in the fire department that equates to two additional full-time positions, to ensure sufficient reserves are available during wildfire season; and,
• Smaller adjustments to part-time staffing levels in other departments that represent “less than one full-time equivalent position Citywide.”
Digging into the budget weeds, the General Fund tax revenue projections list $5.03M in property taxes; $2.69M in sales taxes: $4M in transient occupancy taxes; $4.51M in “Other Revenues” which would include fees, rents, and other miscellaneous sources; and $2.1M in “intergovernmental transfers.”
Those are monies taken out of the so-called enterprise funds — mainly water, sewer and harbor funds — to compensate City Hall for services rendered, like payroll, HR, legal, and admin.
Overall, the revenues are projected at $18.35M.
On the expense side, personnel costs top the list at $11.76M; with operational costs at $9.53M; unfunded pension liabilities are at $2.22M; “other operations and maintenance” costs are at $4.29M; transfers out are $2.07M; and debt service is listed at $1.13M.
“Having strong reserve balances as the City now does,” reads the budget, “positions the City well for a potential recession or unanticipated financial impacts.”
The budget forecast lists revenues from Measures Q and E (a half-cent and a one cent local sales tax respectively) predict they will bring in $4.29M this fiscal year.
Expenditures out come to $2.66M which means the two local tax measures should be able to continue to add $1.8M to $2M a year for infrastructure.
Of perhaps most interest is the condition of the Harbor Fund, which is an enterprise fund entrusted to the City by the State Lands Commission, which actually owns the west side of Embarcadero — both land and water lease sites.
The Harbor Fund predicts $2.36M in overall revenues, with $1.85M coming in from harbor lease payments. There’s $413,000 in “boat charges” (live aboard fees, and docks, piers, moorings, and slip fees for facilities owned by the City); $73,000 in charges for services; and $24,000 in “other revenues” like the paid, day use, boat trailer parking at the launch ramp.
On the expense side, personnel costs top $1.08M; operational costs are $934,000; pension costs are $146,000; operations and maintenance is at $512,000; with transfers out to City Hall at $324,000, for a total of $1.91M.
That leaves some $442,000 surplus in operations. The fund balance when all is said is at $969,000. “Fund Balance is defined as working capital: current assets less current liabilities.”
In November, voters will be asked to support a $120 a year tax added onto property tax bills that would raise some $680,000 a year and specified to be spent maintaining City-owned harbor facilities.
The citizen-driven measure needs a simple majority of votes to be enacted.
