Costa Mesa Budget Review
During their Study Session next Tuesday, February 10th, the Costa Mesa City Council will discuss the mid-year budget analysis. In years past this has been illuminating, but not earth-shaking. Not so this year. This year the council will hear from the Finance Department that our municipal fiscal San Andreas Fault is slipping - and will continue to slip into the foreseeable future with no "Richter Scale" predictions possible at this time.
"FUND BALANCE" TO BALANCE BUDGET
The short version of what will be discussed is: because of the known shortfall in revenue from a couple very important sources - Transient Occupancy Tax and Sales Tax - the city must tap deeper into that magical pocket called "fund balance" to balance this year's budget. They had budgeted to spend $6.24 million in fund balance to make the numbers work this year. Now they must dig deeper into that pocket, bringing the total fund balance to just under $11 million.
FUND BALANCE $66 MILLION
So, today I asked a member of the city staff just how deep that pocket really is? How much money do we have in the "fund balance"? The answer rocked me back until the details were explained. We currently have $66 million in the fund balance account. Following the proposed adjustment there will be $55 million. However, not all of that can be tapped. More than half of it is restricted to very specific uses, including $14+million for the emergency reserve which cannot be used for normal operations. Without boring you with the details, there will be approximately $10 million of usable fund balance left after this adjustment.
TOT IS WAY, WAY DOWN
These are scary times for all of us, but for municipalities in particular. For example, this year the revenue from the Transient Occupancy Tax (TOT) is down nearly 10%, but the last two months for which numbers are available show short falls of almost 14% and 18%! I cannot let this slide without observing that our City Council chose not to present an increase in the TOT to the voters in November. That bit of short-sightedness is coming back to bite us all in the backside now.
SALES TAX DECLINE IS ONLY A GUESS
We don't know what the shortfall in our Sales Tax revenue will be precisely, so our excellent finance folks are using 10% as a number until the actual decrease is known, probably in March.
STATE AND FEDERAL IMPACT?
Another shoe waiting to drop on this financial centipede is the question of how much the state is going to squeeze the cities as our legislators practice malfeasance with the state budget. And, then there's the federal stimulus package - the impact of which is unknown locally.
BUDGET ADJUSTMENT DOESN'T REFLECT ANY CUTS
We also don't know the impact of any cuts the various departments will be making to their expenditures will have on our budget. The numbers that will be presented to the council Tuesday do not reflect any cuts yet.
TAKE A DEEP BREATH
So, dear friends and neighbors, it's time to take a deep breath and hope our city council has the wisdom to listen to it's staff on this issue. That's what I'm going to do and hope I don't end up looking like a Smurf next week.
FUND BALANCE MAGIC NEARING THE END
I do know this, though. This year we are pulling more fund balance money from that special pocket to balance our budget. We will have only $10 million left - which will very likely not leave enough to work that magic next year. If the economy continues on it's current path, our city leaders and staff face some very, very difficult decisions ahead. Let's hope they are up to it.