Tom McGreal | Stratford Court
Del Mar is one of the smaller Cities in coastal CA, which means that we have to closely watch The City’s operating costs to maintain a balanced budget. This review of operating costs shows that we’re doing pretty well in a period of flat revenue growth. To create some context, let’s start with a comparison of per capita costs.
|General Fund Operating Costs
||Costs per Capita
|Carmel By the Sea
In addition to Del Mar’s small size we also have over three million visitors, who come to Del Mar each year to enjoy the beach and visit the fairgrounds and the race track. This creates an additional demand on City services and makes Del Mar truly unique. As a result, it’s not surprising that our per capita costs are relatively high with Carmel by the Sea being another notably more expensive tourist destination city with a beach.
The largest component of the Del Mar’s operating costs are the salary and benefit costs of the City staff. Staff costs make up 65% to 70% of our General Fund expenditure budget each year. So, how big is the staff? What does it cost? Are those costs being properly controlled?
A review of Del Mar’s six-year period from June 30, 2015 through the approved budget for the year ended June 30, 2021 tells the story.
As a basis for comparison let’s remember that revenue growth over the same period will be at a 4.25% compound annual growth rate (excluding Measure Q revenues, which are dedicated to Undergrounding, Downtown Streetscape and Shores Park development).
We can start by reviewing the number of people on the City staff. The staff has grown from 54 people in 2014 to 61 people in 2021. This is a 13% growth over six years or a compound annual growth rate of 2.1%.
Next take a look at the total salary cost, which includes seasonal and overtime costs. Salaries have grown from $5.3 million to $7.0 million, which represents a 32% growth over six years or a compound annual growth rate of 4.93%. Considering the 2.1% growth in the staff level, the remaining 2.8% growth relates to the growth of average salaries per person (including cost of living and merit increases).
|Click on image to enlarge.
A more challenging area is the cost of benefits. Benefits have grown from $1.6 million to $2.7 million or 69% over the six years, which represents an 8.5% compound annual growth rate. This is largely a reflection of the cost of defined benefits under the CalPERS retirement system, which covers all City employees.
Overall, these numbers look reasonable in terms of staff growth and salary costs and understandable given the mandatory pension costs of the CalPERS defined benefit system. The departmental detail also shows that the Planning Department and the Administrative Services department (City Clerk, Finance and Information Systems) constituted the highest growth areas. This growth was driven in recent years by the City Hall project, the increased number of planning permits and support for the increased level of capital improvement projects. The budget for next few years also anticipates the work related to the next Housing Element, which is due in early 2021. While these facts don’t constitute a detailed assessment of productivity, the costs seem to be reasonably in line with the expanded workload.
The city’s policy commitment to ensure that costs will grow more slowly than revenues can be challenging, but will keep us out of trouble.