Based upon the City’s financial results for the six-month period ended December 31, 2020, the budget for the Fiscal Year ending June 30, 2021 shows some good news compared to the Covid budget adopted last June. The Budget for General Fund Revenues was increased by $369,810 and Expenditures were increased by $105,940 leaving the Contingency reserve at $2,317,331 (or 58 days of Operating costs).
The Finance Committee unanimously recommended these Budget actions on February 23rd and the City Council approved the adjustments on February 27th at the Council Workshop.
There is a healthy dose of conservatism built into the new budget. No adjustments were made to Property Tax or TOT (hotel tax), which are two of the largest revenue contributors. The biggest reduction in Revenues was a reduction of $200,000 to Sales Tax, which eliminated any reliance upon the Fairgrounds for Sales Tax revenues for the second six months of the fiscal year. The biggest contributors to the revenue increase were Parking meter and Parking violation revenues at $250,000 each and Planning Service revenues of $113,070.
The primary increase in Expenditures is the $83,620 cost of restoring the 3% Salary cuts. The Agreements with the Del Mar Fire Fighters Association and the Del Mar City Employees Association provided that salaries would be restored as of January 1, 2021 if the City Revenues hit certain benchmarks. The benchmarks were exceeded in the six-month results.
As a result, the General Fund Reserves will total $5.1 million including the Contingency Reserve of $2.3 million. This leaves the City with the task of replenishing Reserves totaling $2.1 million in order to get back to the pre-Covid Reserve targets. The Staff will be presenting a Reserve Balance Policy to the Finance Committee and the City Council as part of the Budget Workshop in May.
The Measure Q Reserves are projected to total $2.1 million as of June 30, 2021, which position the Council to consider the resumption of the Utility Undergrounding plan.
There are a few additional budget issues for the Council to consider if they are not resolved by Budget time:
Do we need to budget for the cost of a Special Election related to the Referendum on the North Commercial area rezone, which is projected to cost up to $175,000?
How much will we need to budget for potential penalties and fines assessed by Housing and Community Development related to the Housing element, if we miss the April 15th compliance deadline?
Can the organizational design of the City Staff be streamlined as decisions are made following the departure of the City Manager?