With the local economy opening back up again, the city of Healdsburg’s budget is starting to bounce back a bit and make some small positive gains.
“There is some good news to report on several fronts, but on the same token, we still have a lot of work to do to get back to where we were pre-pandemic and to feel really confident where we’re sitting,” Andrew Sturmfels, the city’s finance director, said during a June 7 city council presentation on the third quarter of fiscal year 2020-21.
Property transfer tax is continuing to outpace expectations and sales tax is “back on track” for the most part and exceeding expectations.
Transit Occupancy Tax (TOT) bounced back a bit in March. That month the city received $417,006.55 in TOT tax instead of the estimated $185,169.53 in TOT.
In sales tax, so far the city has received 78% of the budget and 9.85% more than the same period last fiscal year.
According to the agenda item report, city staff met with the city’s sales tax consultants last month and believe the city will end the year meeting or exceeding the revenue estimate.
In terms of revenue from development related permits, as of March 31, the city has received $952,729 to a total annual budget of $879,000. The increase in revenues is largely driven by large projects including Eden Housing, the Oaks at Foss Creek, Saggio Hills, the North Village and the Mill District.
Overall, the general fund is in a good position going into the fourth quarter of the 2020-21 fiscal year and is seeing a lot of recovery, according to Sturmfels.
As of the third quarter year to date, the general fund is exceeding its reserve policy goal of 30% reserves at 35.6%. Plus, revenues are starting to return to pre-pandemic levels and fourth quarter revenue is expected to meet or exceed expectations
Community services funds
The city’s community services fund is largely funded by TOT tax and since TOT revenue took a big hit last due to COVID-19 restrictions, so did the community services fund.
The city council adopted the current 2020-21 and 2021-22 two-year budget in June of last year, at which time several measures were taken to reduce city costs including: expenditure reductions in each city department; eliminating several positions with additional positions remaining vacant; pausing contributions to the pension stabilization fund; reallocating Measure V funds to support the general fund and the community services fund and issuing a loan from Measure V to the community services fund.
Despite these measures, the general fund and the community services fund were both expected to have a small deficit in both budget years and the current city budget contemplates using fund reserves to cover the deficits in both funds.
According to the agenda item report, for the nine-month period ending March 31, 2021, 70% of the total estimated revenue from all community services fund revenue sources was received and 69% of the budget was expended.
In February, the city council approved a loan from Measure V to resolve a negative cash balance in the fund, which at the time was $556,091.
“We’re actually performing a little bit better than anticipated,” Sturmfels said of the community services fund.
As of March 31, 2021, the unrestricted cash balance in the fund was positive at $233,227. As of March 31, 2020, the total fund balance was $581,457.
While the cash balance is looking a bit better now with a positive balance, the reserves for the community services fund are still quite low at a year to date level of 4.7%.
Budget amendment
Following the staff presentation of the budget update, the city council unanimously approved a budget amendment in order to true up the fire department strike team reimbursement revenue that was received in 2020.
The Healdsburg Fire Department participated in nine strike team activations last year in order to help other jurisdictions during wildfire season.
The total reimbursement revenue for strike team activity was budgeted at $160,000, but the city ended up receiving $373,729 in strike team reimbursement revenue.
The budget amendment will capture that difference of $213,729.
“We’ve done a really good job across the city managing expenses with the total percent remaining in the third quarter at 26% despite a big hit to the fire department in total spending versus budget. We had a really rough fire season last fall and there was a lot of overtime and additional hours and we also had quite a bit of strike team activity which was unanticipated,” Sturmfels said.
Next steps
The 2021-22 fiscal year still presents many financial challenges, such as meeting the community services fund reserve goals and resuming contributions to pension stabilization, according to Sturmfels.
With this in mind, the city will be conducting a long-range financial forecast to better understand the city’s fiscal trajectory and to inform future financial decisions.
The next fiscal update will include an overview of year-end financial results and in August, city staff will bring an item to the council that discusses and recommends action on individual fund reserve policies.
To view the budget report, click here.
