The Sebastopol City Council and the community in attendance got to see at least some of the facts and figures in the proposed city budget for the upcoming fiscal year, 2021-22, at the June 15 city council meeting’s public hearing.
The entirety of budget deliberations is more than anyone could chew in one session, so there will be another meeting where the public can comment on June 21, at 6 p.m., Mayor Una Glass said. Another meeting is scheduled regarding the proposed budget for June 30 at 6:30 p.m. as needed, per the staff report.
According to the staff report, the city can approve a resolution before June 30 to keep deliberating the fiscal year budget until the July 6 regular council meeting for final approval and adoption. Glass announced that the city is running a deficit in the draft budget before the council and the public that night, spending $1,253,241 more than it’s expected to take in during the upcoming fiscal year.
The deficit in the general fund is from a gap between the estimated $9,891,600 of total revenues expected for 2021-22 fiscal year, but $11,144,841 in anticipated expenditures, tabulated in the 250-plus-page budget draft available here.
Ultimately, the budget draft predicts the unassigned fund balance of its general fund to be $1,675,064 at the end of the fiscal year after beginning with $2,928,305, per the draft. Main sources of general fund money include property tax, sales tax, transient occupancy tax, license fees and state funding, Administrative Services Director Ana Kwong — the finances director— said, adding revenues in the coming fiscal year are predicted to rise by 7.3%.
The city’s sales tax consultant recently estimated sales tax would increase by 5.6%, but besides incoming funds from the American Rescue Plan, “all other revenues either remain flat or decrease,” Kwong said.
The budget draft said property tax, utility user taxes and hotel occupancy tax altogether indicate little growth occurred if any. Miscellaneous other revenues sank by 77.2%, down $202,625, according to the draft budget.
“We’re not broke. We actually have been prudent, and we created our savings accounts for a rainy day. And of course, the past year does seem to constitute, definitely, a rainy day,” Glass said.
Kwong said the $1.25 million deficit would be covered by the unassigned reserve.
The City of Sebastopol has a policy of saving at least 15% of its annual operating expenditures in the general reserve, but it has also succeeded in its multi-year target of saving 20% of unassigned fund balance, Kwong said. So, after siphoning from its savings to fill the deficit, the city is anticipated to still maintain an actual reserve level right at 15%, according to the finance director.
In dollars, Glass said the proposed budget starts the year off with $7.78 million between its general fund reserve and its separate special reserves and holds onto $6.67 million reserves once the gap is closed. Kwong confirmed for Vice Mayor Sarah Glade Gurney that roughly $451,000 in expenses could be chalked up to COVID-19-related costs.
Kwong added that the city received $95,000 in CARES Act funding and would be getting an estimated $1.4 million from the American Rescue Plan, half in the coming fiscal year and the other half in the 2022-23 fiscal year.
A closer look at some city funds
General fund expenses went up by 1%, Kwong said. The 2021-22 proposed general fund expenditures in the draft show the greatest expenses coming from police, fire, public works and planning services.
The draft has a graph of proposed expenditures marking 47% of general fund monies for police, or $5,128,700. For fire services, the graph marks 11% ($1,263,416) for fire services, roughly 11% for public works at $1,257,807 and 5% for planning services, or $587,562 from the general fund.
The general fund took a hit from the past year, but not so much the water and wastewater utility funds, according to the staff report. However, water conservation efforts for the drought may affect revenue reduction, the report said.
Kwong stated both have projected deficits to be covered by unrestricted water and sewer fund balances. The 2021-22 budget draft indicates $2.41 million in anticipated water fund revenues, but $2.91 million in expenses and transfers out for a deficit of $0.49 million.
For the wastewater fund, the proposed budget predicts a $0.67 million deficit, expecting to receive $3.28 million in enterprise fund revenues but $3.95 million in operating expenses and transfers out.
Glass asked the finance director to prepare a list of the consultants and legal services and how much the city spends on them for the Monday, June 21 meeting, as the city’s use of consultants came up as a matter to be more closely examined during their discussion that night.
The mayor said the city council would also postpone its planned public hearing on the Capital Improvement Program – which the agenda lists as regarding the 2021-22 fiscal year to the 2025-26 fiscal year, including its proposed budget for the upcoming fiscal year – to the June 21 meeting, since that occurs after budget deliberations.
