By 2019, City Hall could be running a $6.5 million surplus or a $14 million deficit.
The most likely scenario, city officials said in a report to council, is a $2.9 million deficit.
City Council will review the mid-year budget and the five-year financial forecast on Tuesday and consider some fiscal tweaks as a result.
“The City’s major tax revenues have recovered significantly and have exceeded pre-recession levels,” city finance officials said in a report. “As outlined below, most of the City’s revenues are expected to show moderate to strong growth (this fiscal year).”
Property values increased 6 percent this year after rising 7 percent the year before.
Sales taxes are expected to grow about 3.5 percent per year, a half of a percent over the previous year’s growth.
Tourism is strong. Business license taxes are growing.
Still, pension costs continue to rise. As a result, City Hall has increased employee cost sharing, requiring workers to contribute more of their paycheck toward their retirement benefits. City Hall has used extra savings to pay down the retirement benefits.
Health care costs are projected to rise 7 to 8 percent next fiscal year and 9 to 10 percent the fiscal year after that. Workers’ compensation costs are expected to increase by 31 percent next fiscally year.
“The one-time increase is due to updated actuarial assumptions that take into account a large increase in workers’ compensation claims over the past two years, as well as the effects of increased permanent disability costs as mandated by the state,” city officials said.
Higher than expected health care and workers’ comp costs, along with a possible recession, are the factors that could lead to the worst-case $14 million deficit in 2019.
POTENTIAL AUDIT COMMITTEE
Mayor Pro Tempore Tony Vazquez and Councilmember Sue Himmelrich would like City Hall to form an audit committee. In 2012, auditors recommended the move but the committee was not formed. The audit committee would, according to a letter from the auditors, “provide oversight and review of the City’s financial reporting process, internal controls and the independent audit function.”
If a majority of the council agrees, city officials will come back with a proposed ordinance to implement the recommendation.
When Himmelrich was elected to City Council in November, she left a vacant seat on the Planning Commission.
Council was scheduled to pick a new commissioner to fill Himmelrich’s seat on Tuesday but the decision will likely be postponed because Councilmember Gleam Davis is expected to miss the meeting.
“We don’t make appointments of import like the one to the Planning Commission without a full Council,” Mayor Kevin McKeown said, “so this means the decision will be continued until at least the second Tuesday in February.”
The commission is important, not only for its role making land-use decisions, but also because it is the most consistent springboard for City Council hopefuls. A majority of the current council members sat previously on the Planning Commission.
There are currently 10 candidates who’ve thrown their hat in the ring. Nine of them applied after Himmelrich was elected.
Council will consider approving a slew of grant programs at Tuesday’s meeting.
They’ll consider green-lighting the Human Services Grants Program (HSGP), the Cultural/Art Organizational Support Program (OSP), and the Strategic Sustainability Initiative Funding Rationales.