Saying the city faces significant and costly financial challenges in the coming years, Piedmont officials Monday night presented a proposed 2019-2020 budget that continues a trend of addressing major long-term expenses incrementally and short-term needs conservatively.
The overall proposed 2019-2020 Piedmont city budget is $27,366,492, which is about 5 percent above the 2018-2019 budget.
However, General Fund revenues for 2019-2020 are projected to be about $28,500,000, about $14,000 (less than 1 percent) more than the 2018-2019 fiscal year projection. City Administrator Paul Benoit told the City Council that, if they approve this budget on June 3, that it will provide for a 17 percent General Fund reserve, which he termed “modest.”
Significant financial issues in the city’s future, Benoit said, include $25 million in CalPERS pension unfunded liability, extensive sidewalk repairs and major work for almost every city-owned building or facility, including the community pool.
“Most of our facilities are in need of significant need of repairs or renovations.”City Administrator Paul Benoit, addressing the City Council
Almost 70 percent ($19,658,000) of Piedmont’s General Fund revenues come from property-related taxes. That is $228,000 more than the 2018-19 amount. The breakdown of property-related taxes is:
- Property Tax revenues, budgeted at $14,504,000, an increase of $536,000 (4 percent) over 2018-2019 projections.
- Real Property Transfer Tax revenue is budgeted at $2.8 million, $400,000 less than projections for 2018-2019 but consistent with the 2017-2018 fiscal year budget.
- Parcel Tax revenue, estimated at $2,354,000, an increase of $92,000 (4 percent) over the 2018-2019 projection. This figure includes anticipated revenues bolstered by the June 2016 voter approval of the Measure F parcel tax measure.
Given that almost all of Piedmont’s taxable parcels are residential, the health of the housing market, and property tax valuation, are key to the stability of city revenues. In a budget-related staff report, city officials acknowledge there is no assurance this upward trend will continue as the current economic expansion enters its 10th year.
Piedmont’s reliance on property taxes is both a blessing and a curse, City Administrator Paul Benoit told the council. It’s a positive, he said, because it makes for a stable income situation, as cities that depend more on sales tax income see greater fluctuations. The down side of that, he said, is that there’s little opportunity for growth with property taxes, especially in a mostly residential city.
Other anticipated sources of revenue informing the city’s 2019-2020 budget include:
- Business license, sales and utility users taxes, and franchise fees. This revenue is budgeted at $2,402,000 for 2019-2020, up $19,000 over the 2018-19 projection.
- Revenue from state and regional agencies. The proposed 2019-2020 budget projects this revenue at $1,568,000, $353,000 less than in 2018-2019 projection. The largest component of this revenue source is the Motor Vehicle License Fee income ($1,322,000), $28,000 more than the 2018-2019 projection.
- Revenues generated from various service fees assessed by the city, budgeted at $3,486,000 for 2019-2020. The largest chunk of that is expected to be recreation program revenue ($2,532,000 for 2019-2020).
Even with an anticipated net General Fund loss of about $304,000 for 2019-2020 — after General Fund money was transferred to both the Facilities Maintenance Fund ($550,000) and the Equipment Replacement Fund ($400,000) — Piedmont’s General Fund balance will still be about $4.6 million — the aforementioned 17 percent reserve.
At $18,190,600, personnel costs make up about two-thirds of the city’s General Fund expenditures.. That figure is up 4 percent over 2018-2019.
As is the case in most California cities, Piedmont’s pension costs and retiree medical costs keep rising faster than revenue. Despite the various measures taken beginning in 2013 to contain these costs, including elimination of employer-paid member pension contributions, employee cost-sharing of pension costs, and the restructuring of post-retirement health insurance benefits, thos unfunded liabilities will remain a long-term concern..
The city has budgeted pension and retiree medical expenses at $3.2 million compared to the FY 2018-19 projection of $2.8, an increase of 14 percent.
Mayor Robert McBain said Monday night that the city has done a good job with its finances, given the needs and obstacles. A contract accounting firm earlier in the meeting said Piedmont’s finances were given a “clean audit” for 2018-2019.
“We’ve done a very good job to stabilize the current situation, but we’ve got some daunting challenges.”Mayor Bob McBain
A summation of the 2019-2020 budget can be seen by clicking on this link: http://www.ci.piedmont.ca.us/html/govern/staffreports/2019-05-20/FY1920budgethearing.pdf.
Monday’s budget hearing was the first of two, with the second set for the June 3 City Council meeting. Two council budget workshops were held earlier. No formal action was taken this week. The council is expected to formally adopt the 2019-2020 city budget after that hearing..