Burbank budget shortfall decreases, but tough decisions still lie ahead

Although Burbank’s projected deficit for the current fiscal year has gone down slightly, city staff told the City Council last Tuesday that there is still a lot of work that needs to be done.

Cindy Giraldo, the city’s financial services director, updated council members during a meeting last week that the deficit during the 2017-18 fiscal year is now projected to be about $9.4 million, which is an improvement due to an update to the city’s 2016-17 revenue projections.

The available spendable General Fund balance is expected to be about $14.2 million, which is approximately $1.8 million more than city staff had expected as the 2017-18 budget was being drafted, Giraldo said.

During a study session in October, Giraldo said the budget shortfall during the 2017-18 fiscal year had ballooned from roughly $1 million to about $10.8 million because of a court decision in September that the city is still trying to address.

Los Angeles Superior Court Judge Mary H. Strobel ruled in favor of Burbank resident Christopher Spencer, who alleged that the city was violating Proposition 26 by transferring a percentage of funds from the city’s utility to its General Fund.

Proposition 26, which was approved by state voters in 2010, strives to prevent hidden taxes by requiring a supermajority vote on new taxes and fees.

Under a provision in Burbank’s charter, which was passed by residents before Proposition 26 was approved, the city was able to transfer 6.5% of Burbank Water and Power’s retail electric sales — 5% to the city’s General Fund and 1.5% to the city’s Street Lighting Fund, which is used to maintain the electrical infrastructure of Burbank, Giraldo said.

The city was expected to generate about $8.9 million for the General Fund and roughly $2.7 million for the Street Lighting Fund, but the court ruling has forced Burbank officials to discontinue transferring those funds.

If the city wants to continue receiving electric funds from the city utility, Giraldo said the fees need to be approved by local voters during a future election.

Because the city is unable to utilize those funds, the City Council unanimously approved a $931,000 loan from the General Fund to the Street Lighting Fund to cover the anticipated costs during the current fiscal year.

Though council members were able to put a bandage on that issue, City Manager Ron Davis warned City Council members that there are more tough decisions for them in the near future.

Giraldo said the city will have to turn to its General Fund reserves to address the growing deficit, which is forecast to reach about $27.4 million during the 2022-23 fiscal year.

Should the City Council not take additional measures and dip into the reserves, Giraldo said the reserves will run dry by the 2020-21 fiscal year.

Davis told council members that they need to start finding ways soon to make the city’s operations more efficient and take measures that will save the city money in the long run to stretch out reserves until city officials can find solutions to the ongoing deficit.

He added that the City Council needs to start a dialogue with residents about possibly bringing forward a sales tax measure to generate more revenue for the city.

“If we do nothing, 2021 is going to hit us,” Davis said.

anthonyclark.carpio@latimes.com

Twitter: @acocarpio