Costa Mesa looks to ‘brighter future’ with balanced $163.6M general fund budget

After years of closing budget gaps, Costa Mesa officials this week adopted a balanced fiscal plan for 2022-23 without drawing down general fund reserves or the $13 million of federal COVID-19 relief funding remaining in the city’s coffers.

Themed “Paving a Brighter Future Together,” the $206.1-million all-funds budget includes $163.3 million in general fund revenue, reflecting a $9.2 million, or 6% increase over last fiscal year’s adopted budget.

“The city’s budget is a reflection of our priorities and of all the programs and services that we provide to the public,” City Manager Lori Ann Farrell Harrison explained during a City Council meeting Tuesday. “It’s also a commitment to our long-term sustainability.”

Finance Director Carol Molina broke down the major revenue sources and expenditures in a presentation to council members, outlining some of the new funding commitments in the plan.

The largest contributor toward the general fund — 44.4%, or nearly $72.6 million — came from sales tax, while property tax income accounted for 31.8% of revenue, or $52 million. An additional $6.14 million (4.5%) was brought in by the city’s hotel occupancy tax, while $8.1 million came from fees and charges.

Molina explained public safety costs comprise the lion’s share of general fund expenditures, with $90 million (53%) going toward police and fire. As such, Costa Mesa Police Department will be able to fund 141 full-time sworn positions, the highest staffing level since the Great Recession, while Costa Mesa Fire & Rescue will be able to afford 84 full-time personnel.

A total of $10.6 million was transferred out of the general fund, including $5.4 million to help pay for $25.3 million in proposed capital improvement projects, such as upgrades to parks and streets and transportation projects, $2.4 million to bolster the city’s Information Technology fund and $2.8 million for replacing outdated equipment and maintaining the city’s fleet of vehicles.

The last commitment will fund the purchase of two ambulances, estimated at $375,000, and earmarks $350,000 for the purchase of a new BearCat G2 armored vehicle to assist Costa Mesa Police Department’s field operations.

New features in the proposed fiscal plan include the creation of a new source of revenue, a Cannabis Traffic Impact Fee that Molina explained would levy $235 per average daily vehicle trip and used to pay improvements within commercial corridors where retail marijuana dispensaries do business.

While two storefront dispensaries seeking conditional use permits to do business are scheduled to come before the Planning Commission Monday, so far none are fully operable.

Molina said Tuesday $2.2 million in permitting and application fees from such businesses was collected so far in this fiscal year, which ends June 30, while another $3 million is anticipated in the new budget.

“The major portion of the revenue will be coming from the tax itself, which is 6%,” she added. “So, you’ll see in this year’s budget a slow ramp up to $3 million, and we’re looking at increasing that annually as the retail stores start to open and realize those funds.”

Because the city did not have to rely on general fund reserves, that account stands at nearly $53.5 million. Mayor John Stephens said he was pleased at how smoothly this year’s budget process went.

“The whole process that we’re doing in this city, making progress in these areas, can sometimes be slow, can sometimes be incremental — sometimes, it seems glacial,” he said. “But we seem to be going in the right direction.”

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