While Costa Mesa appears on track to meet the overall revenue and expense expectations in its current budget, officials said Tuesday that significant unanticipated costs are applying pressure to the city’s bottom line.
Those costs weren’t included in the adopted budget for the 2018-19 fiscal year — which began July 1 and ends June 30 — but the city still had to absorb them, Finance Director Kelly Telford told the City Council during a study session Tuesday.
“We adopted a balanced budget, but there were certain things that came up that we just didn’t anticipate,” she said.
As a result, Costa Mesa had to dip into its general fund reserves to cover those costs.
Telford shared information showing the city’s fund balance dipping from $55.2 million at the start of the fiscal year to a projected $50.5 million at the end.
The city’s adopted budget totals $163.2 million.
“That’s why we have reserves,” Telford said. “That’s why we have fund balance ... so we can defend ourselves in those kinds of cases and we do have funds available for unanticipated costs like the … shelter.”
The additional legal expenses discussed Tuesday stem from a lawsuit filed by sober-living home operators who alleged a city ordinance adopted in October 2014 unfairly discriminated against people recovering from alcohol or drug addiction.
An eight-person jury unanimously rejected that claim in December and upheld the ordinance, which requires that sober-living homes apply for permits to operate in single-family residential zones and prohibits them from being within 650 feet of one another. An attorney for the plaintiffs — Yellowstone Recovery, Sober Living Network and Lynn House — has pledged to appeal.
Mayor Pro Tem John Stephens, an attorney, said there’s a lesson to be learned “regarding tracking more carefully our budget-to-actual on matters that are so costly.”
“I do subscribe to Al Davis’ motto, ‘Just win, baby,’ so I’m glad we won,” he said, referring to the late Oakland Raiders owner. “But I think we can look at these costs and do what we can to learn from them.”
Mayor Katrina Foley, also an attorney, suggested exploring additional ways to better monitor the time spent on legal services and see whether they are in line with budgeted levels.
“I think in these big cases — and we still have several underway — we’re going to need to stay on top of the budget a little differently than we might normally,” she said.
Much of the spending related to developing the local homeless shelter has been authorized in the past few weeks. The council this month approved a $280,000 lease agreement with Lighthouse Church of the Nazarene — which will temporarily host the shelter at 1885 Anaheim Ave. — and retained Mercy House Living Centers to run the facility at an annual cost of up to $1.457 million.
The city also anticipates spending an estimated $150,000 to rent four modular trailers that would house the shelter’s beds, showers and restrooms, and an additional $50,000 for equipment and furniture.
On top of that, money will be necessary to secure a long-term shelter site to replace the one at Lighthouse, which is expected to operate for about a year starting in April. The city is exploring a potential location at 3175 Airway Ave., west of John Wayne Airport, but it’s not clear how much it would cost to buy and outfit the roughly 1.3-acre property for that purpose.