Council reveals draft budget

City spending will be up, but revenue can cover it, according to the proposed budget for 2007-08, which will be made public at a workshop set for 3 p.m. Tuesday in the City Council chambers.

No new projects or services have been proposed in the draft budget, which estimates total expenditures from all funds of $70.3 million in the next fiscal year. Most of the 7.9% bump in general fund spending is allocated to funding employee salary increases.

“Many worthwhile endeavors have been suggested by members of the public, council members and department heads; none have been recommended for funding,” said City Manager Ken Frank, the architect of the preliminary budget.

Frank has proposed no new staff hours except for the reserve firefighters and two marine safety officers hired midyear. He has held adjustments in operating costs to a minimum, but included what he calls “reasonable allowances” for capital equipment replacement.


However, Frank advised the council that another $1 million per year would have been needed to finance all the capital equipment requests that city departments contend would benefit the public.

“Capital equipment refers to computers and vehicles, including such big-ticket items as fire engines,” Assistant City Manager John Pietig said.

Frank opined that due to the increase in police retirement funding starting July 1, 2008, capital equipment replacement will be “painfully” less in that fiscal year, when the city’s contribution for retirement will increase by $700,000 per annum. Two years after that, an increase in retirement benefits for the members of the Municipal Employees Assn. will cost the city an additional $450,000 a year.

City spending is financed primarily by property tax revenue, which has increased year-over-year more than 9% for almost 10 years.


Frank is estimating a property tax increase of only 8% for the next fiscal year, but warns that a more cautious figure might be indicated.

“The Orange County assessor has advised us to use 7%, but his preliminary figures tend to be conservative,” Frank said.

Revenue from the supplemental property tax also is expected to decline dramatically due to the slowdown in real estate sales.

Not all the news is bad.

Informal contacts with Realtors in town indicated to Frank that prices remain vibrant. Retail businesses have posted increases. Hotels on average have increased revenue by about 4% for the past two year. The city, which collects bed or occupancy taxes, gets to keep it all, unlike the property tax revenue, which is shared with the state.

Frank must, by law, submit a balanced budget for the council’s consideration, juggling funds so that revenues equal expenses.

Expenditures from the general fund, over which the City Council has discretion, total an estimated $43,728,050. Revenues are projected to total $43,306,500. A $700,000 transfer from the Parking Fund and a $100,000 transfer from the Grants Fund, plus an estimated beginning balance of more than $4 million will keep the city solvent.

The council will have about $66,000 over the mandatory 10% reserve to spend on items not included in the budget.


What’s not included in the budget:

  • A receptionist for City Hall ($67,000);
  • A permanent revenue source for open space. The council last year adopted the concept of allocating property tax revenue of more than 8.5% to the Open Space Fund, a threshold not expected to be reached this year;
  • Financial assistance to keep the South Coast Medical Center Emergency Room in operation;
  • Financial assistance to key city employees to purchase homes in town;
  • Additional traffic enforcement downtown and at the intersection of El Toro and Laguna Canyon roads;
  • More street and sidewalk cleaning;
  • Additional hours for the Senior Center Coordinator ($15,000);
  • Trail maintenance ($10,000);
  • Consultant to update disaster plans ($50,000);
  • Consultant to analyze beach stability, tsunami hazards ($75,000);
  • Parking meters converted to accept credit cards, which would have a one-time conversion cost of $35,000, plus ongoing fees and connections of $40,000 a year.
  • To review the 2007-08 draft budget, visit