Mid-year budget report upbeat

City Manager Ken Frank performed his last budget magic Tuesday — and it was quite a trick

Frank informed the council that the city has $3 million more in the kitty than was anticipated when the 2010-2011 fiscal year ended on June 30. The windfall is due to property taxes and penalties from prior years, a more robust real estate market, higher fees from parking meters and services and savings, Frank reported..

“This is the last time we get these budgets by Ken,” Mayor Pro Tem Toni Iseman said. “Wouldn’t it be fun to have a video history of all his budget reports? He always pulls a rabbit out of his hat.”

Frank, who is retiring in November after 31 years as city manager and chief architect of the city’s budget, made four recommendations for the manna. Firstly, “pray for the legislature,” so the state budget won’t ding the city in what Frank has characterized in the past as rape and pillage.

The council approved his recommendations for modifications to the approved budget for fiscal year 2010-11 made possible by the extra funds.

Recommendations:

•Put $750,000 into the insurance fund to pay for higher incidence of liability claims in the past two years;

•Allocate $700,000 for the purchase of capital equipment, which was eliminated from the budget in June;

•Eliminate three vacant positions in the Streets Division of Public Works, which will virtually wipe out the street paving crew, saving the city about $150,000 this year; and

•Transfer $15,000 from the city Attorney’s budget to pay for a couple of open space lots in Arch Beach Heights to avoid future litigation.

As recommended by Frank and approved unanimously by the council, about half of the $3 million was allocated and the other half squirreled away in the Genera Fund Reserve. After factoring in the unexpected revenue and approved modifications to the budget, the estimated general fund balance on June 30, 2011, would be $6,324,000, almost 14% of anticipated spending, Frank reported.

The council also approved Frank’s recommended modifications to the capital improvement program, which comes out of a different pot of money, including the annual bed taxes from Montage Resort & Spa, for which Frank once said he thanked God.

“Montage is down to a measly $2.72 million,” Frank said.

Down, but hardly chopped chicken liver.

Parking ticket revenue also has dropped precipitously — about 30% because of a kindlier police department policy. However, that decline was offset by real property transfer taxes which made a comeback, Frank said.

The Wastewater Fund was tapped for a transfer of $175,000 to replace equipment at the Bluebird Life Station.

Frank’s financial legerdemain has been credited with keeping Laguna solvent even in critical times such as the county bankruptcy, natural disasters and most recently the severe economic slump.

He is also notoriously tight-fisted, as well as generally pessimistic in his estimates of revenue that he allocates to pay for services and projects, which he assumes will cost more than expected.

Prior to preparing the 2010-11 budget he advised — bludgeoned was one description — all department heads to hold the line.

“I told department heads not to ask for a dime more than they got this [2009-10] fiscal year,” said Frank,

Expenditures were held to 2009-10 levels, by some judicious juggling.

Frank ordered departments to absorb unavoidable costs by savings elsewhere in their budgets. He pared worker compensation costs by $200,000 and eliminated exceptional performance pay in the Fire Department, which saved $71,000, and lowered it in other departments at a savings of $100,000.

Sacrifices by part-time lifeguards and the Municipal Employees Assn., who relinquished 5% salary increases due to start July 1, were commended. They helped balance the budget and prevent layoffs, Frank said.

At Frank’s recommendation, the council refinanced the money owned the Public Employees Retirement System for retroactive increases for safety personnel, reducing the payment by $115,000, which saved the city $150,000 this fiscal year.

Other savings to date that contributed to the $3 million boost to the 2010-11 budget included $150,000 in the Fire Department’s personnel accounts due to fewer on-duty injuries, unfilled vacancies in the police and marine safety departments that saved $100,000 and retrenching the exceptional performance pay to the tune of $345,000.

The City Attorney’s Office spending was $290,000 under budget, reflecting less exposure to litigation and some funding carried over from the previous year in case of litigation against the city, $250,000 of which was transferred to the current budget.

But even Frank found it difficult not to be somewhat “sanguine,” as he put it, when revenues were plumped up by $960,000 from unexpected property tax revenue and penalties due from previous years.

Other plusses:

•$108,000 more than estimated business license taxes;

•$155,000 in reimbursement for fire department responses to calls for assistance to other departments;

•Robust receipts of about $320,000 for real property reports, building permits and design review/zoning fees;

•$225,000 in forfeited deposits;

•Parking meter receipts $320,000 higher than estimates;

•Higher operating assistance to the city’s transit system from Orange County Transportation Authority, reducing the transfer to the city transit fund by $250,000; and

•Savings of $120,000 on the purchase of new credit card parking meters.

However, Frank reported, not everything is hunky-dory.

The city will have to find $1.5 million annually for increased contributions to the Public Employees Retirement System, starting next fiscal year and peaking in the 2013-14 budget, even though staffing has been pared and three additional cuts have been recommended, by attrition, not firing.

Sales and bed taxes are down and investment earnings did not reach last year’s prediction. Earnings also will probably be lower than projected this fiscal year, somewhere in the neighborhood of $800,000 instead of the budgeted $1 million and receipts two years ago of $1.4 million.

Liability insurance expenses have exceeded the amount allocated for the past two years. Some of it was due to the rainfall and some to the fact that people come to town and find nooks and crannies in which to trip and fall, Frank said.

Capital equipment spending plummeted this fiscal year to $108,000, but that level cannot be sustained, Frank opined.

Lastly: The council will need to come up with big bucks for the transit department to respond to the increase in the summer trolley ridership, Frank said. Federal money was used to buy three new trolleys this year, but that source has dried up and a new one will need to be found.

“While there is mixed news, Laguna Beach remains in a relatively favorable position compared to other full service cities in California,” Frank typically understated.