Costa Mesa officials are anticipating an $11-million budget surplus for the recently concluded fiscal year — money that city staff and council members say could be used to increase reserves, pay down pension debt and fund major projects, such as work planned for Lions Park.
An initial review of the city’s books for the 2015-16 fiscal year, which ended June 30, shows total general fund revenue of $122,537,700, with expenditures of $111,446,858.
That adds up to a surplus of $11,090,842 — or 9% of the general fund revenue, officials said this week.
The general fund makes up most of the city’s budget and is used for operating and discretionary purposes.
More than half of the expected surplus comes from higher-than-expected revenue from property, sales and hotel and motel taxes.
Mayor Steve Mensinger said he was “ecstatic” to hear of the surplus.
“I’m proud of staff and the council for taking on the tough issues four years ago that have led to this surplus,” he said Monday.
“Between outsourcing and being smart about hiring, we have maintained our service level with less people while doing more with technology,” he added.
About $2.5 million of the surplus is the result of savings on salaries and benefits from unfilled positions, according to Councilwoman Katrina Foley.
The average number of positions in the city that were budgeted, but not filled, on a typical day last fiscal year was 73, Foley said Tuesday.
“I wouldn’t want to put the vacancy savings into any kind of a project,” she said. “I want to make sure we have that so there’s more money to fill those positions,” particularly in public safety and code enforcement.
It eventually will be up to council members to determine how the extra dollars are spent, but existing council policy calls for using surplus funds to increase reserves, reduce debt and pay for capital projects, according to city spokesman Tony Dodero.
Staff’s initial recommendation is that about $2.6 million of the surplus be used to help meet the council’s goal of having $55 million in reserve.
Almost $2.3 million more is recommended to flow into the city’s self-insurance and information technology funds.
About $4 million is recommended to go toward the city’s plans for Lions Park, which include building a new central library, demolishing the Neighborhood Community Center and renovating the Donald Dungan library branch into a meeting space to replace the community center.
The estimated price tag for that is $36 million. The city had anticipated covering it with a 50-50 mix of cash and borrowing.
Funding from the surplus would reduce the borrowing needed to bankroll the Lions Park project to $14 million from $18 million.
An additional $500,000 of the surplus is recommended to go toward pension debt reduction, and $1.65 million would be used to ensure that “existing operating budget items” from last fiscal year are completed, according to Dodero.
Mensinger said he supports using the surplus to build up the city’s reserves and reduce the amount of borrowing needed for Lions Park.
He also said he’d like to look at providing additional resources to tackle local homelessness and issues related to sober-living homes.
In recent years, city officials and residents have said that such homes, which house recovering drug and/or alcohol addicts, have been disruptive to neighborhoods, contributing to undue amounts of noise, parking problems and secondhand smoke, among other ill effects.
Foley said she too would support increasing funding to help with the effects of sober-living homes.
But she thinks it would be more “financially prudent” to put toward pension debt at least part of the $2.6 million recommended for reserves.
Staff’s recommendation on how to divvy up the surplus will likely head to the city Finance Advisory Committee for input later this year, then go before the City Council for consideration as part of the midyear budget review early next year.
In June, council members approved a $144.6-million spending plan for the 2016-17 fiscal year that includes $117.4 million in expected general fund spending. The current fiscal year began July 1 and runs through next June.