MARTINEZ, Calif. – “This is not bad news,” Mayor Rob Schroder said after Finance Director David Glasser presented the proposed 2019-21 budget during a workshop Wednesday night.
At the end of the two fiscal years covered by the budget, the General Fund – described as the city’s operating fund or “checkbook,” ends with a positive balance.
Those numbers will change in the future as more employee agreements are made, Glasser said. However, based on current figures, Fiscal Year 2019-20 will end with a balance of $8,751,4923; Fiscal Year 2020-21 ends with a balance of $9,764,654.
“We have a surplus, but a looming cost,” Schroder said.
That looming cost involves changes in the California Public Employees Retirement System, Glasser said.
Concerns involve a reduction in the discount rate, or anticipated investment return, from 7.5 percent to 7.0 percent, which has had what Glasser called “dramatic impact.”
Pension costs for safety is $2.7 million in Fiscal Year 2019-20 and $2.8 million in Fiscal Year 2020-2021.
That’s based on 2018 actuarial costs, Glasser said, and a report on the 2019 costs, due in July, may revise those numbers upward.
Other pension costs currently are expected to be $1.8 million in Fiscal Year 2019-20, and $2 million in Fiscal Year 2020-21. Together, the first year of the biennial budget shows $4.5 million in pension expenses and a rise in those costs to $4.8 million a year later.
In addition, the city saw safety personnel’s salaries increase 8 percent in Fiscal Year 2017-18 and 3 percent in 2018-19. They’re expected to go up another 3 percent in 2019-20.
Other salary increases rose 6.2 percent this year.
Social Security, in part because of the dissolution of the Martinez-Pleasant Hill Joint Facilities Agreement (JFA), saw the city spend $450,000 for its 6.2 percent contribution.
The city’s settlement with the Internal Revenue Service concerning the JFA is costing the city $2.8 million, which is being paid in $669,020 installments.
Glasser said he factored a 2 percent consumer price index increase for most of the new budget’s proposed expenditures.
What the Council saw Wednesday included expenditures based on recent memorandums of understanding (MOU) with several of the city’s bargaining units, but Glasser said some other units remain in talks with the city, and those labor agreements will impact the budget’s final figures.
The proposed budget reflects some personnel changes, Glasser said. The position of assistant city manager, vacated when Anne Cardwell was hired by Vallejo, will remain vacant. The salary savings will be offset somewhat by the hiring of a finance account technician, but the city should save about $160,000 a year.
Martinez Police also will modify its positions, restructuring its command staff to drop one captain and one sergeant in favor of adding two lieutenants. The changes are expected to be beneficial to the department, although they’re described as “revenue neutral.”
In the future, the city will look at its engineering staff and whether it makes sense to hire its own city attorney rather than contract the position.
The city is expected to spend $150,000 on a study of its impact fees, he said.
Under community and economic development, the city likely will spend $250,000 annually for waterfront and marina master planning and $200,000 for a new Zoning Code Environmental Impact report, which state grants should underwrite the bulk of the cost.
On the revenue side, Glasser said he anticipates continued strength in the housing market, which is good news for property tax income.
He said he expects a 3 percent growth each year of the 2019-21 budget, $8,918,013 in Fiscal Year 2019-20 and $9,185,553 in Fiscal Year 2020-21.
Other property tax revenue growth could come from buildings of commercial as well as residential properties, he said.
Glasser said 83 percent of the General Fund’s income is derived from property taxes, sales and use taxes, Measure X sales tax, property tax swap and franchise fees.
Most of those sources show gradual increases from the 2018-19 budget through Fiscal Year 2020-21, he said.
Martinez may expect a slight decline of sales tax revenues in Fiscal Year 2019-20, Glasser said. But he expects a 2.1 percent growth afterwards, or $4,326,000 in the coming year and $4,418,000 in Fiscal Year 2020-21.
Martinez won’t see much in the way of cannabis revenues next year, less than $100,000, although that might change once cannabis companies open in the city, Glasser said. However, sales tax from online purchases could give the city a fiscal boost, he said. How those revenues are to be distributed has yet to be decided, he cautioned.
Glasser said Measure X, a general half-cent sales tax, should bring in $3,482,000 in Fiscal Year 2019-20 and $3,552,000 in Fiscal Year 2020-21. While those revenues will be put in the General Fund, they’ll be tracked as a separate line item, he said.
The money will be used primarily on maintaining public safety and other essential services, he said, and the city will be monitoring the results.
Also needing monitoring are the city’s undesignated reserves, which should be spent only on items necessary to achieve the Council’s priorities, and the city’s investments and returns.
Of the city’s enterprise funds, which are supposed to be self-supporting, the marina fails to generate enough money to cover its expenses.
“The marina has been a drain on the General Fund,” Glasser said. The General Fund has been used to cover expenses when marina revenues have proven insufficient.
As the city develops a state trust land use plan and a master plan for its waterfront property, Martinez officials must consider what is the best use for the marina property.
Measure D, a specific half-cent sales tax that produces revenue solely for repair of Martinez’s roads, has given the city 10 times the street repair revenue it had before the bond measure passed in 2016.
In 2019-20, the tax is expected to bring in $3,482,000, and in 2020-21, $3552,000.
Higher gas taxes mean Martinez could see as much as $1,419,973 in Fiscal Year 2019-20 and $1,522,732 in 2020-21.
The Public-Educational-Government fund balance is about $700,000, and receives about $55,000 from franchise cable subscribers.
The budget calls for spending $200,000 toward upgrading the downtown area’s wifi and earmarks $75,000 the first year and $30,000 the second year to improve City Hall’s audio-visual equipment; and sets aside $36,000 for the community government access television channel.
Glasser said the mission of the upcoming two-year budget is to “show a return on that investment and deliver essential services to residents, customers and visitors,” and described the focus is to develop long-term organizational sustainability.
“The choices we make today maintain a level of service and quality going forward,” Glasser said.
No vote was taken Wednesday; the Council will review and vote on the budget next month.