On Wednesday, the Martinez City Council will host its mid-cycle budget workshop and is warning of more challenging budget conditions going forward.
The staff report warns, without ARPA funds (temporarily) with continued rising costs across almost all categories of City expenditures that are outpacing revenues, any new expenses would need to be carefully analyzed and weighed against budgeting for core services.
An overview of mid-cycle budget adjustments is detailed in this staff report for the City Council’s consideration. City departments have recommended $520,000 in budget cuts to offset rising expenses and present a balanced budget to the City Council.
With the depletion of ARPA, the following initiatives or services will not be able to be funded by the General Fund without causing an unbalanced Fiscal Year 2024-25 budget:
- Fireworks display (for July 2025 event)
- Microgrants to businesses and nonprofits
- Park design and construction for facilities not currently budgeted within the CIP
- Building improvements to City facilities (beyond those improvements already
- budgeted/completed, such as City Hall space renovations and reroofing)
- Supplemental funding towards the Chamber of Commerce and Downtown Martinez &
- Company
- Supplemental funding for the CORE contract
- New positions not otherwise funded
Staff recommends that the City Council develop and adopt a fiscal sustainability plan in the upcoming fiscal year in advance of the next Biennial Budget to ensure near-term measures are taken to plan for the long-term fiscal health of the City.
Staff Report Also Highlights Other Cities Facing Significant budget Challenges
The City of San Ramon is facing a budget deficit of $14.1 million for FY 2024-25 and anticipates their structural deficit to last five years. Aside from hiring freezes, San Ramon is looking at significantly reducing park maintenance, delaying planned replacement of equipment and vehicles, and conducting a fee study to achieve a higher rate of cost recovery.
The City of Benicia identified a structural budget deficit of approximately $6.5 million in early 2023, and subsequently declared a fiscal emergency on November 7, 2023 – a procedural step necessary to place two revenue measures on the March 5, 2024 primary ballot. In addition, a Resiliency Plan was put in place, which included significant cuts to city services and a restructuring of the organization resulting in the elimination of several positions to save costs.
To prevent budget cuts affecting core services and staff, Suisun City is using about $1.9 million from its Reserve Fund to cover its FY 2024-25 budget shortfall, noting however that doing so will mean Suisun City is no longer in compliance with its 20% reserve fund policy
Editors Note – The staff Report Did not include neither City of Antioch, City of Lafayette or City of Pittsburg who also are having budget issues:
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- City of Antioch is on track to use $6.3 million of its budget stabilization fund to ensure a balanced budget.
- City of Lafayette is looking at a potential sales tax
- City of Pittsburg announced it is now looking at a potential sales tax for roads and bike lanes
$172,731 of ARPA funds remain Unallocated
approximately $2 million of the $9.16 million has been spent, which consists of several different projects, programs, and staffing needs. As of today, only $172,731 of ARPA funds remain unallocated.
Additionally, Mayor Zorn requested that some of the funds go towards a public utility art program, and Vice Mayor McKillop requested they go towards a historical walking tour.
General Fund
Staff says the city needs to focus on rebuilding its reserves—noting budget transfers of $1.7 million from General Fund Unassigned Reserves for Marina-related projects and needs from FY 2021-22 to present. Along with $2.8 million for other projects.
Revenues
Estimated revenues (including Transfers in from the Water Fund, which remain unchanged), total $37.5 million, an increase of $896,000 from the initial FY 2024-25 revenue projection.
- Property Taxes – Increase of $278,500 based on the latest estimates from the City’s property tax consultants.
- Sales and Use Tax Local Sales Tax (Bradley Burns – 1% rate) – Decrease by $280,300 reflecting the decline in consumer sales consistent with trends across the state and nation, and the loss of some retail tax generators due to business closure or relocation.
- Transaction and Use Tax (Measure X – 0.50% rate) – Increase of $67,800 resulting from higher than anticipated revenue due to vehicle acquisitions by residents and online shopping.
- Transit Occupancy Tax Franchise Fees (TOT) – Increase of $50,000 reflecting the resumption of TOT payments from the Alhambra Inn (formerly known as the Quality Inn).
- Franchise Fees – Increase of $111,600 reflecting stronger than anticipated fees from PG&E and Republic Services.
- Fines & Forfeitures – Increase of $134,500. This includes an increase in parking citations of $125,000, tow releases of $5,000, and court fines of $4,500.
- Intergovernmental Revenues – Increase of $186,800. This primarily reflects Vehicle In-Lieu tax of $50,000 and $125,000 in state grants.
- Licenses and Permits – Decrease of $105,500 reflecting a slowing of construction activities. This is consistent with state and national trends. Charges for Services – Decrease of $262,100. The budget estimates were based on a three-year average of revenues. After careful examination of Engineering Plan Check fees and Planning Plan Check fees, it has been determined that these two revenue streams were overstated in previous years due to the reliance of contract staff processing permits. The new estimates reflect having permanent staff trained in the correct billing procedures. Additionally, Building Plan Check Fees are somewhat lower due to reduced construction activity. These reduced estimates are somewhat offset by modest increases in Administrative Review Fees, Public Works Inspections, and Recreation Fees.
- Use of Money and Property – Increase of $763,500. Interest earnings are estimated to be $1.1 million. This is partially offset by a correction in the allocation of cell phone tower revenue between the General Fund and the Water Fund. It is important to note that this increase is projected to be largely one-time and future interest earnings may fluctuate considerably based on interest rates and the success of the City’s investments.
- Other Revenue – Decrease of $270,000 primarily reflecting a reduction in Cannabis – Community Benefit Contributions.
Expenses
- General Government – A decrease of $55,926 reflecting the funding of the Executive Assistant from ARPA instead of the General Fund. Increased General Liability insurance costs were offset by the department’s efforts to only budget for core services.
- Administrative Services – A decrease of $133,660 reflecting the reallocation of staff to the Management Information System program and a reduction in recreation expenses resulting from the division’s efforts to only budget for core services. These budget cuts offset increases to General Liability insurance costs
- Finance – An increase of $8,446 reflecting higher salary costs offset by a reallocation of some costs to the Water Fund and the department’s efforts to only budget for core services. These budget cuts offset increases to General Liability insurance costs
- Public Works – A decrease of $36,579 reflecting one position partially funded from ARPA and a reduction in expenses reflecting the department’s efforts to only budget for core services. These budget cuts offset increases to General Liability insurance costs.
- Police – An increase of $745,171 reflecting an increase in unfunded accrued liability (UAL) pension costs of $360,000, $190,000 in overtime salaries, $30,000 in holiday pay associated with the two new holidays (Cesar Chavez and Juneteenth), $30,000 for training pay, and allocated insurance costs. Increased costs for Animal Control Services, CORE outreach and equipment upgrades were absorbed by reducing other budgeted expenses based on actuals
- Community & Economic Development – An increase of $127,324. This reflects additional costs associated with Economic Development and Planning initiatives.
- Non-Departmental – An increase of $9,202. This reflects a $61,700 increase in UAL pension costs offset with a decrease in professional services.
- Transfers Out – A decrease of $300,000. The biennial budget included $300,000 for the Mountain View Park Basketball Court Replacement project to be funded from ARPA. Resolution 142-23 authorized the reallocation of the Mountain View Park Basketball Court Replacement funds to the Pine Meadows Park project. These funds were reallocated in the current fiscal year, prior to the bidding and award of the contract by the City Council. Therefore, the 2024-25 transfers out are reduced.
If You Go
Martinez City Council Meeting – Special Meeting
525 Henrietta Street, Martinez CA
6:30 pm – Budget Workshop
Staff Report + Agenda Items – click here
