City council picks top priorities for budget surplus
by Steven Felschundneff | email@example.com
During its most recent meeting the Claremont City Council heard a report from City Manager Adam Pirrie on the status 2020-21 general fund.
In 2020 the city’s finance department, which at the time was led by City Manager Pirrie when he was finance director, had anticipated significant disruption to the city’s finances because of the COVID-19 pandemic. As a result the staff had proposed a conservative budget. However, revenues were much better than expected which has resulted in a surplus.
At the close of 2020-21, general fund revenues totaled $30,816,425. Expenditures for the fiscal year totaled $26,618,357 resulting in a surplus of $4,198,068.
During his presentation City Manager Pirrie said that sales taxes for the fiscal year 2020-21 were actually the largest ever.
Sales tax revenues for 2020-21 were budgeted at $4,182,000 in anticipation of significant disruptions to taxable sales as a result of COVID-19. However, actual sales tax receipts were $6,867,586, an excess of $2,685,586 over the adopted budget.
The staff report identified two factors that led to the significant increase in sales taxes. First, the change of ownership at Claremont Toyota resulted in a boost in car sales. Second, online sales, such as those conducted through major retailers, rose dramatically during the pandemic but were not anticipated in the June 2020 budget. Claremont receives a percentage of the sales tax receipts received from online sales from a countywide pool.
Unanticipated higher levels of construction in the city meant that license and permit revenues exceeded the budget by $689,366.
Utility User Tax revenues were higher than budgeted by $342,505 primarily because people were home more and were using more electricity, gas and other utilities.
Property tax revenues for 2020-21 were $244,394 higher than the full-year budget of $10,693,100. Growth in property taxes is driven by the cost of living increase of up to 2% built into the language of Proposition 13. Also, real property is reassessed when sold, which, given the large increases in the median home price in Claremont over the last year, will result in higher tax revenue for the city when a home changes ownership.
The full-year revenues also included a one-time payment of $442,114 from the Federal Coronavirus Relief Fund, to assist in the city’s response the COVID-19 pandemic.
Staff recommended the city council allocate the surplus across a variety of priorities including: $1,000,000 for an additional discretionary payment to CalPERS to pay down the unfunded liability on the city’s employee pension plans; $1,000,000 for a contribution to fund the city’s Section 115 Pension Trust and approve the proposed pension trust policy; $1,000,000 to the city’s operating and environmental emergency reserve; $898,068 for the city’s equipment and facility revolving reserve; and $300,000 for future open space acquisitions and implementation of the Wilderness Park Master Plan.
City Manager Pirrie said the top priority was the nearly $900,000 set aside for the equipment and facility reserve for police facility painting and an upgrade to the fire suppression systems.
City policy is to maintain 25% of general fund expenditures in the operating and environmental emergency reserve, colloquially called the rainy day fund. The fund was established to provide a source of money in case of a natural or fiscal emergency so that the city could continue to operate and provide needed services.
The fund’s current balance at $5.35 million is well below the target, however, with the $1 million from the surplus, the balance will be $6.39 million or 22.9% of expenditures. The current year’s budget includes another contribution of $499,547 which will elevate the fund to $6.89 million or 24.7% by the end of the fiscal year.
Several councilmembers asked if they could elect to tweak the allocations by moving money from one priority to another — specifically putting more money into the equipment and facility reserve and less into the operating and environmental emergency reserve. The council also had questions about money Claremont will receive under the American Rescue Act.
City Manager Pirrie said the American Rescue Act money cannot be used for pensions or to fatten the city’s reserves, so in the end the council did not alter the staff-recommended allocations.
Councilmember Corey Calaycay reiterated his concerns about the Section 115 Pension Trust, specifically about future city councils’ ability to draw on those funds in an emergency. He preferred the option of paying down the city’s pension liability directly to CalPERS.
The Section 115 Pension Trust was proposed last summer as a way for the city to save money to pay down its pension liability but in an alternative financial vehicle which could ultimately pay a higher interest rate.
The council voted unanimously on four of the staff recommendations with Councilmember Calaycay voting no on approving and funding the Section 115 Pension Trust.
Update to fireworks ordinance
The council voted unanimously to introduce an ordinance, amending Title 9 of the Claremont Municipal Code regulating the sale and use of fireworks.
As the law is currently written, a law officer must personally observe someone discharging fireworks which is often impossible because generally the police are called about a home where fireworks have already been detonated. Even if an officer saw fireworks coming from the backyard of a home, no action could be taken if that officer did not actually see who ignited the explosives.
The new ordinance would hold the owner responsible for fireworks that exploded on their property and it would increase the fine from $100 to $1,000.
In the case of a rented home, the “person in possession” of the property, for instance. the lease holder, would be held responsible.