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By Mike AllenJune 14, 2019 (Santee) -- Santee’s finance director, Tim McDermott, rolled out a balanced budget for the next fiscal year for the City Council to review at the June 12 Council meeting, but warned the city is facing future deficits unless changes are made.
Should the current trends in revenue collection and spending continue, Santee will face a shortfall in 2020 of $184,000 that will rise to $650,000 by 2024, McDermott said, referring to budget documents in his presentation.
McDermott was quick to add, “This won’t be the budget we’ll bring to you…We’ll balance the budget based on the resources we have.”
Santee’s general fund budget for the 2019-20 fiscal year was forecast at $45.5 million, an increase of $1.25 million over the current fiscal year which ends June 30. When all the chips are counted, the city will end this fiscal year with a $618,000 surplus.
The Council only reviewed the proposed budget and is scheduled to adopt it at its June 26 meeting.
So what’s the fuss over projected deficits? McDermott said ever-escalating costs associated with the city’s contract with the county for Sheriff’s Department services, fire and ambulance coverage and workers’ pension liabilities, are all growing faster than the revenue it gets to pay for those expenses.
Public safety, the fire and Sheriff’s contracts account for two-thirds of the general fund budget. The Sheriff’s contract next year is tabbed at $15.4 million, an increase of $828,000 from this fiscal year. The Fire Department budget is $13.9 million, up by about $96,000.
For the most part, the news of future deficits didn’t rattle the council. “This is not the first time we’ve seen deficit spending,” said Rob McNelis. “The reality is that we do make changes to the budget and we do have the ability to grow.”
McNelis peppered McDermott with a number of questions, getting him to state the city’s bottom line numbers have remained fairly stable in recent years and that the property tax projections are still moving in a positive direction.
The city gets about half of its revenue from property taxes. Next year, it expects to collect $19.8 million, up $1.2 million from this year. The next largest source of revenue comes from sales taxes, which is projected to come in at $12 million for the 2019-20 year. Yet that is only an increase of $38,500, or 0.3 percent.The shift to more people buying goods online is definitely hurting many cities like Santee, which don’t get anywhere near the tax cut when the funds are allocated by San Diego County, using a complex formula based on population, McDermott said.
Another concern is an apparent slowdown in building activity, further reducing the fees the city collects. Then there’s the threat of another recession strike, which would cut deeply into an already eroding sales tax number.
Councilman Stephen Houlahan had a much more dour reaction to the prospect of higher deficits resulting in reduced city services and staffing cuts.
“We’re going to need something bigger….whether it’s a bond or some sort of initiative for a sales tax (increase),” he said. “It’s probably political suicide to say this but if it doesn’t happen we’ll go down the same road as Lemon Grove, (resulting in) possibly being assimilated by the county.”
In recent years, Lemon Grove’s finances have become so constrained there was talk of filing for bankruptcy and dis-incorporation, although the city will end this fiscal year with a small surplus.
No one else supported Houlahan’s pessimistic view, and other Council members generally praised the city staff for preparing yet another balanced budget.
Given the increases Santee is showing in its revenues, city leaders seem content to increase certain types of spending including adding to its staff. Next year, the budget calls for 130 full time positions, up by three over this fiscal year. About half of those are in Fire and Life Safety.
The council also reviewed its capital improvement program for 2020-2024. The program consists of 76 projects that total $330 million, but only $26 million is tabbed to be spent for the coming fiscal year.
The largest program is for improvements to roads and interchanges at Highway 52, totaling about $45 million, including $600,000 already set aside and $1 million proposed for the next fiscal year.
While some of the projects were already budgeted, and some underway such as Mast Park improvements, many others were totally unfunded. For example, a massive project to install sidewalks throughout the city was estimated to cost about $41 million, but has zero funding.
Another unfunded project was a proposed library, which was estimated to cost $20 million. While the county operates an aging, 9,000 square foot library on Carlton Hills Boulevard, some have advocated the city allocate funds to purchase a site and construct a new library.
Councilwoman Laura Koval said she’d like to see a new library incorporated into a planned community center aimed at serving seniors and teens next to the Cameron YMCA. That didn’t sit well with McNelis, who stated that the city already has a library, and doesn’t have the funds to build a new one.
“We only have so much money. To tell people we’ll do a library without any funding or new taxes is disingenuous,” he said. “The reality is we promised a community center for much longer than a library. That’s the priority for me.”
One interchange project, at State Route 67 and Woodside Avenue, has been getting funds since 2015, but has yet to break ground. The problem is a design for a roundabout that is different than state regulators ever saw before, so it’s slowing down the design approval, the Council was told.
Councilman Ronn Hall said he was so fed up with the delays, he was ready to “yank this sucker,” meaning stop the project entirely. That would mean losing some $700,000 already spent on the design for a project estimated to cost $4 million.
Hall championed a trail improvement project from behind the WalMart to Cuyamaca Street, for $79,000 that was slated to be completed by next year.
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