All posts by Catherine Blakespear

6/4/17: City budget planning brings mostly good news

The City of Encinitas continues to enjoy financial prosperity as a result of disciplined budgeting, low-debt, rising land values and modest goals. We live within our means, covering all the city’s priorities – like law enforcement, park maintenance and street paving – while judiciously allocating funds for larger capital infrastructure projects.

Last week we started the two-year budgeting process, while also mapping a six-year plan.

Some details in this good news picture include:

Rising revenue and low debt
The city’s revenue is increasing, mainly from rising property and sales taxes. The assessed value of our city’s land is $14.4 billion, with home prices continuing to rise. The city’s property tax revenue went from $40.3 million in 2015/16 to $42 million in 2016/17, and is predicted to be $43.7 million in 2017/18 and $45.8 million in 2018/19.

While property taxes provide 60% of our general fund revenue, sales taxes are the second-largest source of city income, providing 20% of the general fund. When someone buys goods in the city, a tax of 7.75% is charged, with 1% of that coming back to the City of Encinitas. Sales tax income is estimated to rise from $12.8 million in 2016/17 to $13.2 million in 2017/18.

Thankfully, we have a low debt-to-income ratio, which reflects our annual payment on city debt, or bonds, compared to our revenue. Our bonded debt ratio is 5.7%, and anything under 10% is considered excellent. Although we have the capacity to take on more debt, at this time we’re not actively discussing it.


We recently honored outgoing Leucadia 101 Main Street Executive Director Carris Rhodes, who has done an outstanding job for the past four years. Here she’s congratulated by Deputy Mayor Tony Kranz (right) and me at a farewell party hosted by John and Elena Thompson.

Costs and pensions
But the costs of running the city are also increasing, of course. Our contract with the Sheriff’s department is going up by 5.7%, an additional $761,000 on top of the $13.6 million we already pay yearly. We’ll be receiving the same services that we currently do but with an increased cost, which is apparently predominantly based on the department’s rising pension obligations.

While the economics of Encinitas are fundamentally strong, like every public agency, the city is also burdened by the rising costs of pension debt. We have to make an additional payment of $505,000 to the CALPERS pension fund in 2018/19 on top of the $5 million we annually contribute now toward our pension obligations.

Our unfunded pension liability is about $40 million, and we’re about 80% funded. This compares to an average for public agencies of 70% funded, which means comparatively we’re doing well. Based on the CALPERS assumed rate of return of 7%, our yearly pension obligation will nearly double in five years, going from about $5 million now to $9.3 million in 2022/23. Later this fall, the finance department plans a deeper analysis of strategies for tackling this issue.

Here are some highlights of the proposed capital improvement budget:

Funded infrastructure projects. Some of these projects have been long-promised, are expected in the next two years based on Council direction, or are already under construction.

  1. New marine safety headquarters (lifeguard tower with perks!) at Moonlight Beach: $3.5 million
  2. Standard Pacific Park in Leucadia design and construction: $2.7 million
  3. Pedestrian railroad underpass at El Portal: $5.3 million
  4. Leucadia Streetscape, Segment A: $7.9 million
  5. Hiking and walking trail development in four locations, El Camino Del Norte, Adams Run, Manchester Ave. and Rancho Santa Fe Road: $2.2 million
  6. Birmingham Drive Complete Streets – $3.05 million
  7. Shade structures at city parks: $1.075 million over 6 years with about half built in the first 2 years
  8. Study of traffic, bike and pedestrian improvements on El Camino Real: $250,000, in addition to a walking audit
  9. Citywide road paving: $3 million every year (we recently tripled the money spent yearly on paving to eliminate failing roads and improve everyone’s driving conditions)

These projects are planned in the 6-year budget, but their specific timing is not yet clear, based on regulatory uncertainty, environmental requirements or funding:

  1. Beacon’s Beach Access: $4.25 million (still don’t have Coastal Commission approval)
  2. Pedestrian railroad crossing near Montgomery or Verdi: $2.9 million (will be timed with the construction of SANDAG’s rail trail east of the tracks in Cardiff)
  3. Leucadia Streetscape – Segment B: $8.1 million
  4. Leucadia Streetscape – Segment C: $7 million
  5. Citywide rail quiet zones: $5 million
  6. La Costa Avenue improvements – $2.5 million
  7. Leucadia Blvd. roundabout at Hygeia – $2.05 million
  8. Morning Sun Drive sidewalk – $1 million

These projects are on the list but not funded:

  1. Construction of Fire Station #6 in Olivenhain: $6.5 million
  2. Replacement of Fire Station #1 in downtown: $6 million
  3. Street improvements on San Elijo and Vulcan Ave.: $8 million
  4. Highway 101 improvements between Solana Beach and the underpass at Santa Fe: unknown
  5. Rail trail improvements east of the railroad tracks: unknown
  6. Various street improvements, including downtown Cardiff, Santa Fe, Windsor, Crest: $10 million

These are only the highlights. We have lots of smaller projects, such as $1.5 million in various drainage improvements. The largest capital expenditure category is “Streets and Rail” with a total project budget of $30.5 million.

And built into our operating budget are increases in some city services. For example, we are now cleaning public bathrooms at parks, beaches and city facilities twice a day instead of just once a day. We are cleaning the downtown sidewalks more frequently; and we’re going to organically manage four more parks – Sun Vista, Mildred MacPherson, Hawkview and Las Verdes – in addition to Glen Park, which was our pilot project.

The Finance Department will make changes to the proposed budget based on Council comments at our last meeting and return to us for review and possible adoption on June 28.

Here are links to Encinitas Advocate and San Diego Union-Tribune stories about our budget process.

Colleague Collaboration


Your Encinitas City Council at our State of the City event earlier this year. (l. to r.) Council members Mark Muir, Tasha Boerner-Horvath, me, Joe Mosca, and Deputy Mayor Tony Kranz.

In a complex, but thankfully collaborative process, the city’s five elected decision-makers really pulled together at the Council meeting last week to do this budget analysis and discussion. Our trust in each other allows us to be a highly functioning board, with a minimum of disharmony and ill-will, even when we see things differently.

Budgeting can be an ordeal, but I left our meeting with a warm feeling about my colleagues and our professional staff, who masterfully researched and clearly presented lots of complex data. We shared a genial spirit of working together.

Rail trail update
Three weeks ago, the Coastal Commission rejected our request to place the rail trail in Cardiff on the west side of the railroad tracks. Instead, they issued a final ruling decreeing that the trail will remain east of the tracks.

Last Friday, I officially asked the SANDAG transportation committee for four improvements to help the trail better fit into our community:

  1. Reduce the overall size and footprint from 17 total feet to something smaller, preferably 10 feet in width.
  2. Build the rail trail with a material that is more natural than concrete or asphalt, such as emulsified/compacted decomposed granite.
  3. Move the required 4-foot post-and-cable fence as close to the railroad tracks as possible to allow our informal trails to remain.
  4. Minimize parking loss.

The requests appeared to be well received, and I’ll keep you updated.

In service,

 


I was happy to present a proclamation to announce June 2 as Gun Violence Awareness Day in Encinitas. The proclamation is aimed at raising awareness about keeping firearms out of the wrong hands and encouraging responsible gun ownership to keep children and all citizens safe. Americans are 25 times more likely to be killed by a gun than people in other developed countries. Protecting public safety is a mayor’s highest responsibility.