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Projected Budget Surplus For 2014 Due To Taxes, Pension Reform And ‘Fiscal Prudence’

By Tiffany Rider - Assistant Editor

August 13, 2013 – Breaking the cycle of somber city budget presentations of the past several years, Long Beach City Manager Patrick West and Mayor Bob Foster expressed more smiles than usual at a press conference to discuss the proposed fiscal year 2014 (FY14) budget.

“I’m proud to say that the budget I deliver to you is structurally balanced and, if my recommendations are followed, will be essentially balanced for the next three fiscal years,” Foster said in his budget recommendation presentation on August 1.

The elation of city officials and staff is attributable to the fact that for the first time in a decade, the city is expecting a $3.5 million budget surplus for the upcoming fiscal year starting October 1. As noted in the community budget book, “Although this is a positive step, this [2014] surplus represents less an one percent of the total General Fund, and it is vulnerable to fluctuating revenues.”

City of Long Beach 2014 Budget

Long Beach city management listens as Mayor Bob Foster
addresses the media during an August 1 press conference
to discuss the proposed budget for fiscal year 2013-14,
beginning October 1. (Photograph by the Business Journal’s Thomas McConville)

In the past seven years – since Foster was first elected mayor – the city has slashed $134 million in expenses from the general fund in order to help solve its structural deficit. Approximately 786 positions were eliminated from the general fund, though Tom Modica, director of government affairs and strategic initiatives for the city, in responding to a Business Journal question last week, said that due to the city’s shuffling policy, only 89 actual people lost their jobs. Modica said that during those seven years approximately 16 city employees took early retirement to help reduce the actual number of people the city laid off.

Business Journal Publisher George Economides, who has followed the city’s budget process for nearly three decades, noted that as far back as he can remember, the city has intentionally budgeted for positions it knows it will not fill. “This inflates the expense side, sometimes significantly, and is a back-door way at the end of the year to show budget savings,” he said. “It’s not just Long Beach, it’s throughout the public sector. So, there may be a $150,000 position budgeted (or more than $200,000 with benefits) that sits there on the books as an expense. The response from government is always the same: ‘We plan is to fill that position so the money has to be available.’ And citizens buy it, then they see their fees for services go up.”

The impacts of the city’s cuts over the years have caused service reductions to the community in all departments, including police and fire. Moreover, the city has been operating what West described at the city council’s first FY14 budget hearing as “a 21st century organization on 1970s technology.” The deferred investment in business systems and maintenance of infrastructure, on top of everything else, has resulted in employees leaving for other organizations – what West called “brain drain.” There are concerns, he said, with attracting talent to the city.

Despite ongoing challenges, West told the city council that operations have been streamlined and efficiencies have been created by combining services and offering online options. “We are a smaller organization but a more nimble and focused one,” he said.

The $3.5 million budget surplus is attributed to what West described as “fiscal prudence,” as well as tax revenues and pension reform having a positive impact on city coffers. Pension reform alone is saving approximately $11.6 million in FY14 and an estimated $13 million ongoing every year thereafter.

The mayor recommends the estimated budget surplus be used to offset a projected $2.5 million budget deficit in fiscal year 2015 and reduce the $2.3 million budget deficit predicted for fiscal year 2016. If approved, the city would have a budget surplus of $1 million in fiscal year 2015 and a budget deficit of $1.3 million in 2016.

Economides agreed with the mayor that that is the best use of the surplus. “Let’s hope the city council agrees.” He also agreed with West that the city is a more efficient organization. “The Foster/West team has kept an eye on taxpayer money, much better than any previous administration,” he said, adding, “but there’s always room for further efficiencies and implementing new technology is the best pathway.”

In addition, approximately $45 million in one-time funding is available to spend in FY14. The one-time funds are sourced from additional property tax revenue from former Long Beach Redevelopment Agency (RDA) owned properties transferred to the city’s possession last year, as well as dollars from former RDA properties sold and oil revenues.

The proposed FY14 budget, if approved, would allocate these one-time dollars toward improvements at city parks, playgrounds, libraries, public facilities, business operating systems and infrastructure. The council has already allocated $11.8 million in one-time funds for street, sidewalk and park projects in the current fiscal year.

Also benefiting from the $45 million in one-time funds is public safety, which would receive $5.5 million for funding police and fire academies, overtime funding for gang enforcement and other police priorities, gender accommodations in fire stations and additional cameras for the Long Beach Common Operating Picture surveillance program. Finally, approximately $3.2 million would be used for organizational investments and $3.3 million would be set aside for “council-directed policy decisions.”

No pay raises are included in this budget, according to West. Upcoming budget hearings and meetings of the city council’s budget oversight committee will review how the city plans to address ongoing issues like the city’s unfunded liabilities, the projected increases in the state pension program rates and city reserves.

Upcoming Budget Meetings

A series of public meetings to discuss the budget have been scheduled. Below is the schedule, which runs through September 10. All nine council districts are holding meetings so residents have an opportunity to learn about the document and ask questions. Contact your councilmember for time/ date/location of the budget meetings. Learn more about the budget online at www.longbeach.gov/finance/budget/documents.

• August 14: 5th District Community Budget Meeting;
• August 19: 9th District Community Budget Meeting;
• August 20: City Council Budget Oversight Committee Meeting (Presentation On Unfunded Liabilities);
• August 21: 8th District Community Budget Meeting;
• August 22: 3rd District Community Budget Meeting;
• August 22: 7th District Community Budget Meeting;
• August 27: 2nd District Community Budget Meeting;
• August 27: City Council Budget Oversight Committee Meeting;
• August 28: 6th District Community Budget Meeting;
• September 3: City Council Budget Oversight Committee Meeting;
• September 3: City Council Budget Hearing;
• September 9: City Council Budget Oversight Committee Meeting;
• September 10: City Council Budget Hearing.