Bell Gardens city officials are looking for ways to close a more than one million dollar shortfall in the city’s 2013-2014 Fiscal Year (FY) budget. Under consideration are possible tax and fee increases, as well as water and waste management rate hikes to a level that would cover the cost of providing those services.
Bell Gardens Director of Finance and Administrative Services Will Kaholokula told council members during their June 10 meeting that the city will need $24,630,000 in FY 2013-2014 to cover expenses but only has $23,530,000 in projected revenue, leaving an estimated $1.1 million deficit.
City Manager Philip Wagner said this is the largest deficit he has seen since joining the city.
“As the city council is well aware, it’s been financially difficult the last several years due to the challenges of the sluggish economy,” Wagner said at the meeting. “The difficulty we face this coming fiscal year is that we’ve already made significant cuts to the budget.”
Last year, the city’s 2012-2013 budget was adopted with a $747,000 deficit, which was later “totally eliminated” by renegotiating vendor contracts, freezing positions and making cuts, Wagner said.
While revenue from sales and property taxes, parking lot and ground leases, motor vehicle license fees and the Bicycle Club Casino, the city’s largest revenue generator, are up slightly, the increase is not enough to cover a $692,000 increase in city expenses and losses in other sources of revenue, according to Bell Gardens officials.
Higher costs — increases of $312,420 in retiree health insurance benefits and $162,000 in liability and worker’s compensation insurance, more than $200,000 in mandated costs, including a $120,000 state required Storm Water Discharge Study, and $90,000 for the upcoming election — together with the $145,000 deficit left by the city’s now defunct redevelopment agency and a $92,000 decrease in Community Development Block Grant funds, make up the bulk of the deficit.
“There are things that we have very little control over,” said Wagner. “We have done everything to maintain our expenses,” including increasing employee contributions to PERS retirement costs, insurance payment caps, not filling vacant positions, and reducing operating expenses in several city departments, he explained.
The city annually contributes $200,000 to a reserve fund, which now stands at $1.9 million, but Wagner told EGP the funds would not be used to cover the deficit because it’s “our savings for emergencies.”
With the economy improving, the city is expected to experience an increase of $25,000 (1.5%) in revenue, Kaholokula said. More than 47% of Bell Gardens’ revenue, over $10 million in FY 2013-14, will come from the Bicycle Casino, consistent with the close to 50% in past budgets.
“We’re a one company town, our biggest producers of tax for us is the Bicycle Casino,” Wagner said. “That is our biggest source of revenue and our biggest source of jobs.”
That fact concerns Carlos Cruz, executive director of the Bell Gardens Chamber of Commerce. He told EGP that while he looks forward to a new hotel at the casino, which is expected to generate traffic and shoppers in the southeast city, he worries that the city depends too heavily on revenue from one big business.
Other sources of city revenue include property taxes (4%), sales and use tax (10.5 %), vehicle license fees (15.9%), parking lot and ground leases (14.9%) and from other business taxes, permits and city fees (12%).
Wagner says he would like to see more money from property taxes, “but to do that we need more businesses, more sales, more manufacturers.”
The number of businesses in Bell Gardens increased slightly last year from 959 to 993, according to Abel Avalos, the city’s director of community development.
Cruz told EGP that the Chamber is “optimistic about this year,” and is working on ways to retain and attract new businesses to the city.
Kaholokula told EGP that the recently opened Walmart Neighborhood Market contributes around $30,000 to $35,000 in sales tax revenue.
But not all businesses generate that level of tax revenue, said Avalos, noting, however, that new businesses create jobs and income for the city.
The $145,000 deficit from Bell Gardens’ redevelopment agency, which helped renovate the city’s downtown area, is the result of previously authorized administrative salary expenses. Up to $3 million more could be lost if the state orders the city to sell land acquired by the RDA, according to Wagner.
Funds in the city’s Retiree Health Insurance fund have been depleted, leaving the city to cover the $552,420 in costs, an increase of $312,420 from last year. City officials have saved $141,000 in health care costs by selecting less expensive plans and setting caps on city contributions.
“Every employee of the city of Bell Gardens is doing more with less,” said Wagner.
Also aggravating the city’s financial outlook is a $512,000 deficit in the 2014 Waste Management Fund, the result of the city charging its 9,400 residential and business accounts about $10,000 a month less than what it costs to provide the service.
Bell Gardens’ Water Utility is also working with a $282,000 deficit and city officials are anticipating a negative fund balance of $547,000.
Water rates have not been raised since 1994, according to Kaholokula. A 2010 Rate Study recommended two 30% rate increases in consecutive years.
“We have to pass those costs onto customers,” says Wagner. “This is something that we are going to be addressing with the city council.”
The city’s golf course is also working with a $66,500 deficit but a general fund transfer has been budgeted to eliminate the shortfall. Wagner told EGP there is no current plan to turn management of the golf course over to a private entity, but it’s an option the city has explored in the past. He said they concluded there was no benefit to be gained from paying “someone to run it.”
Wagner told EGP that the city is looking at potentially selling off its water rights or increasing water and waste fees or taxes.
“What I have is $1.1 million deficit,” said Wagner. “…So every option will be looked at.”
Bell Gardens Chamber of Commerce board members also plan to discuss the budget and look at the deficit’s direct impact on businesses, including potential tax and fee increases, Cruz told EGP.
In the meantime, the city will delay improvement projects, repairs and maintenance to help minimize costs, with the exception of street resurfacing projects that will be paid for using $897,603 in state approved funds, Kaholokula said.
Belt tightening efforts have also caused the elimination of the city’s Winter Wonderland and Halloween Celebration, a reduction in pool operations and a reorganization in jail operations.
Wagner said the last thing the city wants to do is lay off workers and increase fees, but adds it is “an option.”
Saying they need more time to review the proposed budget, the council continued the budget discussion to its June 24th meeting.