Bell Gardens Turns Deficit to Surplus
By Nancy Martinez, EGP Staff Writer
After a year of cuts to staff, citywide events and expenses, the city of Bell Gardens has turned a $1.1 million deficit into a $293,000 surplus.
The city manager, however, is warning city council members that looming financial obligations will require the predominately low-income city to find new sources of revenue, or continue to significantly reduce expenditures to offset costs.
Also haunting the city’s finances is the failure of the city council to act on water rates, which have remained stagnant for 20 years and could leave the city utility with a $1 million dollar deficit by the end of the fiscal year.
On the positive side, the city’s 2014-2015 budget shows $25.6 million in revenue and $25.3 million in projected expenses, creating the anticipated $293,000 surplus.
The surplus is primarily the result of a one-time, $250,000 contract renewal fee being paid by Athens Waste Management and $565,000 in reimbursements to the city’s now defunct APLP (Academic Pursuit Loan Program) student loan program.
City Manager Phil Wagner says the surplus is more of a carryover, explaining it is not likely Bell Gardens will be able to use the funds for added services.
“We need to continue to monitor all of our expenditures, new purchases, whether its pencils, pens or police cars, we take a look at everything carefully before we those expenses are made,” Wagner said.
The student loan program was created in 1994 to provide interest-free student loans to local residents, but was discontinued in 2009 due to a lack of funding and difficulty collecting on the loan debt. Since then, the city’s finance department has collected $565,000 in past due loan payments, which will be transferred to the general fund.
“The city was fortunate to have a one-time infusion of revenue … it’s unlikely that it will be repeated next year,” Wagner said.
The new budget also includes a $200,000 payment into the city’s reserve fund, bringing the fund to approximately $2.3 million. Revenue from the fund is intended to provide the city with a financial cushion in the event of an emergency.
Overall, city expenses increased by $713,000 (2.9%) compared to last year. Higher CALPERS contribution obligations and vacation and sick day cash-outs increased personnel costs, despite the city having fewer employees.
“The rising cost of health care is a national problem beyond the control of the city of Bell Gardens,” Wagner told EGP. “Pension costs continue to grow as CALPERS tries to recover from devastating investment losses and phases in higher rates based on new retiree life expectancy,” he explained.
The city also took a big hit in the form of a $607,000 increase in general liability insurance costs.
A decision has to be made on whether to raise the rates paid by customers of the city-owned water utility, Wagner said.
Despite rising costs and looming infrastructure repairs, the city council has failed to act amid concerns that a rate hike would be hard for low-income residents to absorb. Yet, faced with operating costs higher than revenue taken in, Bell Gardens has not raised water rates in 20 years.
If the council fails to increase rates, as it has in the past, the utility’s operating deficit will reach $1.1 million by the end of the 2014-2015 fiscal year.
Wagner told EGP they are exploring other options to offset the deficit, including renegotiating vendor contracts and “additional cuts to an already bare-bone budget.”
Most of Bell Gardens’ $2.1 million jump in revenue can be attributed to increases in sales and property taxes, parking lot, ground lease and vehicle licensing fees, as well as Athens and student loan payments.
While the Bicycle Club Casino continues to be the city’s largest revenue source, it now only accounts for 39.2% of general fund monies compared to 42.7% in 2013-14. Casino revenue is expected to increase by 2.4% to over $10 million, but will still be $2.78 million lower than in 2008.
Wagner acknowledged that it will be some time before the city sees “the same level of tax revenues that we’ve generated in the past.”
A new Bicycle Casino Hotel set to open in October 2015 is also expected to generate more funds, but building inspections will also cost the city an additional $92,000. “We have never gone through this before,” said Wagner, explaining that “The unstable economy has impacted the casino and revenues have basically stayed flat.” Our only other option is to “just sit here and cross our fingers,” Wagner said.
Other new expenses in the budget include $48,000 for tree trimming and $50,000 to update some police department software. The city’s golf course, like those in many other cities, continues to operate at a deficit, which will cost the city $75,747 to cover its costs. Costs saving include a $90,000 reduction in the city clerk’s budget because it’s an off-election year, and saving $120,000 for a Water Discharge Study that will be paid out of gas tax funds.
Wagner cautions that pending labor negotiations with five of the city’s bargaining groups as well as healthcare and pension obligations will likely negatively affect the city’s budget.
He also warned the council to be prudent and aware of the impact the now defunct redevelopment agency continues to have on the city. The state may require the city to sell off property previously purchased through its RDA, which could translate to a $3.5 million annual loss.
Wagner said current improvements are just baby steps to getting the city back on solid financial footing. “We need to continue to keep the budget tight and we need to squeeze everything we can out of the budget.”
The council is scheduled to vote on the budget at their June 23 meeting.
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June 19, 2014 Copyright © 2012 Eastern Group Publications, Inc.