Long Beach budget shortfall narrows to $12 million, but potential funding issues remain • Long Beach Post News

The bleakest forecast for the fiscal year beginning in October had previously pegged the shortfall at $36 million, but the city’s financial management team said that figure is now closer to $12 million, an amount that could be covered by the federal government’s remaining pandemic relief funds

City budget manager Grace Yoon said Long Beach will be able to avoid any service cuts this year because previous budgets have performed better than expected during the pandemic. That meant the city didn’t have to use all of the $76 million in American Rescue Act funding it had put into reserves or previously earmarked to maintain services.

Using the remaining funds to support city services won’t cut any of the other programs — like tenant relief and small business recovery — the federal money also covers, according to Yoon.

The use of the funds will help solve the problem this year, but the $12 million shortfall will carry over to the next fiscal year as it is a structural funding problem. The projected new deficit for fiscal year 2024 is $20.8 million.

What helps the city?

A number of positive things have happened since the initial projection of a $36 million deficit last year. And things have improved even since December, when Yoon told the board that the budget deficit was likely to narrow.

Sales tax and property taxes fueled by the sale of homes during a historically strong housing market have helped inject additional revenue into the city’s general fund, as have increased service user taxes public. Together, these revenue streams have increased by $18.6 million since the last budget update late last year.

Other more volatile sources of income, such as oil, also tend to rise. Yoon said the city would continue to budget as if oil were selling for $55 a barrel, but soaring gas prices were pushed higher by increasingly expensive oil.

Crude oil has been trading above $100 a barrel since late February and the ongoing Russian invasion of Ukraine and sanctions announced by President Joe Biden on Tuesday, including a ban on oil and natural gas imports Russians, could still disrupt the market.

Yoon said any additional funds from oil production at Long Beach would likely be made available as one-time funds for the board to use in the current or next fiscal year starting in October.

Other things, such as city-paid settlements and judgments and workers’ compensation claims, saw reductions. The city’s contributions to employee pension plans saw a slight increase of $500,000, but Yoon said it was the lowest in years and it’s possible the city will pay next year. less than this year.

Future concerns for the city

One of the biggest budget problems facing the city is the result of a lawsuit it faces for charging its water utility fees to access water and sewer lines owned by the town. The water utility, in turn, passes these costs on to its customers.

Voters eventually approved of the practice by passing Measure M in 2018, which generates millions of dollars a year for the general fund, but it was challenged in court for violating a state law that requires service providers utilities to charge only the cost of providing the service.

An appeals court ruled against the city in December and now the city is waiting for the California Supreme Court to hear its case in hopes that it will overturn the appeals court ruling that said Measure M was unconstitutional.

If the city loses the case or the court refuses to hear it, that would mean a loss of $9 million a year going forward. The city should also repay the millions it has already spent. The sum could be as high as $42 million and could force the city to issue court bonds to repay the money.

A smaller, temporary cut to the city’s general fund will begin this year when the city finally begins paying a countywide homeless tax that the city has benefited from for the past six years but has not contributed because of its local sales tax increase, Measure A, putting Long Beach at the top of allowable local taxes.

Over the next four-plus years, Measure A will be reduced by 25% to allow a portion of Long Beach sales tax revenue to fund the county’s homelessness tax. For consumers, the sales tax rate will remain the same, the only difference being where the money goes. The change is expected to cost the city’s general fund between $10 million and $16 million annually through September 2027.

There are still unfunded or underfunded programs like the city’s road repair plan, park maintenance and other obligations that have been deferred and total nearly $3 billion.

The city must also determine how it will comply with a new statewide organic recycling law that could require it to buy new trucks, hire new drivers and enter into a contract with a recycling facility. treatment of organic waste.

That investment should be offset by “significant” rate increases, Yoon said.

And after?

The budget must be adopted before the start of the fiscal year on October 1 and has traditionally been adopted in September.

The city began its budget cycle earlier this year and, for the first time, added community meetings ahead of the release of the proposed budget, which traditionally happens in July.

Public meetings were eventually cut in half and moved online due to a winter surge of COVID-19 cases. At the meetings, residents asked for more funding for things like libraries, road repairs and affordable housing, while others questioned whether police departments should have more or less funding.

A community budget survey released earlier this year to gauge residents’ pre-budget priorities yielded 723 responses, most of which (56%) were from East Long Beach City Council’s three districts, which are generally wealthier and whiter than the rest of the city.

A community activist criticized the survey at Tuesday’s city council meeting for not being representative of the city as a whole. While only 28% of the city is white, according to the latest census, 53% of survey respondents identified as white. Long Beach is nearly 43% Hispanic, and 17% of survey respondents identified as Latino.

Feedback from the survey could help city officials determine where to focus funds in the next budget. A first release of the budget is expected to take place in the coming months, followed by months of public meetings held by the city council and its budget oversight committee where residents can weigh in on the proposed spending plan.

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