Budget balanced but with questions

Dave Brooks

The city’s proposed $298-million budget would be balanced, avoid

layoffs and maintain a 4.2% reserve, but it leaves unanswered

questions about how to pay for future retirements and aging roads and

sewers.

The City Council got its first look at the 2004-05 budget during a

special study session Monday, at which newly appointed City

Administrator Penny Culbreth-Graft presented a positive outlook on a

budget that includes strong increases in revenue.

Councilman Dave Sullivan called the report optimistic and noted

that the city needs to begin saving for future retirement programs,

which are currently unfunded and short nearly $36.7 million.

“It’s certainly a problem we have to deal with,” Sullivan said. “I

think in the more flush years, and this isn’t one of them, we have to

make bigger efforts to make contributions to get rid of those

problems. It’s just getting bigger and bigger.”

Culbreth-Graft acknowledged that something had to be done to

address the increasing costs of the city’s retirement benefits, but

said overall the City Council had been fiscally responsible,

especially after enacting several rounds of layoffs during last

year’s budget talks.

“Because you did that, we were able to create a benchmark to

present this budget without proposing any future cuts,” she said.

Besides a plan to hand over a portion of the city’s sales tax to

the state, nearly every revenue source in Huntington Beach was up.

The utility users tax, which is imposed on most consumer utility

bills, was expected to increase $600,000 for a total of $19.7

million. The transient occupancy tax, a 10 percent tax for the use of

a room in a hotel or lodging facility, was up 51%, bringing in nearly

$3.2 million for the city’s general fund.

Overall, $148 million is allocated to the city’s general fund,

Huntington Beach’s largest source of discretionary spending. About

31% of that money, or just over $46.1 million, is allocated to the

city’s Police Department, while another 14%, or $20.9 million, goes

to the city’s Fire Department.

The Public Works Department has the third largest budget at $16.9

million, followed by Community Services at $10.9 million and the

City’s Administrative Services at $10.5 million, roughly half of

which was paid out in salaries and benefits.

Those benefits are beginning to add up for the city. The city

still needs to determine how it plans to pay for its retirement

supplement plan. The lifetime benefit is given to public employees in

addition to what they already receive through the state’s own

retirement system.

The system is short $30 million for the long term, while the

city’s retiree medical plan is in need of another $6.7 million.

Labor costs could increase more the next fiscal year as the city

faces contract negotiations with its eight employee associations,

three of which are operating on expired contracts. The rest have

labor agreements that are scheduled to run out by the end of year.

Culbreth-Graft also asked the council to think about how it

planned to tackle the city’s aging infrastructure system. Despite

pouring $51.6 million into the city’s pipes and streets for the

current fiscal year, the city has a growing list of deferred

maintenance projects that are being perpetually put off until funding

can be found.

“In the coming years, the city will need to find new ways to deal

with these deferred maintenance issues before they reach a crisis

level,” Culbreth-Graft said.