City ‘solvent’ despite unknowns

Laguna’s streets may not be paved with gold, but the biggest repaving project in the city’s history is taking a big chunk of money, although it won’t affect the 2008-09 budget.

With little fanfare, the City Council approved on Tuesday $46.5 million in estimated expenditures next fiscal year from the general fund, as recommended by City Manager Ken Frank.

The city is solvent, Frank said, barring state raids on the city’s sales and property tax revenue “” and even those would eventually be repaid.

“Our recommendations are based on what is known about the state budget and its possible impact on the cities “” in other words, nothing,” said Frank, architect of the city’s budget. “Therefore, we have tried to guess.

“We have eliminated the $100,000 which Laguna has received in the past from the state for police services, but we haven’t excised the $320,000 in Proposition 172 sales taxes, which are designated for public safety, nor has the [city’s] property tax revenue been lowered, about $1 million of which could be borrowed by the state for three years.”

City code requires Frank to submit a proposed budget to the council in May for approval by July 1 of each year.

“Compared to the federal government, the state, most California counties and a lot of cities, we are in good shape,” Frank said.

The budget by law must include a 10% reserve, but the council earlier this year asked for 15%, as a hedge against disasters.

“The 2008-09 budget has the 15% reserve the council wanted [and a bit more], but we are dipping into the current year’s surplus, which is not a good sign,” Frank said. “The budget is $290,000 higher in expenses than revenue. It’s not a big deal, but it can’t go on indefinitely.”

Fortunately, the city’s repaving project won’t go on indefinitely. Public Works Director Steve May anticipates the project will be completed by January.

Previous street projects have been funded by the gas tax and Measure M money, which comes to about $1.1 million a year.

However, gas tax revenue will be used to repay money borrowed from other city funds for the street project. General fund revenue will not be used.

“We will take $800,000 out of the Laguna Channel rehabilitation budget and $1 million out of the Lifeguard Headquarters project, neither of which are yet in the construction phase, and $1 million each from the Vehicle Replacement and Street Lighting funds,” Frank said.

The lifeguards may not like tapping into funds for their headquarters, but they have to be tickled by a Public Employees Retirement System actuary’s clerical error, which bumped up their retirement benefits by a year.

Lifeguards, who are represented by the municipal employees association, were inadvertently included in the new retirement benefits for the police department, which brought down the costs to the city because the benefits are based on length of service and lifeguards tend to be older when they take full-time jobs.

“Bizarre as it sounds, it is to the city’s benefit to accelerate the enhanced benefit for the lifeguards sooner than later,” Frank said.