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Prudent Under-Spending Saves Tax Dollars

May 15, 2019 - The City was able to end the 2018 fiscal year $1.1 million in the black, when comparing budget to actual. On May 7 (watch meeting footage), the City Council reviewed the 2018 Year End Financial Status Report, including the reasons for the fund balance. The budget savings was generated mostly by position vacancies and reduced spending on contracted services, while the modest revenue surplus was generated primarily by a one-time refund from the State Department of Labor & Industries (L&I).
In the lead up to the November 2018 election and Proposition 1 (a property tax levy), several staff resigned after finding new job opportunities elsewhere and the City also experienced an increase in retirements. In most cases, the City left these vacancies open, which resulted in salary savings. Moreover, due to less staff resources, the City reduced service levels by eliminating Summer Celebration, shrinking senior programs, trimming Community Center operating hours, and other measures. In some cases, existing staff temporarily took on additional responsibilities.
Given the City’s financial challenges, staff prudently under-spent what was budgeted in 2018. In some cases, previously contracted work was brought “in-house” and completed by City staff. For example, the City typically contracts out hedge maintenance work along the City’s arterials, but due to a poor bidding climate and contractors pursuing more lucrative jobs, the City did not receive any bids. As a result, the City’s Right-of-Way Team completed the highest priority work itself. In the Community Planning and Development Department, staff drafted the code amendment language to update the City’s critical areas ordinance and shoreline master programs, a task typically handled by a specialized consultant.
In ongoing attempts to seek all possible efficiencies and cost control measures, staff identified an irregularity regarding the reporting of worker hours for police and fire personnel to Labor & Industries. This resulted in a significant one-time refund of over $222,000 in L&I insurance premiums and will reduce future payments to L&I.
Typically, when the City experiences one-time, unexpected savings, these dollars are reinvested back into the community through one-time capital projects that address deferred maintenance, safety concerns, and other capital improvements. Examples of such projects have included the Mercer Ways Shoulder Projects, the Groveland Beach Dock and Shoreline Repairs, and Island Park Ballfield Replacement, just to name a few.
Collectively, staff attrition, under-spending, and one-time refunds have all helped the City get one step ahead of significant projected deficits and accelerate the implementation of its Fiscal Sustainability Plan. 
The Council will determine the disposition of the surplus funding later this fall. Even with this one-time surplus in place, significant future deficits are projected.



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