BUDGET 2021-22: City emerges from pandemic with strong finances
by Mark McDermott
Perhaps no event rang truer to recently retired City Controller Henry Mitzner’s most famed City Hall axiom than the adopted 2021-22 fiscal year budget, which projects the City of Manhattan Beach emerging from an economically devastating time with its economic health somehow better than ever.
“When it’s bad out there, it’s good here,” Mitzner always said. “And when it’s good out there, it’s great here.”
The City Council unanimously adopted a budget at its last meeting in June that is theoretically projected to have a $335,000 surplus, but in reality, after $8.4 million in American Rescue Plan revenues and $1.5 million in other pandemic relief funds filter in over the next year, will more likely show a much larger surplus. Along the way, City Manager Bruce Moe initiated both an early retirement program and a staff reorganization that will result in five fewer positions and over a half million dollars in savings, while a Pension Obligation Bond prepared by finance director Steve Charelian will realize between $1 million and $4.3 million in savings annually and almost $40 million over the next 25 years. In addition to the surplus, the City was able to keep its General Fund reserves at $15.5 million, its economic uncertainty reserves at $4 million, and add $450,000 to its pension stabilization reserves, bringing that total to $2.2 million. Additionally, the City will give the Manhattan Beach School District $250,000.
Charelian credited the City’s relatively good outlook with its fiscal restraint last year, when early in the pandemic $1.4 million was slashed from the budget, largely by leaving six vacant positions unfilled.
“This year’s budget was challenging with the changing dynamics COVID-19 affecting the way we do business and account for revenues,” he said. “Our department held the line by maintaining most of the cuts from the prior year’s budget…. The fiscal year 2022 proposed budget is a conseravtive spending plan. We will be monitoring the continued economic uncertainty, as we are not out of the woods yet.”
Councilperson Richard Montgomery praised the approach.
“We went through a tough year, all of us, last year,” he said. “Steve and your team, Bruce — everybody helped us get through it. Now we see the benefits of the hard work, setting up for the next year. So we made it through the tough part, now comes the fun part….The budget to me is conservative but fair. It puts us in the right place going forward with healthy reserves, because we may need them. God forbid something else happens this year.”
The City is keeping three of those six vacancies open this year. Additionally, a staffing reorganization, which adds two code enforcement officers to the Community Development Department, will be offset by cutting two Community Service Officer positions. A third Community Services officer was one of 11 employees in the city who accepted early retirement incentives, which were offered to 21 employees. The City created a new Public Information Office, led by a new civic engagement manager. Also included in the new office will be a graphics coordinator and a marketing coordinator, both which will be reclassified from other departments. The City Manager’s office gained an assistant to the city manager and an executive assistant, both which likewise will be reclassified from other departments.
The city endured an 11 percent decline in sales tax and 8 percent drop in hotel bed tax revenues last year, but was kept afloat by its largest source of revenues, property taxes, which represent 47 percent of all General Fund revenues and still grew by 6 percent in last year’s budget. This year, property taxes are expected to grow by 8.3 percent to reach $38 million. Sales taxes are expected to increase by $1.1 million to reach $9.3 million as the pandemic economy recedes. Hotels, however, continue to struggle after experiencing a year in which they averaged only 25 percent occupancy; revenues are projected at 8.5 percent lower than pre-pandemic levels.
Moe, in his budget message, noted that forecasting remains difficult with so much uncertainty lingering due to the pandemic.
“The sudden and severe declines in retail sales and travel/tourism activities were unprecedented in scope and therefore made forecasting budgetary impacts a challenge,” Moe wrote. “City staff has made every effort to prudently estimate FY 2021-2022 revenues, and reduce expenditures accordingly, but it should be noted that the duration and severity of the coronavirus-fueled economic shutdown remain uncertain…. The good news is that our City has weathered economic downturns before, with minimal long term impacts, thanks to our conservative approach to budgeting and history of prudent planning. ” ER