By Shawn Raymundo
Councilmembers voted on Tuesday, June 15, to approve the city’s $267.6 million budget that has San Clemente projected to experience a strong economic rebound in the coming fiscal year, in part, because of the local real estate market and sales-tax revenue.
For the 2021-2022 Fiscal Year, which begins July 1, the city is anticipating revenues from all funding sources to reach $153.5 million, while placing spending at an estimated $166.4 million on “capital and other one-time costs,” among other things, according to the adopted budget.
The city’s main operating fund, the general fund, is projected to collect $70.5 million in revenue next fiscal year, up from the $68.2 million that had been budgeted in the current fiscal cycle.
Property taxes—the city’s largest revenue stream—is expected to provide about $38.5 million in general fund coffers, while another $11.5 million is set to come from sales taxes. The city’s anticipated revenue from all taxes in FY 2022, nearly $55.8 million, marks a 5% increase from taxes the city is projected to collect in total this fiscal year.
Anticipating a strong economic outlook in the budget, the city attributed that prospect to the continued growth of the local housing market, as well as sales taxes exceeding expectations.
“The economy is bouncing back with more of a ‘V’ shaped recovery than the more gradual recovery anticipated initially,” the city said. “Housing prices are stable and continue to grow in a strong real estate environment, while sales tax revenues are better than anticipated.”
The city’s budget acknowledged that there will be lingering concerns during the economic recovery from the pandemic, including inflation and interest rates, as well as the unemployment rate, which nationally fell to 5.8% in the month of May.
San Clemente’s unemployment rate in April (the most current data from the state) was reported at 5.5%, far lower than the countywide rate of 6.2% and the statewide rate of 8.3% in the same month.
“The current outlook is positive,” the city said, before noting, “However, underlying issues may influence the economy as economic operations restart.”
Certain development projects in the town, such as the planned construction of In-N-Out on Avenida Pico, off the 5 Freeway, is likely to “be beneficial for the City from a property and sales tax perspective,” the city said.
As for expenditures, the city in FY 2022 is budgeting just shy of $73.2 million with more than $35 million, or nearly 50%, of those costs earmarked for spending on public safety divisions—police and fire services, and marine safety.
The public works budget is set at $17.4 million, representing about 24% of total general fund expenditures next fiscal year.
The $73.2 million in appropriations for the upcoming fiscal cycle marks an increase from the roughly $70 million that was planned to be spent in the adopted Fiscal Year 2020-2021 budget. According to the city, expenditures for the current fiscal year was adjusted to $73.9 million.
Based on those adjusted expenditures in the FY 2021 budget, the biggest increase is being made to the Beaches, Parks and Recreation Department, which is growing from roughly $4.7 million to $5.3 million.
According to the city, that 13% increase is “due to personnel costs and other charges, such as contract class instructors, as pandemic restrictions are lifted.”
The fire services and marine safety budgets are each growing by 5% in the next fiscal year to cover, respectively, growing contractual costs with the Orange County Fire Authority, as well anticipated lifeguard staff.
The city’s contract with OCFA is slated to increase from $9.7 to $10.3 million—a 6% increase from the prior year. The $12.6 million budgeted for fire services also covers phase-in costs to add a fourth firefighter.
The marine safety budget will total $2 million, an increase from the prior year by $85,400 because of anticipated staffing, “including the adding back of budgeted costs for the Junior Guard program.”
Spending on police services will also grow from $18.6 million to $19.43 million, a 4% increase. The city notes that its contract with the Orange County Sheriff’s Department is increasing to $18.1 million in FY 2022.
“The contract increase of 5.2%, or $905,590, increases existing service levels,” the city said in its budget. “The number of deputies remains the same, however, a Community Services Officer (CSO) is added and $15,000 of Overtime is included to provide staffing for the Citizens Academy.”
The city council is expected to also approve the contract renewal with OCSD on Tuesday.
In the proposed budget, the city also looks to slash spending in some areas, most notably in legal services. General fund expenditures for legal services will drop from more than $1.56 million this fiscal year to $1.32 million in the upcoming cycle, marking a 16% decrease.
Additional spending cuts in the budget are being proposed in overtime costs for personnel, reducing that expenditure from $217,221 to $135,470, a 23% drop. Capital outlay costs, which includes machinery and equipment, major maintenance and street maintenance, will be slashed to $3.5 million, down from the $4.3 million budgeted this fiscal year.
According to the budget, the city’s financial forecast shows the city ending FY 2022 a year from now with a surplus of about $183,000. However, the city noted, that “is expected to be a deficit in future years due to expenditure increases, some driven by increases, such as the fourth firefighter/paramedic and other costs.”
During the pandemic, a hiring freeze was imposed in an effort to cut down on costs as the city was bracing for a revenue shortfall in taxes and other sources. The city’s budget notes that the hiring freeze remains in effect, with seven positions vacant, reportedly saving the city roughly $900,000.
“As future vacancies occur, position needs will be assessed and the ability to meet service levels will be considered,” the city stated.
With the economy beginning to turn the corner and return to a sense of normalcy, the city’s revenues are expected to increase. But, the city acknowledged, that normalization also means costs to provide resident services will go up as well.
“These costs will require positions to be filled that were left vacant as a result of the pandemic, however, filling positions will take time to hire and onboard,” the budget stated.
Additional saving measures that the city highlighted include the execution of the five-year tree services contact with West Coast Arborists and the prioritization of certain capital improvement projects.
The city council’s meeting on Tuesday is scheduled for 6 p.m. and can be livestreamed on the city’s YouTube channel.
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Shawn Raymundo
Shawn Raymundo is the city editor for the San Clemente Times. He graduated from Arizona State University with a bachelor’s degree in Global Studies. Before joining Picket Fence Media, he worked as the government accountability reporter for the Pacific Daily News in the U.S. territory of Guam. Follow him on Twitter @ShawnzyTsunami and follow San Clemente Times @SCTimesNews.