Editor’s Note: This story has been updated from its initial posting on Monday, May 23, to include comments from the City Council’s meeting on Wednesday, May 25.
By C. Jayden Smith
The San Clemente City Council reviewed a draft of the city’s $136.1 million budget for Fiscal Year 2022-2023 at its Wednesday night, May 25, meeting, without calling for any major changes.
The budget proposal—which, pending their approval next month, would go into effect on July 1—comes as the current fiscal year, when the city saw significant economic growth in and around San Clemente as more pandemic-related restrictions were lifted, draws to a close.
Based on the budget, the city is projecting an even brighter future and facing a positive operating position over the next five years, while maintaining a “AAA” bond rating from Standard and Poor’s, marking a capacity to meet financial commitments.
In City Manager Erik Sund’s introduction letter to the council, he noted a balanced operating budget that will remain “conservative” as staff anticipates higher activity levels and recognizes the need to fund public safety, technological improvements, and other potential cost increases.
“Although concerns still exist, such as the energy prices and inflation, the overall economic outlook is positive,” Sund added.
According to the budget, which outlines the council’s top goals, or strategic priorities, for the coming fiscal year, city staff will look to “ensure financial stability”; “grow resident confidence and value in city services”; “update and maintain infrastructure”; “improve and maintain strong staff recruitment and retention”; and maintain a “strong approach to digital transformation.”
For FY 2023, the city is looking to have a total operating budget of $136.1 million, a $9.3 million increase from the previous year, according to the city.
As for the General Fund, the city is expected to receive nearly $76.6 million in revenue, up $6.1 million from this fiscal year’s adopted budget. About 79% of the anticipated revenue comes from tax collections.
Growth in assessed valuations, development, and property resale activity is projected to result in $41 million in the form of property taxes, a roughly 6.5% rise from the current fiscal year. About 54% of the city’s overall General Fund revenue will come from property taxes.
And based on anticipated consumer spending in the coming fiscal year, sales taxes are expected to generate $13 million in revenue for the city, up from the $11.5 million initially projected in this year’s budget.
Along with those funding sources, revenue from recreation and marine safety fees, and parking permit and meter collections further comprise the city’s General Fund monies, which are also expected to increase this year.
The budget report explained that the economy’s return to the anticipated steady growth before the pandemic hit is a reason for the city’s optimistic outlook.
“This economic growth conversely has led to growth housing prices, which are anticipated to grow in the 4-6% range and retail sales remain strong as the pandemic restriction easing has increased demand for items and also dining and restaurants,” the budget stated. “These areas of economic growth bode well for the City, as property and sales taxes are major revenue categories improving the outlook for the City of San Clemente.”
Continued development in the Marblehead community, specifically at the Outlets at San Clemente, as well as in other areas of San Clemente, will also be beneficial, the city stated.
Spending-wise, the budget lists a General Fund expenditure total of $81.2 million, a marginal decrease from the city’s adjusted FY 2022 budget of $81.3 million. The current budget previously set General Fund expenditures at $73.65 million.
More than a quarter of the city’s planned General Fund expenditures—$21.3 million, or about 26.2%—are allocated toward Police Services. Another $19.2 million (23.6%) will go to Public Works, $14.1 million (17.4%) is earmarked for Fire Services, $8.8 million will fund General Government costs, and $6.3 million is to be spent on Community Development.
Spending on public safety services—police, fire and marine safety—is up $3.5 million from the adopted FY 2022 budget, with marine safety, in particular, growing from $2 million to $2.1 million.
The city in the budget explained that the contractual services for public safety represented a 4-6% increase, partly to account for additional body-worn camera costs and phasing in the city’s requirement of adding a fourth firefighter to fire truck crews.
Legal and other contractual services, the city added, will decrease in the coming fiscal year, keeping overall contractual services “flat.” Spending on “Other Charges” will rise 17%, because of the upcoming Primary and General Elections.
On Wednesday, the council addressed a letter from the Downtown Business Association in which the group asked for an increase to its initially budgeted subsidy of $34,000.
Presenting the letter to the council, Mayor Pro Tem Chris Duncan explained that the actual costs the DBA incurs from operating various services and events were significantly higher than the subsidy.
Duncan asked whether the city could instead allocate $59,000, which would help cover the DBA’s costs that include, among other things, maintaining the flower pots that hang along Avenida Del Mar, and recommended reviewing such a change before adopting the budget.
The letter also mentioned an insurance issue in that the DBA was currently underinsured given the increasing size and scope of events, such as the annual car show and Puttin’ on the Glitz, that the organization holds.
Councilmember Kathy Ward expressed concerns with the council receiving the letter so late in the budget process, as it did not allow her and city staff proper time to prepare and take an in-depth look at the issues presented.
Sund reminded councilmembers that they have $18,000 left in the contingency reserve as an example of funds that could be diverted to the DBA. He suggested facilitating a meeting with the DBA, creating a report, and then having the council decide whether to allocate its contingency at the final adoption.
“I would be willing to do that, with one provision,” Mayor Gene James said. “Between now and next year, we do a study of the city taking (the car show and the Glitz).”
Sund acknowledged the staff direction to conduct the meeting and assess the aforementioned topics.
In his introduction letter, Sund also noted the current difficulties of recruiting, and that the city used funds from the American Rescue Plan Act to fund positions across multiple departments and improve staffing levels. He added that the city will have to balance service levels with the remaining vacancies.
“The City is starting to recruit for previously vacant positions to staff facilities; these vacancies were maintained to provide cost mitigation measures during the pandemic and as a result of lower activity levels,” the city stated in the budget.
Capital Improvement Program (CIP) spending will account for $14.3 million of the budget, declining $7.1 million from the current fiscal year. The budget includes 31 projects, 43% of which concern the streets, 19% regarding water, and 15% involving parks and medians.
Arterial Street Pavement Maintenance will cost $1.5 million, as will Street Improvement Projects, and $1.2 million will go toward the Calle Real Pump Station Rehabilitation. There are also 38 maintenance projects that will be funded at a cost of $8.7 million.
Regarding the progress of the city’s goal to add pickleball courts to Richard T. Steed Memorial Park, $500,000 was allocated within the CIP budget for the planning and design process, while another $3 million was earmarked for Fiscal Year 2023-24 for the actual improvements.
Councilmember Steve Knoblock asked Sund if the process could be expedited, considering the amount of public complaints received over the noise from pickleball at San Gorgonio Park.
Sund said staff are going to focus on expediting the necessary design stage, as soon as July 1, so that the city has the build specifications in hand when it goes to bid for the project, and whatever company is chosen can build according to Steed Park’s site-specific plan.
“Once the design is done, I do have the intentions of coming back to council because at that point, we’ll have what I will call realistic costs as to what it will cost to do those improvements to Steed Park,” Sund said.
In response to Knoblock’s question of whether the city should start budgeting for the project within FY 2023 in case the design results in a reasonable cost, allowing the city to put the contract out sooner, Sund said he wouldn’t recommend that strategy.
He added that the city would just need to have the funds ready when the time comes to award the bid, in which he was preparing for a large bill to come, and that staff are working with nearby entities, such as the Glaukos Corporation, that are interested in sharing costs.
Excluding capital outlay, one-time transfers, and other one-time costs, the General Fund operating budget is $75.2 million, while the operating revenues total $75.6 million. Therefore, the General Fund is anticipated to have a surplus of $422,820, according to the city.
Starting with FY 2022-23, the city’s five-year financial forecast—while utilizing numerous assumptions—projects a surplus each year, although never above $1 million.
“To me, that’s a disappointing number,” James said. “I would probably like to see that doubled; I think somewhere between $750,000 and $1 million would be in my comfort zone.”
Jake Rahn, the city’s financial services officer, in response to the mayor’s question of how the city could double its operating position, said the city is making additional paydowns on the unfunded pension liability and that it could look at adjusting certain fees as part of efforts to find additional revenue.
Sund added that staff can now move forward with the goal of keeping an advantageous operating position—between $500,000 and $1 million in his eyes—in the back of their minds. Within his role, while also attempting to maintain morale and productivity, Sund mentioned that maintaining some existing staff vacancies could help the city’s cause.
James also took a moment to speak about city management and staff’s efforts to implement the strategy set by the council.
“I just want to commend you on the tactics you laid out here this afternoon,” he said. “Other than the operating position, I’m very pleased with everything.”
The budget will be up for final adoption during the council’s next meeting on June 7.
C. Jayden Smith
C. Jayden Smith graduated from Dana Hills High in 2018 before pursuing a Bachelor’s degree in digital and broadcast journalism from the University of North Texas. After graduating in December 2020, he reported for the Salina Journal in Salina, Kansas. Jayden loves college football and bothering his black lab named Shadow.