Our City’s Budget: The good, the unexpected, and what to do about it!
👋 Hi Positive People!
The City recently released its staff report on Sausalito’s 2024-25 Budget, which will be discussed at the City Council meeting this Tuesday, May 7th. The report is focused on the operational budget (as opposed to capital improvements), and provides valuable insights into our city finances. To help everyone understand this complex subject better, we'll be publishing a detailed explanation in the future. The new budget year begins on July 1, 2024.
Overall, there's both good news and a significant challenge ahead.
Over the years, past and present City Councils have maintained strong financial discipline, resulting in many years of surpluses. We've accumulated over $7.75 million in savings in our general fund that can be used for any purpose, along with $3.1 million in emergency reserves and budget stabilization accounts. Additionally, the City has set aside $5.7 million in a special trust (a 115 trust) to manage the annual variability in pension payments (which is based on the ebbs and flows of the stock market) that the City will pay former employees as mandated by the state.
The City finances would continue to be in good shape if not for a recent monkey wrench.
This unexpected issue is that we recently lost our insurance carrier and are struggling to find a new one. The current best offer is at least $2 million more than what we paid before. If you are a homeowner, you may be experiencing similar obstacles with your own home insurance as it's a state-wide issue in California.
While this isn't an immediate crisis due to our cash reserves (see above), it's a pressing issue that needs resolution. The City Staff is recommending that we keep service levels the same and not make any personnel or budget cuts. But the insurance cost problem needs to be solved.
How do we solve this? New revenue streams, lower our risk profile
How to solve this insurance cost issue is one that we at Positive People and the City Staff are looking at. We will update you as we study it and learn more. A few initial ideas include:
Developing new revenue streams: For example, one new hotel could generate enough Transient Occupancy Tax (TOT) to help the City pay this higher premium.
Support hiring of a risk officer: Another idea is to start lowering our insurance premiums over time by reducing the City’s perceived “risk.” The current City budget calls for a “Risk Officer” to be hired to do this kind of assessment and we should continue to support this.
Fix our aging infrastructure: Fixing our aging infrastructure in another serious way to reduce our risk profile. While we have funds set aside for this, these types of projects can be prohibitive. The good news is that there are many grants (free money) available for these types of projects. This includes the $2.4 million in grant money to make our Ferry Landside area safer and better organized for pedestrians, cyclists and cars. We need to prioritize getting projects like this one done so we don’t lose this free infrastructure money. The Sidewalk Repair program is another small step in the right direction, and enforcing sidewalk repairs will reduce our risk profile.
The big picture on our finances & the future
Despite a $1 million surplus last year, the $2 million shortfall this upcoming year is primarily due to increased insurance premiums (88%) and state-mandated pension payment variability (8%). Without the insurance issue, our budget would nearly balance without dipping into the surpluses saved in previous years.
Understanding the budget in this context is challenging. At the direction of the current City Council, the City Staff has been working on making a 10-year projection of the whole budget. This work is critical to understand the impact of the choices we make today and what it means for the future. We strongly encourage the staff and City Council to prioritize this work so we can make better informed decisions.
What can you do today? Stay informed and vigilant.
We need to prioritize paying attention to the right things. The Insurance premium rate hike is a big deal and we need to work together to find solutions like the few listed above.
One thing to watch out for is superficial financial information and pennywise, pound-foolish perspectives on this topic. Just like many of the decisions we make with our own personal finances, there are decisions and trade-offs we make to manage our short term and long-term finances depending on our goals (when do we want to retire, how much money do we need/want in retirement, are we sending our kids to private schools, college, etc). Our City finances are even more complex and require in-depth understanding to make these important decisions.
For example, some may believe that the way to pay for this hike in insurance premiums is by undercutting investments we are currently planning to make in areas that generate more tax revenue for the City. Investments in things like the Business Improvement District and the Ferry Landside project are designed to help our local businesses be successful, fill our empty downtown storefronts and encourage more residents and visitors alike to visit and spend more money downtown. As business taxes contribute 44% to our City’s revenue vs 25% from our property taxes, we believe that investing in those areas that help improve our businesses and downtown will ultimately put the City in a better financial position over time. This is similar to investing in the cost of college education for your kids knowing that it will help improve their financial position in the long run.
How to stay educated on complex issues like this
So it’s important to educate yourself on these complicated matters. And we’re here to help. Even if you’re not a numbers person, we’re working to distill complicated financial information into something we can all understand. We hope to spark more meaningful conversations and smart decision-making based on factual information.
Please join our mailing list and invite a friend to do the same to get more information like this.
Another great way to educate yourself is to watch how our City Council discusses this topic at the next City Council meeting this Tuesday starting at 7 p.m. Below is information on how to attend.
We believe that by working together we can solve our problems.
Warm regards,
Positive People for Sausalito
