National City has unveiled its $77 million spending plan for the next fiscal year and it shows that expenses will exceed revenues by about $7 million, marking the second consecutive year the municipality anticipates a deficit.
Though challenged with limited revenue sources, National City often ends with an excess in revenues every year.
To bring some relief, the city plans to use nearly $7 million from the city’s unassigned general fund balance — money that is available at the city’s discretion, according to the city’s finance department.
“I don’t think it’s time to panic,” said City Manager Ben Martinez. “It’s daunting, but I think, piece by piece, we can start to address that. We’re not gonna tackle it all in one year. But we need to make wise decisions, remain conservative and do the best we can to turn this tide.”
The new budget forecasts property tax revenues will hit $2.7 million, an increase of about $100,000 from the current year. Sales tax revenue is expected to rise slightly from $39.4 million to $39.5 million. And hotel tax revenue is projected to slightly increase, from $1.8 million to $2 million.
Several factors are contributing to the anticipated deficit, despite revenues and expenditures being higher than the current year.
For one, revenues are shrinking. The city won’t be able to count on any more federal stimulus dollars as it plans to spend the final $2 million this fiscal year. It also sees a reduction of $1 million in sales tax and a federal grant of $500,000 to pay for fire and emergency response is expiring.
Liability insurance premiums are also rising. The city is expecting to pay nearly $2 million more in the new year. Additionally, city departments’ staffing and operational needs will cost the city about $2 million more.
For example, the Police Department requests a new power generator and several repairs and remodels at its headquarters. It also wants to recruit crime analysts, an investigator, and at least two officers who would lead a new community response team tasked with building better relationships with local businesses.
The Engineering Department said it needs to hire a city engineer and rely less on consultants and Public Works wants cameras to inspect sewer and storm drain systems more effectively. Human Resources wants to eliminate its four part-time positions and add three full-time ones so that it is staffed with eight full-time employees.
National City has faced unexpected turnover in various departments over the past several months, including challenges in filling its city manager position permanently. The City Council hired Ben Martinez late last year after officials had selected Armando Vergara as the replacement, but he died of natural causes in late June. Deputy City Manager Scott Huth was then named acting city manager until Martinez was appointed.
Some measures the city is contemplating in response to the shortfall: freeze vacant positions, budget more frequently throughout the year, turn some ongoing expenses into one-time or short-term ones and explore new ways to generate its transient occupancy tax.
Several members of the public, concerned about the use of unassigned funds to address the deficit, were critical of the City Council’s $100,000 district budgets. They approved the funds during the last budget cycle but did not establish a policy that outlines how those public monies can be used. Officials have been spending funds but some of their expenses have raised questions about whether they are a legitimate use.
“The taxpayers don’t want to spend any more money,” said resident Edward Nieto. “The slush fund catastrophe (was) a failure for the whole year. (It) shed bad light on the budgetary process at this time of the year. … Don’t dip into those reserves.”
This story originally appeared in San Diego Union-Tribune .
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