Paul Wyatt. Mayor Pro-Tem

By Paul Wyatt

City government issues are deeply tied to the question of money—what will it cost, is the project worth it, where will the money come from, how reliable are the revenue sources? The city of Dana Point is in the process of deciding how its money will be spent for the next two years. This budget preparation should, and does, command a lot of community input. But sometimes, definitions and terms used are confusing, communication suffers and frustration levels rise. In this week’s column, I hope to raise awareness that a new budget is in the works and to define some of the terms that get used and misused when discussing the budget.

Purpose of a budget: (a) No city may incur any debt or liability in any year that exceeds income and revenue anticipated for that year without two-thirds voter approval (California Constitution, Article XVI, Section 18). To verify compliance, a city must determine its anticipated income and revenue. A budget does this. (b) The city administration cannot spend public money without legal authority to do so. A budget does this.

It is the fiduciary responsibility of the City Council to review and approve the budget, and to ensure long-and short-term financial awareness.

Fiscal Year: The city of Dana Point operates on a fiscal year that begins on July 1 and ends on June 30. The city uses a two-year budget, prepared by the city staff and approved by the City Council. The current budget period ends on June 30 of this year, so preparation of a new budget for fiscal years 2018 and 2019 is underway. This new budget should be approved by the City Council before July 1—the start of fiscal year 2018—and will be used to authorize expenditures until June 30, 2019. The City Council does have the right to adjust the budget at any Council meeting with a majority vote, but this does not diminish the importance of making this budget as accurate as possible.

Budget Basis: This budget should reflect the community’s priorities, estimate revenues by source and expenses by function based on actual revenues and expenses history and anchor to long-term forecasts (five-plus years). Service metrics, programs and deferred maintenance also contribute.

Fund Accounting is an accounting system for recording revenues whose use has been prescribed by the source, grant authority, governing agency, law or policy in separate restricted or unrestricted funds. It emphasizes accountability and is used by most city governments. Dana Point’s financial accounts are separated into several funds: General, Gas Tax, Clean Air, Capital Improvement, Facility Improvement and Park Development to name a few. Each fund has its own budget and accounts.

General Fund: This big-daddy of the funds is the operating fund used to account for the delivery of the day-to-day services provided by the city. It is the largest and most interesting fund, and most of the budget preparation will be spent on it. All of the city’s unrestricted revenue such as property taxes, sales taxes and transient occupancy taxes goes into this fund. The General Fund also includes General Fund Reserves, contingency reserves required by state law or city ordinance that have specific rules for both amount and usage. Emergency Reserve, Cash Flow Reserve, Art in Public Places Reserve are some of the General Fund Reserves included in the Dana Point budget.

Capital Improvements Program (CIP) Fund: The CIP is a capital fund that details acquisition, construction or rehabilitation of major capital facilities and infrastructure. CIP is separated into several maintenance and project funds to allow increased visibility and control. Since many capital projects, revenue resources and expenditures may extend over several years, CIP has a rolling seven-year plan. Although some special revenue funds go directly into CIP, the primary source of revenue is transferred from the General Fund.

Challenges: Internal challenges such as escalating costs and aging infrastructure, as well as external challenges such as varying state funding, state and federal mandates, and unfunded pension liability all make budget preparation difficult and even more important. I am sure that many interesting dialogues among city staff, City Council members and the residents of Dana Point will take place over the next three months as the fiscal year 2018-2019 budget is prepared and approved.

Look for more communication from your City Council as budget preparation moves forward.

Paul Wyatt is the Mayor Pro-Tem of Dana Point.

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