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By Joe Muller
Over the last couple of months some members of the community have implied the city is in dire financial straights. I assure you this is not the case. Yes, we have some prospective fiscal hurdles to get over. However, it is important to note that the city currently has total reserves in our general fund equivalent to 43 percent of our projected annual revenues. The recommended acceptable level of such reserves is only 16 percent. This is important information, but it is equally important to realize the two-year budget adopted last Tuesday night by a 4-1 vote is not just balanced, but actually has surpluses in both FY18 and FY19. The potential hurdles I mentioned earlier don’t occur until 2020.
So why the concern then? Because currently our projected revenue trend (money coming into the city) is starting to converge with our expense trend (money going out of the city). And this is a problem requiring that we take steps to get in front of and remedy to make sure those lines do not cross. One of the options is to cut expenses. It is always a good idea for the government to operate as leanly as possible, but let’s be honest, do we really want to cut services?
During Tuesday night’s Council meeting there was a robust discussion over proposed cuts to several areas of the budget, including many of the community services and activities that the city provides and/or sponsors for our residents. My concern was we have not had our strategic planning meeting so we haven’t yet defined the city’s spending priorities. Coming to the realization that some of these cuts were outside the one arena I was concerned with—community activities—I decided to make a tough decision and voted to approve the proposed cuts.
But what was most encouraging about Tuesday’s meeting was that three of my four fellow council members agreed with me that economic development must also be looked at and discussed as a way to increase revenue and address our potential financial issues. (Mayor Debra Lewis alone resisted considering economic development and its resulting increase to city revenues, apparently preferring to focus solely on cuts. As puzzling as this position was, it became even more so when she thereafter alone voted against passing the budget which incorporated cuts the Mayor had directed staff to make).
We need to come to grips with the fact that our largest revenue source in the city is the Transient Occupancy Tax (TOT hotel tax). It is true we have multiple hotels in the development channel and these hotels will alleviate some of the pressure we are currently feeling, but they won’t close the gap. If we don’t diversify our revenue streams the next recession will put us in a tenuous situation. In 2020, we have a proposed $1.6M budget deficit. Let’s face it; we only have one immediate opportunity to close that projected deficit – the Lantern District. The city made a large investment in the area to try and achieve the first phase of revenue diversification. It is estimated the Lantern District could generate up to $1M in property and sales tax revenue. Doheny Village is an important piece to our diversification puzzle but is still years out as we work on the specific plan. The Lantern District is the best opportunity we have to see the sales and property tax revenues we need to close the gap.
It has been said when it comes to economic development that no city can survive the status quo. In other words, if a community is not growing, it is dying. We need to come together as a community to ensure this is a problem Dana Point will never face. I am very much encouraged by the fact that four-fifths of our city council, along with some extremely hard work from city staff, worked through our differences to collaborate on a budget which maintains and strengthens the city’s sound financial position and who are committed to the economic development of our city to help keep that intact.
I invite Mayor Lewis to join us.