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TONI NELSON, Capistrano Beach
City Manager Mike Killebrew should be commended for taking immediate action to address a $4 million budget shortfall expected for the fiscal year ending June 30, 2020. He found approximately $1.5 million in line-item expenditure cuts to at least partially address the devastating hit to the city’s transient occupancy tax (TOT) revenue.
Unfortunately, almost half of those savings were wiped out by a whopping $734,000 increase in the city attorney budget, but it was an impressive effort and long overdue. He also tapped unrestricted funds and reserves, taking $1 million out of the reserve for unfunded employee pension liabilities. Unfortunately, the challenge is far from over, because another $6 million hit to TOT is expected next year.
The elephant in the room is that Dana Point had a serious fiscal problem long before the emergence of COVID-19. In eight out of the past 10 years, we spent more than we took in, resulting in net operating deficits in every year except the last two. Even before the pandemic, Dana Point was expecting structural deficits (anticipated expenditures exceeding revenue). Per the staff report, “When the current budget was adopted, a long-term financial plan through FY25 was also approved; in that plan was a $627,000 structural deficit projected to accumulate between FY22 and FY23.”
If council does not address the root causes, Dana Point’s fiscal problem will become a crisis. This year’s $4 million hole will be plugged, but what about the $6 million hole expected next year, and the continued shortfalls likely in the years after that? Next year’s $6 million shortfall will be too big to fill with designated reserves without violating council’s fiscal policy or raiding funds currently set aside for roads and deferred property maintenance. This problem is serious, and it can’t wait.
A few years ago, Councilmember Paul Wyatt did an analysis that concluded Dana Point was spending about 30% more than comparably sized cities in every single department. It’s time for this council to get serious about “right sizing” our city – not just balancing the budget, which has been a challenge for years, but cutting expenditures by at least 20% so that there’s a comfortable margin to replenish reserves and put the city on the road to financial health. We can no longer ignore sacred cows like the $1.7 million city attorney budget, the lavish city vehicle policy, or the $13 million police budget that the council majority rubber-stamps without question each year. We simply can’t afford to ignore potential savings in any area.
It’s time for our city council to do what every business owner in our city is doing right now—look at every line item and find creative ways to improve efficiency and cut expenditures to create a healthy and sustainable financial model. Behind every crisis is an opportunity. Let’s not miss this one.