Although Garden Grove officials have high hopes for future revenues from a massive water park hotel project, the city's short-term budget picture remains difficult with another multi-million dollar deficit projected for the upcoming fiscal year.
Officials had to once again draw from reserves the current year to fill a $5.3 million budget hole and they are projecting a shortfall of just over $6 million for the 2015-16 fiscal year.
The deficit includes $1.9 million needed to cover basic city services and more than $4 million in new budget requests. They do not take into account new labor costs that might result from ongoing contract negotiations with employee unions.
As in the recent past, the projected gap will be covered with one-time use funds squirreled away in previous years, proceeds from the sale of properties acquired by the former redevelopment agency.
In the past, Garden Grove has relied heavily on redevelopment to finance its development strategy, seizing properties and providing subsidies to developers and hotel projects with the hopes of siphoning tourists out of Anaheim's resort district.
Hotel bed tax revenues, which have risen steadily over the past decade, have been a key part of Garden Grove's revenue plan under the previous mayor and city manager, making up 17 percent of city revenue this fiscal year.
But when Gov. Jerry Brown eliminated redevelopment agencies, that financing vehicle disappeared -- along with the city's strategy for economic development.
While the city expects a boost in hotel tax revenue from the Water Park Hotel and there are enough one-time funds to eliminate the structural deficit in the short-term, Interim City Manager Allan Roeder told city council members at a recent public meeting that costs will continue to rise, driven in part by increases in public employee retirement rates.
"You will not be able to do enough development in this community to keep pace with [expenditure growth]," said Roeder. "We need to develop new models. The old models don't work."
Without any new ideas on the horizon, city officials are pinning their hopes on the Great Wolf Resort Water Park Hotel, a huge project slated to open sometime next year. City staff is projecting it will bring in $8 million a year in additional revenue.
Assuming the hotel is open for four to six months of 2016 with 70 percent of its rooms filled, next year's budget projects $3 million in tax revenue from the Water Park Hotel, Finance Director Kingsley Okereke said.
A few other stalled redevelopment projects could also generate future revenue; for example, the Brookhurst Triangle, a high density, mixed-use residential project along Garden Grove Boulevard, is expected to break ground later this year.
Yet despite these potential bright spots, Okereke noted that the city is still "catching up" to restore services and staffing cuts to pre-recession levels.
Although the city did not lay off employees during the recession, it scaled back staffing by offering buyouts and early retirement deals, furloughs and keeping positions vacant.
Early retirements and buyouts hit some departments harder than others, Okereke noted. Next year's budget adds back a few positions while eliminating vacant positions and reducing hours in some departments.
The Community Services department will eliminate one position and reduce hours for administrative aides to the tune of $139,435. Human Resources will eliminate one vacant position and promote an administrative aide.
Meanwhile, two sworn police officer positions and a dispatcher position that were held vacant will be filled.
The city will also set aside money for new transparency and online access initiatives, such as open government software that will place the city budget and public records act requests online.
Officials will also begin squirreling money away for the purchase of a new financial management system. This year's proposed budget includes money for a consultant to advise them on what to purchase.
The city's current accounting system is over 30 years old, an archaic system specially designed for the city that is labor intensive and requires manual data entry, Okereke said. That system has also made it more difficult to implement open government software that will put the city's entire budget online.
"It takes understanding the system just to get the information you want," Okereke said.
Yet to be discussed is the city's plan for addressing the state's mandate that the city cut back 28 percent of its water use.
Any fines associated with violating conservation measures will pay for the staff time it takes to enforce the conservation measures and isn't going to be a moneymaker for the city, said Public Works Director William Murray.
However, as ratepayers use less water, that's likely to result in less tax revenue for the city, Okereke said.
"It's a two-edged sword...people are using less water, but if you have contractual obligations, you still have to pay them," Okereke said.
Other major costs increases in this year's budget include:
- A $296,039 increase in the county animal services contract, for a total annual cost of $1.19 million. The city considered considered piggybacking on Westminster's city-run animal services, but found the facility was too small to accommodate another city.
- $634,468 for new "Hot Red" Radios for the Police Department
- $124,500 for employee retirement and benefits
And here is a rundown of new spending being requested by either council members or staff:
- $25,000 for translation and bilingual services at city council meetings
- $45,000 to pilot Socrata, a transparency and open government software
- $50,000 for the city's 60th anniversary celebration
- $15,000 for a donation to the Vietnam War Museum of America Foundation. The city typically gives the museum $25,000 each year, but the cultural arts fund that previously paid for some of that donation has since run out.
- $25,923 for a part-time mayor's aide, requested by Mayor Bao Nguyen for non-political work and outreach
- $253,860 for a tree-planting program to replace trees citywide
- $175,325 for the second Open Streets Event
The City Council will take up the 2015-16 budget at their next regular council meeting on June 23rd.
View the entire 2015-16 Budget Workshop Presentation.
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