Interim City Manager Maria Hurtado and Administrative Services Director Jenny Haruyama briefed council members on the budget for fiscal year 2014-15, which begins July 1, and the five-year outlook for city revenue and expenses.
“The city is now prepared to benefit from all the past planning the city has done to prepare for the growth that we are experiencing,” Hurtado said to open the workshop, adding, “While the city’s revenue outlook appears promising, there are still some challenges on the horizon that will require the city’s continued diligence in managing service demands while continuing to develop revenue strategies.”
Haruyama said that the city will receive $16.3 million in property tax and $16.1 million in sales tax next fiscal year. The city will also get $7 million from the Measure E half-cent sales tax increase that is set to expire next year. Those three sources account for 67 percent of city revenue.
“Tracy relies heavily on sales tax, property tax and Measure E,” Haruyama said.
The expiration of Measure E, according to Hurtado and Haruyama, will contribute to expected budget deficits starting in two years. The city budget analysts forecast deficits of $2.5 million in 2016-17, $4.4 million in 2017-18 and $3.9 million in 2018-19. But that could turn around in subsequent years.
“The revenue starts to rebound slightly and shows a large increase in ’18-19,” Haruyama said, referring to financial forecasts. “We do anticipate that property tax revenue, or assessed value, will come close to pre-recession levels by ’18-19 at the latest.”
Hurtado said that sales tax revenue is already where it was before the recession.
“It has surpassed peak pre-recession levels from seven years ago,” she said.
Hurtado said that the city has a $28.9 million cash reserve. That is expected to grow to $33.6 million for fiscal year 2014-15 because city staff balanced the budget without using reserves, has some personnel cost savings and created efficiencies in city management.
To preserve as much of the city’s reserve money as possible and make sure the city can weather other shortfalls, Hurtado proposed setting aside money in four new reserves. One, a Measure E smoothing reserve, would help the city overcome issues relating to the end of the half-cent sales tax. The other three are an emergency reserve fund, in anticipation of a lawsuit from the state to reclaim redevelopment money; a capital and special projects reserve, to help fund projects in lean years; and an economic development reserve, to allow the city spend money to attract or keep businesses.
Hurtado announced a workshop Aug. 19 to discuss details about the four proposed reserve funds.
The City Council will vote to approve the budget at the next regular council meeting, June 17.
Joe Wilson Pool project revealed
During the budget workshop, Haruyama updated the council on the estimated cost to rebuild a pool at Dr. Powers Park.
The entire project, she estimated, will cost $3.5 million, including $128,000 to demolish the existing Joe Wilson Pool, $2.4 million for construction, and costs for security and project design.
Haruyama said the council could vote to use $1.9 million of the money it had set aside to build an aquatics center, but the rest of that money cannot be used, because it is specifically earmarked for development, not redevelopment. Or, she said, the council could use part of the $4.7 million in revenue left over from the fiscal year ending June 30.
The city is also owed $5 million in community benefit from development of Cordes Ranch, the $1.75 million first payment of which is due in September 2015.
“Because there might be a timing sensitivity to council in terms of when they want to engage in the reconstruction of the pool, they could in fact use some of the year-end funding to support that and then replenish them when the community benefit dollars come in,” Haruyama said.
The pool project is now part of the 2014-15 budget, and council members will decide on specifics at a later meeting.
New airport layout approved
During the regular meeting of the City Council after the budget workshop, the council members heard from the consultant they hired to draft a new airport layout plan, Reinard Brandley.
Brandley revealed the latest plan, which the city will use to secure a grant from the Federal Aviation Administration to refurbish the airfield.
The plan sets the official length of runway 12/30 — which has been disputed for several years — at 4,001 feet, based upon measurements using GPS coordinates.
If the city gets the FAA grant, it will build more hangars on the south side of the airport, expand the blacktop area between runways, build new corporate hangars and administration offices and add other retail space, possibly for a restaurant.
Brandley said the project would cost about $12 million and take three years to complete.
Mayor Pro Tem Michael Maciel made a motion to accept the airport layout plan, which was seconded by Councilman Robert Rickman. The council voted unanimously to accept the new plan and move forward.
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