Administrative Services Director Jenny Haruyama reported that midway through the 2012-13 fiscal year, which began July 1, the city was expected to need only $907,510 in reserve money to make up the difference between general fund expenses and revenues.
The deficit was originally predicted to be $2,180,100 for the $49.9 million general fund.
Sales tax revenue is largely responsible for the reduced gap, according to the report, which estimates the city will see a $1,240,700 increase over what was expected when the City Council passed the budget in June.
Haruyama said Wednesday, March 6, that although she “feels confident” about the revenue projections, midyear expense estimates could be a little off the final numbers — which could be good news.
The City Council anticipated when the budget was passed that 2 percent of the approved general fund would not be spent.
“The trend is that you usually spend about 98 percent of your operating budget,” Haruyama said. “That’s just how the trends have been with Tracy, and that is what they budgeted for.”
Haruyama said the “conservative” midyear estimate envisions spending as much as 100 percent of the approved budget, but there’s plenty of time for the savings to materialize.
“We’re at midyear, so there’s a lot of wiggle room, and we do very conservative projections,” she said. “For example, you could have purchases made earlier rather than later in the year that skew your projections, so it looks like you’re spending more.”
She added that if city staff members continue to monitor and question expenses, “we’re confident … that we’ll realize the majority of that savings.”
The report also projected the city’s financial position for the next five years.
It estimated a $2.8 million general fund surplus during the 2015-16 fiscal year and a $3.6 million deficit for 2016-17, the first full year the city will be without revenue from the half-cent Measure E sales tax passed by voters in 2010.
Haruyama pointed to several already-enacted efforts to rein in
costs, including consolidating several city departments and arranging new contracts with employee unions that will save about $3 million between July 2012 and June 2015.
“We’ve made significant headway,” Haruyama said.
But the city is still at the mercy of several trends that leaders can’t control.
According to Haruyama, the rate the city must pay to the California Public Employees Retirement System is expected to rise, as is the cost of health care coverage for employees.
The slow rebound of property tax revenue following the housing meltdown is another hurdle, Haruyama said. She expects the city to take in $1.2 million less during the 2013-14 fiscal year than in 2008, when property taxes funneled about $15 million into the general fund.
She said elected and appointed leaders will have to find more ways to save money and increase revenue. Some options staff members will investigate are paying down CalPERS liabilities with surplus or idle funds, and a possible boost in property tax money from annexing the Cordes Ranch business and industrial park into city limits.
“I’m still mindful that we need to constantly chip away at this,” Haruyama said. “Every time we take two steps forward, sometimes there are other factors that make us take three steps back.”
• Contact Jon Mendelson at 835-3030 or firstname.lastname@example.org.