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Lean Budget Keeps Focus on Neighborhoods, Infrastructure & Streets

DESPITE RISING PENSION COSTS, MAYOR FAULCONER’S PROPOSED FY2018 BUDGET STILL PRIORITIZES CORE NEIGHBORHOOD SERVICES, ROAD REPAIR & LARGEST INFRASTRUCTURE BUDGET THIS DECADE

 

San Diego CA regional parksSan Diego – Continuing his commitment to invest in neighborhoods despite a lean budget year, Mayor Kevin L. Faulconer today introduced the City of San Diego’s Proposed Fiscal Year 2018 Budget – a balanced plan that prioritizes core community services such as street repair, recreation centers, libraries and public safety while making the largest infrastructure investment of this decade.

 

“We’ve made so much progress over the past three years to invest in all of our neighborhoods, and this budget plan keeps the focus on key services the City Council and I have worked hard to restore,” Mayor Faulconer said. “Even though pension costs are taking a bigger chunk out of our bottom line I am going to keep my promise to put our neighborhoods first. This balanced budget takes a fiscally responsible approach to ensure we keep our libraries and rec centers open, continue our march to repair 1,000 miles of streets and provide hundreds of millions for infrastructure projects.”

 

Despite the need for budget reductions driven by surging pension costs, Mayor Faulconer’s proposed budget funds 349 miles of street repair, maintains operating hours at libraries and recreation centers at the highest levels in a decade, and includes key improvements to public safety.

 

The annual budget for the Capital Improvements Program, which funds most infrastructure projects throughout the city, has also seen significant growth since Mayor Faulconer took office. It has more than doubled since FY2014 and now stands at $445 million.

 

The City is projecting modestly improving revenue from property, sales and hotel taxes in FY2018, but that growth has been outpaced by a significant increase in the City’s annual pension payment following recent changes by the San Diego City Employees’ Retirement System’s independent pension board. The portion of the pension payment for the City’s $1.4 billion General Fund has increased by $45 million, from $191 million in FY2017 to $236 million in FY2018.

 

The increase stems from changes in actuarial assumptions calculated by SDCERS, such as projected longer lifespans for retired employees, and lower-than-expected investment returns in the past fiscal year.

 

The overall result is a need to balance for a total of about $80 million, which this proposal does.

 

“The good news is that our local economy keeps growing and is helping us keep intact or grow many of the core services that our residents rely on the most,” Mayor Faulconer said. “But the reality is we have limited resources because the City is still required to pay off the pension promises made by past City leaders. That’s money that could be going to our neighborhoods and serves as a reminder that City Hall must continue to live within its means.”

 

Mayor Faulconer has proposed balancing the budget with about $22 million in cuts spread across various City departments, the use of $16 million from a new pension stabilization reserve he proposed to the City Council, fiscally responsible changes to reserves, and rolling over $8 million in projected surplus from the current fiscal year budget, among other things.

 

The structurally balanced budget follows responsible financial practices by ensuring that ongoing expenses are funded with ongoing revenues and that one-time expenses are paid for with one-time revenues. The proposal includes:

 

  • Up to $71 million in funding for 349 miles of street repair
  • Most funding for the Capital Improvements Program this decade – $445 million
  • Maintaining recreation center and library hours at the highest level in a decade
  • Funding to staff five new parks with 33 acres of parkland
  • $74.1 million to move forward on the innovative Pure Water recycling program
  • $1.1 million increase for Planning Department to implement housing affordability initiatives and develop the Parks Master Plan
  • Continued funding for year-round, indoor shelter for homeless individuals and veterans and other homeless services, $3.4M
  • Four academies for police recruits
  • Continued funding for the plan that has improved 9-1-1 police dispatch response times
  • A firefighter academy to maintain full staffing levels
  • Funding for operations of the new Bayside Fire Station (scheduled to open in December)
  • A fire-rescue Fast Response Squad for the San Pasqual Valley (previously a pilot project in FY2017)
  • Maintaining arts and culture grants above FY2015 levels – $10.4 million
  • Fully funding reserves to policy targets and making annual pension payment

 

Demonstrating confidence in the City’s strong financial discipline and underlying fiscal health, Fitch Ratings in February upgraded the City’s credit rating. Fitch noted the “city’s exceptionally strong gap-closing capacity” as it faces the FY2018 budget. Fitch Ratings upgraded the City’s Issuer Rating from AA- to AA and upgraded the City’s General Fund-backed Lease Revenue Bonds from A+ to AA-, with a stable outlook for all ratings.

 

The $3.6 billion budget proposal recommends spending levels for City operations and capital projects for Fiscal Year 2018, which runs from July 1, 2017 through June 30, 2018.

 

The final budget will be adopted in June following several weeks of review by the public and the City Council. Mayor Faulconer will formally present the budget proposal to the City Council at 2 p.m. Monday in the City Council chambers.

 

For more information, the entire proposed budget can be viewed online here, this Fact Sheet provides a summary of notable changes, and here is a set of budget infographics.

 

Here is what City Councilmembers are saying about Mayor Faulconer’s proposed budget:

 

City Council President Myrtle Cole: “Despite facing a budget deficit, our libraries and park and recreation centers are just some of the many critical city services that we need to maintain and continue to enhance whenever possible. I will be working with my fellow Councilmembers and the IBA to review the Mayor’s budget and work to ensure that it preserves city services and programs to the greatest extent possible.”

 

Councilmember Barbara Bry: “Based on my briefing with the Mayor, I am confident that we will finalize a strong FY2018 budget that prioritizes core community services. As chair of the Budget Review Committee, I want to ensure that the public is actively engaged in the budget review process. It is critical to involve the community in these important decisions during this challenging fiscal year.”

 

Councilmember Chris Cate: “As Chair of the City’s Public Safety and Livable Neighborhoods Committee, I am pleased to see that Mayor Faulconer’s 2018 proposed budget includes maintaining public safety service levels and programs. I have and will continue to advocate for public safety, which I believe, is a top priority for the City.”

 

Fiscal Year 2018 One San Diego Proposed Budget Fact Sheet

OVERVIEW OF PROGRESS UNDER MAYOR FAULCONER

We’ve made so much progress over the past three years to invest in all of our neighborhoods, and this budget plan keeps the focus on key services the City Council and I have worked hard to restore.” Mayor Kevin L. Faulconer

Record levels of street repair

  • Ahead of schedule to meet Mayor Faulconer’s five-year goal of fixing 1,000 miles of streets
  • As of March 31, 384 miles have been repaired in first 21 months of the pledge
  • In 2016, an independent assessment of San Diego’s street network showed the overall condition index of City streets has risen to 72 on a scale of 0 (lowest) to 100 (highest) – an improvement of more than 20 percent since the last assessment in 2011
  • San Diego’s streets are now in better condition than other major California cities, including Los Angeles, Oakland, San Francisco and San Jose

Most Capital Improvement Funding This Decade

  • More than $1 billion for infrastructure projects in Mayor Faulconer’s first three budgets (FY2015-FY2017)
  • The annual Capital Improvements Program budget has more than doubled – 249% – in FY2018 compared to FY2014, the year Mayor Faulconer took office
  • Provides funding for infrastructure projects in several departments, including Public Utilities, Transportation & Storm Water and Park & Recreation

Library and Recreation Center Hours Remain at Highest Point in a Decade

  • Keeps vast majority of recreation centers open 60 hours a week, compared to 40 hours a week for most rec centers a decade ago
  • Total weekly library hours have increased by 17% since Mayor Faulconer took office
  • Maintains additional evening and weekend hours at the Central Library and branch libraries

FY2018 HIGHLIGHTS

Infrastructure & Streets Investments

  • Projected to fix 349 miles of streets, $71M
  • Largest Capital Improvements Program this decade, $445M (a $24M increase from last year)
  • Moving forward on the innovative Pure Water recycling program, $74.1M
  • Keeps Mayor Faulconer’s ongoing pledge to dedicate at least 50% of new revenue toward neighborhoods and infrastructure for fourth straight year – a promise now codified by voter-approved Charter Section 77.1 in 2016
  • More than half of new major General Fund revenue ($18.1M of $33.6M), spurred by San Diego’s growing economy for infrastructure improvements

o   Road repair, $15.3M

o   Fix elevators at City Parkade, $1.5M

o   Construction of the compressed natural gas fueling station for City’s refuse collection fleet, $1.2M

Fiscally Responsible, Balanced Budget

  • $3.6B budget crafted with fiscally responsible practices
  • Fully funds annual pension payment, $324.5M ($63.4M increase from last year)
  • Projected growth in property tax revenue (5%), sales tax revenue (2.5%) and transient occupancy tax revenue (5.7%)
  • Fully funds General Fund reserves at 15% target for FY2018 by contributing $7M

Brining Opportunity to Every Community

  • Increase in Park & Recreation staffing and maintenance for 33 acres of parkland for new parks: Franklin Ridge Pocket Park, Cesar Solis, Park de la Cruz, Wightman and Southcrest Trails, $656,000
  • Increase for Planning Department to implement housing affordability initiatives and develop first phase of the Parks Master Plan, $1.1M
  • Continued funding for year-round, indoor shelter for homeless individuals and veterans and other homeless services, $3.4M
  • Funding for November special election to modernize and expand the convention center, repair roads and reduce homelessness, $5M

Safe & Livable Neighborhoods

  • Replacement of self-contained breathing apparatus equipment for Fire-Rescue Department personnel, $2M
  • Staffing and operations for new Bayside Fire Station (opening in December), $865,000
  • Fire-Rescue Fast Response Squad for San Pasqual Valley (pilot program in FY2017), $789,000
  • Continued funding for four police academies with approximately 43 recruits each, $8.3M
  • A firefighter academy to maintain full staffing levels, $485,000

Balancing the Budget

  • Reductions to various departments through eliminating positions and non-critical services, $22.3M

o   Examples include:

  • Eliminating 59 full-time equivalent positions, $8.6M
  • Reduced contracts in Transportation & Storm Water Department with minimal service impacts, $4M
  • Fuel savings costs by using renewable diesel, $500,000
  • Reduced water consumption in Park & Recreation Department, $400,000
  • Using new Pension Payment Stabilization Reserve to help balance General Fund budget, $16M
  • Reducing Workers’ Compensation Reserve from 25% to 12%, $13.7M
  • Use of excess funds from current fiscal year, $8.3M
  • Use of Chargers’ lease termination fee to pay stadium debt service, $4.8M
  • Reduce arts and culture grants, $4.7M (funding still above FY2015 level at $10.4M)

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