The City of Manteca is projected to have operating reserves of $7.4 million when the next fiscal year ends on June 30, 2015.
That is the equivalent of 24.5 percent of the day-to-day operating expenditures for a full year for general fund expenditures. The reserve is designed so the city never returns to the point it was in the mid-1980s. That’s when Manteca had just a little over $1,000 in reserves, was forced to buy used CHP cars for police patrol units, and was unable to man the Louise Avenue fire station.
The reserves are just shy of the 25 percent set aside established by the council.
So why does the proposed general budget of $30.1 million for the fiscal year starting July 1 have an “operating structural deficit” of $506,315 as outline by City Manager Karen McLaughlin?
It’s because the budget is a projected “snapshot” of the city’s financial picture frozen in time. By that, the city looks to fund all current fiscal year expenditures with revenue they receive that year and not from money either already on hand or earmarked for receiving in a subsequent fiscal year.
It also has to do with Manteca’s budgeting strategy put in place by former City Manager Dave Jenkins and former Finance Director Lettie Espinoza that has been sharpened by municipal staff today to avoid a return to 1985. Simply put the city over estimates expenditures and under estimates revenue.
The $149,000 structured deficit anticipated for the end of the current fiscal year won’t materialize. That’s because the city’s expenditures going into the 12th month of the 2013-14 fiscal year are lagging while revenue is ahead of projections. Property tax and sales tax revenue, as an example, are trending ahead of estimates for the current year.
“In some cases we have expenses budgeted such as hiring a full-time position but the person may not actually be hired for three or four months into the fiscal year,” McLaughlin noted.
Also there are items budgeted such as health benefits for the council that not all members utilize. The city, though, budgets for all potential expenses which means budgeting as if all five council members took full advantage of the maximum health benefits offered,
Some critics in the past have questioned such a budgeting practice noting that it doesn’t give a “true” picture of the anticipated income and expenditures. McLaughlin noted that in both cases — expenditures and revenues — are not an exact science in forecasting. By erring on the conservative side it eliminates year-to-year surprises that pop up and allows the city to effectively weather unexpected expenditures better.
“It’s like your personal budget,” McLaughlin noted. “Some expenses such as mortgages payments are a given but others are estimates of what you need to spend.”
The city also refrains from chipping into reserves set aside for specific purposes.
The $506,304 will come from a projected starting operating reserve of $7.9 million. After being taken into account it will leave the city with an estimated $7.4 million on June 30, 2015.
The overall general fund reserves are estimated to come in at $15.9 million by the end of June 2014. That includes $5.1 million in excise tax on new construction and $2.8 million that is carried over year-for-year for major emergencies. That fund was set aside in the event of the repeat of the 1997 floods when Manteca incurred a lot of expenses helping with evacuations and such or if a major piece of equipment failed way ahead of its scheduled life use.
McLaughlin noted the $506,315 structured deficit for the general fund represents $392,900 in onetime cost.
$183,000 for an election as well as for a possible special election.
$23,500 for leadership training for succession planning.
$33,650 for council leadership training/team building.
$10,000 for downtown improvement financing strategies.
$20,000 for economic development consultation.
35,000 for property services associated with the Successor Agency property disposition.
$25,000 for a cost allocation plan.
$62,750 for labor negotiations support services.
The council will conduct a workshop on the proposed budget on Monday, June 16, at 8:30 a.m. at the council chambers at the Civic Center, 1001 W. Center St.