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Expense Control
Tom McGreal | Chair, Finance Committee

The City reported preliminary results for the fiscal year ended June 30, 2018, which showed revenues on budget and expenditures coming in $758,000 below budget. This is good news that will be helpful as the City faces some challenges in the fiscal 2019 budget.

The City also reported on the updated budget for the current fiscal year ending June 30, 2019. The City’s Budget projects a 1% growth in revenues for the fiscal year ending June 30, 2019. Results so far this year are on track with these projections. This outlook for flat revenue growth places significant pressure on expenses, which need to be controlled to ensure that we generate a surplus of revenues in excess of expenses sufficient to fund important Capital Improvement Projects.

Managing expense growth in line with revenue growth is a tricky business that the City has faced before. In fact a similar scenario back in 2007 resulted in a policy solution that has served us well. As you may recall Council member Jerry Finnell presented a unique idea requiring that the growth of revenues exceed the growth of expenditures by 1.4% each year. The City adopted what became known as the Finnell Plan and this policy has enabled us to fund a long list of Capital Improvement Projects over the years without the necessity of incurring debt. Of course, this does not include the new City Hall, which did require our first significant issuance of debt.

Fortunately, we now have the new Measure Q revenues earmarked for three major new projects including Streetscape, Citywide undergrounding and the development of Shores Park. These projects could not be undertaken without the new Measure Q 1% sales tax that the voters overwhelmingly supported in 2016.
At the same time it is important to note that Measure Q revenues do not in any way alleviate the need to stick to the spending controls imposed by the Finnell plan. Revenue growth still needs to exceed operating expense growth in order to generate a surplus to fund the many very important capital improvement projects each year.

The City Council faces some important decisions in the coming months as it manages spending for fiscal year 2019. City Council will also be kicking off the new two-year budget process with a budget workshop in February where these expense challenges will be addressed.

As we know it’s easy to manage fiscal affairs when revenues are robust. The real measure of fiscal discipline is taken when expenses need to hold the line. The Finance Committee is watching closely. Let’s see how things develop.

 

 

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