Petaluma officials unanimously approved a $170.7 million budget Monday that was 22 percent less than the previous fiscal year, which saw heavy spending on the completion of numerous public works projects, totaling $19.8 million, and continued maneuvering around rising pension costs.
Officials were able to delay a looming unbalanced budget another year, with an estimated $100,000 deficit now beginning at the end of fiscal year 2020-21 and forecast to increase to $13.5 million three years later. That projection underscored the need for additional revenue sources to avoid drastic cuts or drawing from the general fund reserve, which sits at $8.7 million with $4.2 million of that set aside for emergencies.
But 2017-18 did provide more revenue than expected thanks in part to a 3 percent change in tax forecasts that include property and construction, totaling $860,493 in revenue for the general fund. Tourism taxes also exceeded expectations, bringing in an additional $344,400.
Tax revenue is projected to reach $29.5 million in the upcoming year beginning on July 1.
“It is a status quo budget this year that neither seeks to prematurely contract in anticipation of future deficit, nor expands in reaction to a better-than-expected revenue picture,” said City Manager John Brown, who worked closely with new finance director Corey Garberolio to cultivate the budget.
The city enters 2018-19 with $46.7 million in its general fund, up 3.3 percent from last year. However, expenditures are expected to increase by $1.5 million primarily due to cost of living adjustments and benefits increases.
Salaries and benefits account for 80 percent of the general fund budget, and increases there also translate into higher retirement costs. Pension costs from the California Public Employees Retirement System are already hindering budgets statewide, and Petaluma is expected to see increases of more than $1 million every year for at least the next decade.
“Because the red ink has moved out two years from last year’s projections, we have the benefit of additional time to plan for and address the projected deficit,” Brown said.
A number of full-time staff positions were also approved, adding two operators to the water recycling plant, an environmental compliance inspector, and a police volunteer coordinator to the department’s roster.
Petaluma will continue to channel more money into much need road maintenance from a state gas tax increase, which faces a potential repeal effort on the November ballot. The city will be able to take advantage of a $733,710 increase in revenue from the gas tax bill, allowing $5.5 million in expenditures toward the streets — 22.2 percent higher than last year.
Before voting unanimously to approve the budget on Monday, Brown pitched a last-minute compromise to complete a $60,000 funding request from PEP Housing, which provides affordable housing for seniors.
(Contact News Editor Yousef Baig at firstname.lastname@example.org or 776-8461, and on Twitter @YousefBaig.)