Belmont budget sound, faces long-term challenges

“Our city has done really well in helping us stay afloat despite the pandemic and some of the other things,” Mayor Julia Mates said.

Belmont’s total citywide budget is $87.5 million. Revenue is $91.2 million, resulting in a surplus of around $3.7 million. However, the long-term forecast shows a $4.3 million reduction over the next five years. Budget expenditures are $68.2 million, up 5.4% from last year. Around $56 million is for the city’s operating budget, with $12.3 million for the Belmont Fire Protection District. Capital improvement projects funding added $19.3 million.

Worker salaries and benefits make up more than half of the city expenditures, which is typical. Property tax makes up 37% of city revenue, with sales tax at 13%. Revenue from transient occupancy taxes is slowly increasing but will not hit pre-pandemic levels until 2025 or 2026. The Belmont Police Department’s budget in 2023 is $14.8 million, Parks and Recreation at $9.1 million, Community Development at $4.7 million, and Public Works at $11.3 million.

However, a staff report said the city faces challenges due to pandemic recovery and underfunded tax revenue from the state. Belmont said California is currently underfunding property tax in-lieu of vehicle license fees. A recent state budget estimate is using Educational Revenue Augmentation Funding to backfill the VLF shortfall. ERAF is excess local property taxes returned by the state after local school districts are fully funded to mandated levels. A staff report said the ERAF funds are already owed to cities like Belmont and are instead being used to pay a separate state obligation. The council declared it a long-term concern and a significant threat to monitor.

“It’s a shell game not of our making. It’s a shell game created by the state,” Vice Mayor Tom McCune said.

Councilmember Charles Stone said it could result in having to lay off city staff.

“I am incredibly concerned by the state’s attempt to engage in a shell game with the ERAF money,” Stone said. “The impact would be devastating to Belmont.”

Belmont Finance Director Grace Castaneda said the general fund projections show falling revenue over the next 10 years. The city will likely need to dip into reserves because Belmont only has a few revenue sources. Belmont officials have spent the last year looking at expanding its revenue sources base.

“As those revenue sources take a hit, take time to recover, and lose growth potential, our total revenue is not catching up to our expenditures,” Castaneda said.

Budget priorities in 2023 are hiring and unfreezing funding for city workers, developing diversity and equity programs, and funding for street improvements. The city is also focusing on more funding for public safety communication equipment and the city’s Crisis Assessment, Response and Education program, or CARE. The program has officers with mental health training respond to calls involving mental health crises. A community survey found residents want street repairs, improved 911 response times and park improvements. Councilmember Warren Lieberman thanked city staff for identifying long-term issues and being proactive, noting there were times in the past when that was not the case. He declared the budget process clearer and better over the years.

“This city has been incredibly well served by the finance department in combination with all our departments in terms of just how well this has all been managed,” Lieberman said.

A budget adoption meeting date is scheduled for June 14. It will also vote on a resolution to increase taxes on new developments to offset increased development costs by creating a Community Facilities District. This tool helps generate locally-controlled revenue to support essential city services to new developments like police, fire, libraries and schools. Under the proposed structure, new developments would pay taxes to mitigate new city services.

curtis@smdailyjournal.com

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