San Mateo County to increase reserves

“We believe this will position us for whatever the future holds,” Callagy said. “We believe this is most prudent to do this now. With the uncertainty looming, we want to protect our ability to retain employees and to keep them should the economy turn.” 

This increase will be reached by requiring county departments to maintain reserves at 4%, an increase from the current 2% many of which don’t meet already, Callagy said. Part of the new reserve policy is an increase in oversight from the county executive if reserves fall below 2%, including requiring departments to submit all contracts for review and approval, even those below $200,000. 

“I really do think upping the reserve policy is really going to be effective and I look forward to potential more investments in that area,” Supervisor David Canepa said. “We just don’t know with the economy.” 

This effort looks to, in part, address some concerns with departments going over budget and having to dip into their respective reserves. 

“Some of those departments, like environmental health and building and planning, it really is a matter of, unfortunately, increasing the price of services that we provide,” Callagy said. “They haven’t been increased in quite some time and certainly we’ve fallen behind with inflation.” 

The fiscal year 2024-25 budget is now $5.25 billion and also accounts for a net increase of four new county employees. The increase of $1.02 billion from the recommended budget approved earlier this year is mainly the result of rolled over one-time funds from the year prior.

A number of ongoing projects that were originally scheduled for completion last fiscal year did not conclude as anticipated, resulting in a uniquely large increase to the finalized budget compared to that recommended in May. These funds are almost entirely obligated already, though, and are not able to be used for ongoing county finances such as salaries. 

More than $450 million has been rolled over for approved capital projects and infrastructure improvements. These projects — which include the South San Francisco Wellness Center which just broke ground and the recently finished County Office Building 3 — are at various stages in completion, but some invoices could not be processed before the year-end closing of fiscal year 2023-24. 

These one-time funds for capital improvement projects are what are largely affecting the changing budget, and once these projects reach completion, there will be more stability in recommended versus adopted budgets, CFO Roberto Manchia said. 

A significant portion also includes various property purchases, as part of a long-term financial strategy to own buildings rather than rent.  

“Purchasing buildings rather than staying in leases that expose the county to what many of our community members feel in terms of unexpected rent hikes, I think that’s a good long-term strategy for us to keep in mind,” Supervisor Noelia Corzo said. 

Properties in the budget include the Ramada Inn in South San Francisco, the La Quinta Inn in Millbrae, and properties located on El Camino Real in San Mateo and Mitten Road in Burlingame.

Another major adjustment comes from steep increases in health benefits through Kaiser and Aetna, with an overall increase of $5.3 million in the budget to account for the rising insurance premiums. Manchia said these increases align with what many county residents are experiencing as well. 

Rolled over funds from half-cent sales tax Measure K — primarily for capital and affordable housing developments — are those that were obligated early on in the development processes. Many projects are awaiting entitlements, permits or other approvals to begin construction, but funding is approved and ready to be used as soon as possible. 

“The key to whatever we do here, in the future, will be the data analysis to make sure that the few precious dollars that we have are being leveraged to the highest and best value,” Callagy said.