San Mateo’s financial picture shows increased challenges in the coming years as it deals with revenue fluctuations and expenditures around infrastructure projects and employee compensation.
Rich Lee
A financial update presented at an April 17 special council meeting showed the city’s current 2022 to 2023 budget faces a deficit and decreased revenue compared to previous estimates. The city’s expected revenue dropped from $163.8 million to $157.5 million for the current year, a $6.3 million decrease, while city expenditures rose $600,000 from $164 million to $164.6 million, according to a staff report. The city’s general fund will see a net loss of $7.1 million, about $2.5 million more than the 2022-23 adopted budget. However, the city has over $100 million in reserves, with Finance Director Rich Lee stating the city was in a good position to absorb losses like the ones from this year’s budget using the reserves.
A 2023-2024 budget preview shows the general fund revenue is projected at $160.7 million and expenditures at $172.2 million, a net loss of $11.5 million. Property tax revenue is estimated at $79.6 million in the coming year, a decrease of $3.8 million compared to this year. Sales tax revenue is slowly growing, while transient occupancy tax is estimated
at $6 million, less than the $7 million pre-pandemic baseline of 2018 to 2019. Real property transfer tax showed high-interest rates hurt 2022 revenue, with the coming year expected to be more favorable. According to Lee, employee compensation will be around $89.8 million, more than half of the general fund expenditure. Pension contributions will rise significantly from 2024 to 2025 due to investment losses from the California Public Employees’ Retirement System, or CalPERS. The investment losses will amount to an additional $177 million in pension costs over the next 20 years starting in 2024, according to a staff report.
The city has about $234 million in unfunded capital improvement plan projects from 2023 through 2028, which means no dedicated funding source has been established for the projects, according to city staff. Unfunded CIP projects include Marina Lagoon Dredging to reduce flooding risks costing around $15.7 million, 19th Avenue drainage at $12 million, Laurel Creek drainage at $9.6 million, and 16th Avenue drainage projects at $9.5 million.
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In future years, sanitary sewer projects like the Clean Water Program represent a large chunk of capital improvement project costs, while street improvements will need significant funding. City staff said maintaining its annual street investment of $8.1 million is required to work toward the council’s goal of eliminating all failed streets. Current 2023 conditions show 5% of roads in San Mateo are considered failed, with around $10.9 million needed per year to reach no failed streets by 2037, according to a staff report.
The council had previously asked for information about how unfunded capital improvement projects could be financed if the council looked at reducing street funding. Staff used the April 17 special meeting to ask the council if it wanted to make any changes to the annual $8.1 million street funding. Councilmember Rich Hedges called street infrastructure improvements a critical issue for him and residents on the east side of San Mateo and was against any financial cutbacks that would stop infrastructure improvement promises made to the public through Measure S, a quarter-cent sales tax. He argued for more funding to reduce failed streets.
“I just cannot agree to cut back on anything on streets and roads or bike lanes,” Hedges said.
The first public hearing on the 2023 to 2024 budget is June 5, with budget adoption June 20.
Any reporting on budget deficits at local cities needs to look at ARPA funds. The SMDJ reported on the Foster City Budget back on March 29th. But it only looked at quotes. Not the details. Litteraly the first sentence of the staff report reads "The FY 22/23 adopted General Fund budget (Funds 001 to 003) included a projected structural deficit of $3.94 million, inclusive of a $3.5 million transfer out to the City’s Capital Improvement Projects Fund. An improvement in several revenue seg-ments in the 1st half of the fiscal year combined with the July receipt of the final tranche of Ameri-can Rescue Plan Act (ARPA) relief monies for $4.05 million (for the recovery of loss revenues from COVID-19) is prompting a projected $3.61 million General Fund surplus by year end." So the question becomes... does the San Mateo Budget talk about ARPA funds? Many cities have been hiding structural deficits with ARPA funds. I'm seeing well run cities use ARPA funds for useful improvements but as far as I can tell local San Mateo Cities are using ARPA funds to buoy and hide fiscal issues.
Well, thank goodness for that $100 million in reserves. Now, where’s the info related to cutbacks, especially employee compensation, pensions, or benefits? Perhaps there aren’t any, and if everyone draws a line in the sand like Mr. Hedges, I guess taxpaying citizens shouldn’t count on cutbacks, but more taxing measures… San Mateans, hold onto your wallets, it’s gonna be tough to keep all those hands away.
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Any reporting on budget deficits at local cities needs to look at ARPA funds. The SMDJ reported on the Foster City Budget back on March 29th. But it only looked at quotes. Not the details. Litteraly the first sentence of the staff report reads "The FY 22/23 adopted General Fund budget (Funds 001 to 003) included a projected structural deficit of $3.94 million, inclusive of a $3.5 million transfer out to the City’s Capital Improvement Projects Fund. An improvement in several revenue seg-ments in the 1st half of the fiscal year combined with the July receipt of the final tranche of Ameri-can Rescue Plan Act (ARPA) relief monies for $4.05 million (for the recovery of loss revenues from COVID-19) is prompting a projected $3.61 million General Fund surplus by year end." So the question becomes... does the San Mateo Budget talk about ARPA funds? Many cities have been hiding structural deficits with ARPA funds. I'm seeing well run cities use ARPA funds for useful improvements but as far as I can tell local San Mateo Cities are using ARPA funds to buoy and hide fiscal issues.
Well, thank goodness for that $100 million in reserves. Now, where’s the info related to cutbacks, especially employee compensation, pensions, or benefits? Perhaps there aren’t any, and if everyone draws a line in the sand like Mr. Hedges, I guess taxpaying citizens shouldn’t count on cutbacks, but more taxing measures… San Mateans, hold onto your wallets, it’s gonna be tough to keep all those hands away.
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Keep the discussion civilized. Absolutely NO personal attacks or insults directed toward writers, nor others who make comments.
Keep it clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
Don't threaten. Threats of harming another person will not be tolerated.
Be truthful. Don't knowingly lie about anyone or anything.
Be proactive. Use the 'Report' link on each comment to let us know of abusive posts.
PLEASE TURN OFF YOUR CAPS LOCK.
Anyone violating these rules will be issued a warning. After the warning, comment privileges can be revoked.