FY 2017-18 Budget Shortfall

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Have an idea on how the City should balance its budget?

Attend the 5/26 Resident Input Meeting,

take the Balance the FY 2017-18 Budget Survey online
(available until June 2nd at 5:00 p.m.),

complete the Budget Strategy Online Form,

or email budget@pvestates.org.

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Background
Since the mid-1980s, the City of Palos Verdes Estates has relied primarily on revenue from the combination of property taxes and a supplemental parcel tax to pay for:

  • public safety services;
  • street, tree and parkland maintenance;
  • the City’s infrastructure;
  • community programs; and
  • internal operations.

For the past 20 years, the parcel tax was specifically dedicated to covering the cost of fire and paramedic services, allowing property taxes to pay for other municipal services and capital projects.

Measure D, a special parcel tax to renew the funding of fire and paramedic services, was on the ballot for Palos Verdes Estates city voters on March 7, 2017. As a special tax, a two-thirds majority vote was necessary for its approval. It was defeated with 60% of residents voting in favor.

Current Budget Projections

Fiscal Year (FY) 2017-18 revenue is currently projected to be $13,843,377 in relation to expenditures and transfers of $18,476,243. Not having the parcel tax creates the shortfall.

What Comprises the City Budget

For FY 2017-18, fire and paramedic services are a fixed cost of $4.99 million, so budget balancing reductions must come from all other services and departments. Excluding expenditures for fire and paramedic services, the budget broken down by department is:

  • Police Department is 55% of the budget,
  • Planning and Public Works is 30% of the budget, and
  • Finance and Administration is 15% of the budget.

 Among these departments, the City’s budget is comprised of:

  • Personnel (66%)
  • Materials/supplies and contracts (34%)

What is the Structural Deficit for Palos Verdes Estates?
The City of Palos Verdes Estates has a structural budget deficit of $3.97 million (21.5%) for FY 2017-18 beginning July 1, 2017. The imbalance equates to the cost of fire and paramedic services previously funded through a special parcel tax that is no longer received by the City. The deficit is projected to increase in FY 2018- 19 due to:

  • increasing service contract costs;
  • technology and citywide infrastructure needs;
  • additional tree trimming, beautification projects, and traffic improvements;
  • future pension costs; and
  • unfunded state mandates (for example, maintaining storm water runoff).

Historically, such increases have been absorbed by the City’s longstanding practice of conservative budgeting. However, all available resources are now necessary to maintain essential and basic services.

How will Palos Verdes Estates Address the Structural Budget Deficit?

Over the next two months, the City Council will address how to resolve the budget deficit. Among its options are temporary reliance on fiscal reserves, the implementation of budget reductions and the implementation of fee increases. Budget decisions will be made with the goals of maintaining essential and basic services, protecting against risk and liability vulnerabilities, and avoiding an implosion of the City’s sustainability resulting from fiscal uncertainty. As part of the budget discussion, a new tax measure may also be considered to ensure the City’s long-term fiscal health.

The City’s Fiscal Reserves

Funds in emergency reserves, for capital projects, and for equipment replacement are available as an option to temporarily resolve the budget deficit. They are “one-time” sources; once spent, the funds are depleted and could only be re-accumulated from budget savings.

  • Currently, the City has $10,000,440 in emergency reserves. By policy, the City maintains a reserve amount equal to at least six months of operating funds.
  • The City also has $3,581,529 appropriated for infrastructure improvement projects and $2,714,173 for equipment replacement. If any of these projects are cancelled, the funds can be made available to cover operating costs for a limited period.

Conclusion

The City Council seeks community input for determining how to address the budget deficit and for considering new supplemental revenue to carry the City into the future.

The impact of fixing the structural deficit will require difficult decisions that will impact services currently received by residents. Therefore, now, more than ever, it is important that residents engage with the City and participate in the budget process.

If you would like to share any feedback in addition to the public meetings, you may do so through the following:

  • Email: budget@pvestates.org
  • Online form (click to complete)
  • Regular mail: 340 Palos Verdes Drive West, Palos Verdes Estates, CA 90274
  • Phone: (310) 378-0383
  • Fax: (310) 378-7820

For more information, please visit and monitor the City’s website at www.pvestates.org. To receive notification of meeting agendas, please sign up on the City’s website at http://www.pvestates.org/how-do-i/sign-upfor-e-notifications.

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