The Elk Grove City Council on Feb. 10 unanimously approved an amendment to the fiscal year 2020-21 city budget, which in a mid-year review shows a much better economic outlook than had been previously projected.
Shay Narayan, the city’s interim director of finance and administrative services, referred to that projected improvement during a presentation he gave to the council.
“There are a variety of revenue sources in the (city’s) General Fund, each with their own nature of business,” he said. “The bottom line though shows that at mid-year, General Fund revenues are currently projected to be greater than the revised budget by nearly $6 million at year end.”
Responding to that projection, City Council Member Pat Hume expressed his concerns.
“It both scares and aggravates me that government seems to be coming out of this pandemic more or less fine,” he said. “And so, we had projections that didn’t hold true and the good news is that we’re taking the quote unquote ‘windfall’ and squirreling it away for future rainy day or future high priority projects, using it to pay down pension obligations.”
Hume also expressed concern with how federal dollars would be allocated in President Joe Biden’s proposed $1.9 trillion COVID-19 economic relief package.
Hume noted that if $1,400 stimulus checks for most adult Americans were approved, the total of that allocation would be $560 billion.
“So, almost three times the amount of money is not going into the pockets of struggling Americans,” he said. “It’s going for something else. And a lot of it is going to shore up local governments, that this budget shows, haven’t struggled nearly as much as the people that pay into this budget have. And that just really frosts me. That’s the end of my soapbox.”
After referring to the city’s budget report as “very transparent,” with “encouraging numbers,” Elk Grove Mayor Bobbie Singh-Allen expressed her support of Hume’s comments.
“It is heartbreaking,” she said. “We know of all the struggling businesses and families here in our community, in our state, in our country. And so, I hear you, Mr. Hume. I couldn’t agree more. So, thank you for that and thank you (to the city’s) staff for this great report.”
In his review of the city’s budget, Narayan noted that while the revised budget projected sales tax revenue gains of $24,855, the current projection shows a 23% variance.
“The current projection indicates receiving over $30 million of sales tax by year end, which is nearly $5.6 million more than the revised budget,” he said. “Given that the future outcomes of the pandemic were very unknown during the spring of 2020, there was great difficulty in estimating revenues for (the fiscal year 2020-)2021.”
Narayan mentioned that the unexpected sales tax increase has been “substantially driven” through automobile sales, which have continued during the pandemic.
“Assuming that the auto sales sector, building and construction sector, and large, general consumer establishments remain open for the remainder of the year, (the city’s) staff is confident in the current projection,” he said.
Due to this mid-year projection, the council supported the city staff’s recommendation for the amendment of the sales tax budget for the current fiscal year to equal the current projection.
Narayan also reported that based on calculations provided by Sacramento County, the city projects nearly $850,000 in additional revenue for the city through mostly growth and assessment values in Elk Grove.
Based on the estimated increase in General Fund revenue, the council supported the city staff’s recommendation for programming the projected additional $5.6 million in sales tax revenue.
That programming includes reinstating $900,000 in accelerated annual payments for the California Public Retirees’ Retirement System’s unfunded, accrued liability.
“The accelerated payments to the unfunded liability will reduce future interest costs,” Narayan said. “It’s just like making an extra mortgage payment every year.”
Also approved by the council was the budgeting of $4.7 million as a transfer-out payment to the city’s general Capital Reserve Fund for funding council priority projects.
To date, the city has spent about $41 million of the current year’s budget, and is projected to save more than $1.9 million in total spending in this fiscal year.