Economic Contingency Funds Tide City Budget Over

The city of Murrieta celebrated ending the 2011-2012 fiscal year spending less of its reserve funds than planned despite less revenue than anticipated.

The city ended the fiscal year June 30, and following an audit, its actual general fund expenditures came in at $38.09 million. The figure was $904,000 less than the $39.48 million the city had budgeted for, City Finance Director Joy Canfield explained Tuesday.

As a result, Murrieta started the 2012-2013 fiscal year July 30 with $14.44 million in its general fund budget, $9.6 million of which is set aside as a 25 percent operating reserve and $4.66 million in an economic contingency fund.

“The idea behind (the reserve and economic contingency funds) is really twofold,” Canfield said. “Should we have a catastrophic event such as an earthquake then we have some money to take care of that; the other is with the state having taken away revenues we received monthly and replacing them with revenue we receive annually...a certain amount of funds is required to be on hand...If we did not have that cash on hand we would have to borrow cash to pay our employees and maintain operations.”

The city used $795,683 of general fund economic contingency funds to get through 2011-2012, though it had budgeted to spend $1.7 million, which is where the $904,000 difference was seen, Canfield explained.

Other departments also used less in contingency funds than originally planned: the Fire Department used $641,000 less and the Library used $41,000 less, according to Canfield.

The two main departments that fall under the purview of the general fund, administrative services and police, were both under budget by nearly $650,000, according to Canfield.

“General fund departments once again did an exceptional job of reducing expenditures while still maintaining service levels...” Canfield wrote in the agenda report.

Other positive outcomes were that property tax revenues totaled $5.86 million for a 4.8 percent increase from the previous year, and sales tax revenues totaled $8.28 million for a 10 percent jump.

Canfield hailed this as “a positive sign that businesses are experiencing improvement in retail sales.”

Interest income and revenue from fines and forfeitures were down, however, Canfield said.

“We are not out of the woods yet,” Canfield said. “I would like my revenues to be more than projected...we have lost 20 to 25 percent of the revenue in most of our funds...I think we have done remarkably well and managed our funds through this recession. I have known many cities out there that have had to borrow money to manage their cash flow.”

City council members lauded the positive fiscal report.

“Our staff has done an outstanding job,” said Councilman Randon Lane.

Mayor Pro Tem Rick Gibbs reminded everyone the city was down at least 50 full time employees due to layoffs.

“And we have a staff who is working harder and they continue to come in with ideas to cut expenditures,” Gibbs said. “There are a number of cities who have declared bankruptcy, given up and said ‘that is it, we can’t do this anymore.’”

Mayor Doug McAllister said wise planning has been key.

“The reason we have not had to borrow is because we have made our hard choices,” McAllister said. “You don’t typically find this in government...but we made a hard choice back then to say ‘no we are going to set this (economic contingency fund) aside just in case.’ Had we not done that we would not be where we are today.”