Latest news with #CostaMesaCityCouncil
Los Angeles Times
5 days ago
- Business
- Los Angeles Times
Costa Mesa adopts budget, closing gaps without cutting public works projects
After some last-minute reconfiguration, the Costa Mesa City Council Tuesday passed a 2025-26 budget that prevents the city from dipping into reserves and moves ahead with public works projects, but at the expense of some planned IT infrastructure upgrades. Officials had been grappling over how to compensate for projected revenue declines without violating a local ordinance mandating 5% of the city's $186.9-million general fund be set aside for capital improvements. Given its other expenses, namely employee salaries, the city could not cover the $9.3-million earmark for such improvements. The capital asset needs (CAN) requirement had been funded in prior years but was breached last month when city leaders needed to close a $2.9-million gap forecast for the current fiscal year, in the face of slumping sales tax receipts. Exercising an emergency exemption clause that includes unforeseen economic downturns, council members waived the mandate for 2024-25 but promised to pay back the money over the next five years. As the city headed into another daunting economic forecast for 2025-26, with a projected $3-million decrease in revenue, finance staff Tuesday recommended another CAN exemption during a council budget hearing. Finance Director Carol Molina explained a portion of the $9.3-million funding requirement could be covered by CAN balances left over from prior years ($2.2 million), lease revenue and money from a bond payment for a new fire station ($3.8 million) and an increase in city user fees ($300,000), approved earlier at Tuesday's meeting. The proposal would spare layoffs, but the remaining $3-million capital needs deficit would mean having to postpone nearly $1.8 million in public works projects earmarked for CAN funding, including upgrades to the city's TeWinkle and skate parks, a new roof at the Norma Hertzog Community Center and City Hall maintenance, among others. Addressing concerns provided by council members during earlier budget discussions, Molina floated three options for addressing the gap. The council could waive the $3 million in required funding through the CAN exemption, pay the full amount back over 10 years and not move forward with the $1.8 million in public works projects. If council members wished to keep the projects on track, they could alternately take $1.8 million from a general fund facilities reserve account, narrowing the CAN gap to $1.2 million, then pay that back over the next decade. Or, they could do essentially the same thing, but apply $1.2 million in slated IT infrastructure upgrades toward the leftover gap, then pay back the IT fund. Molina said using the IT money now would not harm the city's tech maintenance plans, as the department was in the process of developing a five-year strategic plan. 'There is technically no plan in 2025-26 for these dollars. As a result, I am OK moving forward with reallocating that $1.2 million,' she said. Council members debated the merit of postponing capital projects, particularly those already being designed or bid out to contractors, and potentially dipping into the city's reserves, which could tarnish Costa Mesa's AAA credit rating as the city seeks to use $12 million in bond funding for renovating Fire Station No. 2. Mayor John Stephens proposed continuing the budget talk to later in the month, saying he needed time to approve recently incoming information regarding the city's consultant contracts and employee positions and vacancies — areas that could potentially result in suggested cuts. But Councilmembers Arlis Reynolds and Andrea Marr supported moving forward with waiving the full $3 million CAN requirement now and possibly revisiting the budget, and the ordinance itself, during the city's mid-year review process next year. By that time, Reynolds reasoned, a facility condition assessment already in the pipeline would be completed and could provide new direction for prioritizing capital projects. 'Let's give ourselves some runway, get the assessment in and see what the economy looks like,' she said. 'I just think we're going to be a lot smarter at the mid-year than we are now.' However, Reynold's plan later shifted to an un-presented 'fourth alternative,' proposed by Molina. The finance director suggested the $1.2 million IT funding could be used, along with an additional $600,000 in leftover CAN balance money, to prevent taking $1.8 million from facility reserves. It would still leave the city $1.8 million short of the $9.3-million CAN ordinance requirement but would leave reserve funding in place, while preventing any interruption in public works projects. Reynolds made a motion, and Molina's fourth option was approved in a 6-1 vote, with Stephens opposed. In remarks, Marr said she'd like to revise the CAN ordinance mandate, potentially applying it to only hard infrastructure improvements and capital maintenance and not broader items, like the repayment of bonds. 'The idea that we've got a separate pot of money that is sacrosanct, that we won't touch because we're going to use it for infrastructure, that's actually not true — that's not how we're using the CAN,' Marr said, suggesting a narrowing of the law's scope. 'I'm OK with waiving it [now] because I think we can do better and we can continue to do it in a way that serves the original intent of why, I believe, the CAN was created.'
Los Angeles Times
09-05-2025
- Business
- Los Angeles Times
Costa Mesa dips into ‘CAN' to fill $2.9M budget gap, next year could be worse
To fill a financial shortfall, caused by a slowdown in sales tax receipts, Costa Mesa officials Tuesday approved deferring $2.9 million in public works projects that were included in the the city's 2024-25 budget. Using the funds earmarked for such projects brings the city out of compliance with a local capital asset needs ordinance also known as the CAN, passed in 2015, which mandates 5% of the city's general fund revenue be set aside to pay for capital improvements. The CAN ordinance includes an exemption for 'economic downturn, natural disaster, emergency or other unforeseen circumstances,' which the Costa Mesa City Council exercised in a regular meeting Tuesday. Officials agreed to operate below the 5% threshold to square away $2.9 million remaining from a $3.6 million 2024-25 budget gap and to pay back 'the CAN' over the next five years by building repayments into future budget plans. But as an even worse economic forecast looms in the foreseeable future — with Costa Mesa finance staff projecting a possible $6.5-million gap between revenue and expenditures in the coming fiscal year — those who helped craft the law warn such waivers set a 'dangerous precedent' for the city's finances. Talk in council chambers Tuesday largely focused on which improvement projects would be cut, staff having already recommended authorizing the CAN's 'Emergency Exception' clause. City staff initially put forth a list of 10 projects that could be deferred, amounting to a collective $2,872,776 in savings, including several building and infrastructure upgrades at City Hall, a $450,000 west side restoration project, a butterfly garden and a $400,000 modernization of the Costa Mesa Country Club. Two other alternatives featured edits offered by the city's Finance and Pension Advisory Committee (FiPAC) — which spared City Hall heating and air handler upgrades but put proposed senior center and sewer line improvements ($250,000 apiece) on the chopping block — and a modification proposed during an April 22 council study session. Public Works Director Raja Sethuraman said even with the deferrals, this year's list of projects was more than enough to keep department staff busy. 'With the requested deferral of approximately $2.9 million we'll still have 96 projects in our capital improvement projects, with $90 million in projects to be implemented over the next two to three years,' he told the council Tuesday. While the action taken by the council sews up an immediate fiscal hole, questions still linger about what could happen to the CAN fund next year as an even more protracted slowing down in revenue is projected. Former Costa Mesa councilmembers and mayors Steve Mensinger and Jim Righeimer issued warnings about dipping into the CAN in a letter addressed to the council and submitted it as a public comment at Tuesday's meeting. They said the ordinance specifies the capital fund set aside can only be canceled by a declared fiscal emergency. 'What's happening today doesn't follow that legal path,' the pair wrote. 'Instead, the council is trying to reframe a raid on the CAN fund as a 'budget adjustment' or a technical allocation change. That's not honest. 'If you're reaching into the savings account, just say it: you're declaring an emergency. Because by law, that's the only time you're allowed to do this.' Neither Righeimer nor Mesinger appeared at Tuesday's meeting. But Mayor John Stephens challenged their interpretation of the ordinance. 'We don't need to declare an economic emergency, we just need to declare that there's an economic downturn, which I think there clearly is,' he said. '[And] the language of the CAN ordinance is not entirely clear it has to be an unforeseen economic downturn.' In addition to proposing the $2.9-million withdrawal be replenished via budgeted payments, Stephens asked staff working on the 2025-26 operating budget to be on the lookout for cost-saving solutions — including using reserve funds, eliminating job vacancies, cutting consultant contracts and a possible repeal of the ordinance. 'We need to be very creative there,' the mayor said. 'That includes putting the CAN ordinance on the table for repealing or amending, and it includes using reserves we've built up and all the other items I mentioned.'
