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Arroyo Grande Asks for Modest Spending Increases

Revenue into the City of Arroyo Grande is coming in ahead of projections, prompting city staff to ask the council for modest budget increases.
The surge in the general fund has come from “one-time savings in the prior year and higher than expected revenues in the current year.” The staff brought to council a request for $203,000 in additional spending across a variety of departments this week.
The request is in contrast to a city report in January that outlined future financial challenges for the city, which included increases in retirement costs and the Five Cities Fire Authority. The request to the council acknowledged as much this week.
“The City is currently facing a mixed fiscal picture. Revenues in many General Fund categories are increasing and economic indicators are generally favorable,” the staff report said. “The City has strong reserves and a diverse revenue stream, which will be important in facing the upcoming challenges associated with increasing retirement costs, deferred infrastructure maintenance, and other unmet needs.”
Some of the requested increases included:
Contractual services to keep up with recent development activity
Fire hazard mitigation in the James Way open space
Participation in the Economic Vitality Corp. Diablo closure economic study
Spending on these items and others is based on an estimated $237,000 in additional revenue to the city from a variety of sources, including sales tax revenue, hotel tax, building permit fees and the sale of equipment.
In January, the council asked city staff to seek the public’s input on tightening the belt or ways to create more income to address anticipated cost increases in upcoming years. Mayor Jim Hill said it would be the most important discussion they would be having in the next six months.
Among the measures presented to the council at the time was reducing staff, offering early retirement incentives, and outsourcing work, as well as raising taxes and fees, selling city property or ramping up economic development opportunities for additional revenue.
Two of the factors exacerbating the growing gap between revenues and expenditures are a requested increase from the Five Cities Fire Authority and increased costs for retired employees. CalPERS cost increases are affecting cities across the state, said City Manager Jim Bergman.
The fire authority is seeking a $1 million increase in funding from Arroyo Grande, increasing the city’s cost from $2.2 million to $3.3 million. Additionally, retirement costs are expected to rise from its current $2.3 million a year to $3.5 million.

By Justin Stoner


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