The city got its first look at a 10-year financial project last week and the picture was not pretty. At its current rate of spending, the City of Corcoran can plan to be $11 million in the hole in its general fund by 2025.
The study went back to 2008 to capture the moment the general fund reached its peak in reserves: there was $5.6 million set aside in the general fund when the nation hit the “great recession.” Since then, revenues have not paced spending, with the city pulling reserves down to $4.2 million in 2009 and $3 million in 2010.
In 2011, reserves dropped to $2.4 million, with the city council at that time noting that reserves should remain at $2 million or more. The following year, the $2 million cap was met, but 2013 saw the city end the year with just $1.8 million in reserves. That amount stayed about the same until this year, when the city projected ending the year with just $1.5 in reserve.
According to NHA Advisors, the company that prepared the report, $1.5 million represents approximately 29 percent of all general fund expenses; the industry standard calls for reserves of at least 25 percent, with the current average at 44 percent and the median set at 31 percent.
The general fund continues its slide despite the city transferring in money from other sources. Income from the lease of the regional accounting facility—which is currently being restructured and expected to take another hit—has been transferred from a maintenance account to the general fund. Also, solar lease revenues have been transferred from the water fund, on which the solar project was put, to the general fund. City-owned properties have also been sold to benefit the general fund.
The city cannot keep up with its spending despite cutting positions. There are now 58 total city cmployees, down from 76 several years ago. Police cars are purchased with COPS monies or grant funds; all capital projects and equipment purchases have been out on hold, when possible.
In the past three years, NHA noted that the City of Corcoran had reached a “new norm” as far as revenues. Income has remained flat from inter-governmental sources, sales tax and property taxes. The city has lost sales tax income over the last few years. It has dropped from a high of over $1.5 million to just under a million dollars a year.
Ending this fiscal year with about $1.5 million in its reserve, the city goes down hill from here. Next year, the reserves are expected to be just $854,000. The following year, the reserve is wiped out and in 2018-19, there will be a deficit of over a million dollars in the general fund.
The downward spiral, according to the report, continues through ensuing years, from $3 million to $5 million to $8 million and $9 million, all the way to a deficit of $11.3 million in 10 years.
That’s a swing of about $17 million over 17 years.
The city will be talking about mitigating measures when it tackles budget discussion, due to begin this month. Some strategies include taking on additional landscaping maintenance, assuming janitorial services, cancelling recreational summer swim, cancelling pool maintenance contract and reducing the contribution to the Chamber of Commerce.
Cost recovery options include increasing the school district share of cost for the school resource officer; invoicing the school district for pool maintenance and electricity during swim season; recovering total cost for crossing guards and city employees at CUSD sites; increasing planning and engineering fees; and creation of LLDs at Hovnanian subdivision.
To generate revenues the city may decide to increase business license fees; increase animal license fees; increase building permit fees; increase the transient occupancy tax (hotel tax) by two percent; implement a utility user tax (on gas, electric, cable and/or phone bills); increase impact fees; look at strategic annexations.