Lean Budget Keeps Focus on Neighborhoods, Infrastructure & Streets

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DESPITE RISING PENSION COSTS, MAYOR FAULCONER’S PROPOSED FY2018 BUDGET STILL PRIORITIZES CORE NEIGHBORHOOD SERVICES, ROAD REPAIR & LARGEST INFRASTRUCTURE BUDGET THIS DECADE

San Diego – Continuing his commitment to invest in neighborhoods despite a lean budget year, Mayor Kevin L. Faulconer recently ​introduced the City of San Diego’s Proposed Fiscal Year 2018 Budget – a balanced plan that prioritizes core community services such as street repair, recreation centers, libraries and public safety while making the largest infrastructure investment of this decade.

“We’ve made so much progress over the past three years to invest in all of our neighborhoods, and this budget plan keeps the focus on key services the City Council and I have worked hard to restore,” Mayor Faulconer said. “Even though pension costs are taking a bigger chunk out of our bottom line I am going to keep my promise to put our neighborhoods first. This balanced budget takes a fiscally responsible approach to ensure we keep our libraries and rec centers open, continue our march to repair 1,000 miles of streets and provide hundreds of millions for infrastructure projects.”

Despite the need for budget reductions driven by surging pension costs, Mayor Faulconer’s proposed budget funds 349 miles of street repair, maintains operating hours at libraries and recreation centers at the highest levels in a decade, and includes key improvements to public safety.

The annual budget for the Capital Improvements Program, which funds most infrastructure projects throughout the city, has also seen significant growth since Mayor Faulconer took office. It has more than doubled since FY2014 and now stands at $445 million.

The City is projecting modestly improving revenue from property, sales and hotel taxes in FY2018, but that growth has been outpaced by a significant increase in the City’s annual pension payment following recent changes by the San Diego City Employees’ Retirement System’s independent pension board. The portion of the pension payment for the City’s $1.4 billion General Fund has increased by $45 million, from $191 million in FY2017 to $236 million in FY2018.

The increase stems from changes in actuarial assumptions calculated by SDCERS, such as projected longer lifespans for retired employees, and lower-than-expected investment returns in the past fiscal year.

The overall result is a need to balance for a total of about $80 million, which this proposal does.

“The good news is that our local economy keeps growing and is helping us keep intact or grow many of the core services that our residents rely on the most,” Mayor Faulconer said. “But the reality is we have limited resources because the City is still required to pay off the pension promises made by past City leaders. That’s money that could be going to our neighborhoods and serves as a reminder that City Hall must continue to live within its means.”

Mayor Faulconer has proposed balancing the budget with about $22 million in cuts spread across various City departments, the use of $16 million from a new pension stabilization reserve he proposed to the City Council, fiscally responsible changes to reserves, and rolling over $8 million in projected surplus from the current fiscal year budget, among other things.

The structurally balanced budget follows responsible financial practices by ensuring that ongoing expenses are funded with ongoing revenues and that one-time expenses are paid for with one-time revenues. The proposal includes:

  • Up to $71 million in funding for 349 miles of street repair
  • Most funding for the Capital Improvements Program this decade – $445 million
  • Maintaining recreation center and library hours at the highest level in a decade
  • Funding to staff five new parks with 33 acres of parkland
  • $74.1 million to move forward on the innovative Pure Water recycling program
  • $1.1 million increase for Planning Department to implement housing affordability initiatives and develop the Parks Master Plan
  • Continued funding for year-round, indoor shelter for homeless individuals and veterans and other homeless services, $3.4M
  • Four academies for police recruits
  • Continued funding for the plan that has improved 9-1-1 police dispatch response times
  • A firefighter academy to maintain full staffing levels
  • Funding for operations of the new Bayside Fire Station (scheduled to open in December)
  • A fire-rescue Fast Response Squad for the San Pasqual Valley (previously a pilot project in FY2017)
  • Maintaining arts and culture grants above FY2015 levels – $10.4 million
  • Fully funding reserves to policy targets and making annual pension payment 

Demonstrating confidence in the City’s strong financial discipline and underlying fiscal health, Fitch Ratings in February upgraded the City’s credit rating. Fitch noted the “city’s exceptionally strong gap-closing capacity” as it faces the FY2018 budget. Fitch Ratings upgraded the City’s Issuer Rating from AA- to AA and upgraded the City’s General Fund-backed Lease Revenue Bonds from A+ to AA-, with a stable outlook for all ratings.

The $3.6 billion budget proposal recommends spending levels for City operations and capital projects for Fiscal Year 2018, which runs from July 1, 2017 through June 30, 2018.

The final budget will be adopted in June following several weeks of review by the public and the City Council. Mayor Faulconer will formally present the budget proposal to the City Council at 2 p.m. Monday in the City Council chambers.

For more information, the entire proposed budget can be viewed online here, this Fact Sheet provides a summary of notable changes, and here is a set of budget infographics.

 

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