An unexpected surge in tax revenues on property transfers could erase more than a quarter of the city’s projected $7.5 million deficit next year, according to a first quarter budget update released by the city last week.
The report, recapping the city’s fiscal performance from July through September, shows that the Real Property Transfer Tax is running 33.7 percent above projections in the adopted budget. That would amount to about $2 million in unbudgeted revenues if the trend continues through the final three quarters, City Manager Phil Kamlarz wrote.
However, the report also contained some troubling news. Revenue from parking fines, which for years has lagged behind expectations in contributing to the city coffers, is 6.3 percent lower ($585,000) than projections and parking officers have written two percent fewer tickets than during the same time period last year.
Also the fire department spent 42 percent of its overtime budget in the first quarter. Kamlarz wrote that the department anticipates exhausting its entire overtime by the end of December, which is only halfway into the fiscal year ending in June. Projections show fire department overtime expenditures costing the city an extra $400,000 to $600,000.
“We’ve been slammed with a lot of vacancies,” said Deputy Chief David Orth.
In September the department had 18 firefighters on leave and seven job openings, he said. Six newly trained firefighters will begin work by Christmas. Because of additional retirements in December, Orth added, the department would have to hire more firefighters and probably wouldn’t be able to straighten out its overtime budget until June.
Last June, the City Council approved the current 2005 fiscal year budget that closed a $10.3 million deficit in the city’s general fund.
Overall, the city spent approximately 23 percent of its budget in the first quarter, essentially in line with projections.
Although the city’s general fund is balanced for the current fiscal year, two special funds require emergency action, according to Kamlarz. Measure B, a fund supported by sales tax revenues, is in deficit and will require a mid-year $2 million cut in spending. The public works and transportation departments use the fund and are working with the city manager to identify expense reductions, Kamlarz wrote.
The Central Services Fund, an internal services fund for mail delivery and in-house printing services, currently has a shortfall of around $240,000, according to Tracy Vesely, the city’s budget manager.
While it’s too early to gauge how much money city taxes will generate this year, Kamlarz wrote that most are tracking close to budget estimates. First quarter returns for the hotel tax, utility users tax and interest income are on target, Kamlarz wrote, although year-end projections showed them coming in at a combined $573,000 below budget forecasts. The business license tax showed a low first quarter return, but Kamlarz wrote he thought it would track even with budget assumptions by the end of the fiscal year.
Projecting city revenues has proven a difficult task for city officials. Last year, the city underestimated property tax revenue by $363,071 and property transfer tax revenue by $3.3 million, while overestimating income from the sales tax by $964,892, the hotel tax by $331,389, interest income by just over $1 million and parking fines by just under $2 million.
With Berkeley still unable to collect its budgeted revenue from parking fines, Kamlarz wrote that the city was considering several reforms, including improving officer training, developing an employee recognition program to improve morale, adding field supervision, increasing officers’ hours and changing enforcement plans for parking meters.
Kamlarz is scheduled to present a mid-year report in February that will include proposals for using unanticipated revenue such as the property transfer tax intake for critical projects and asking the council to approve mid-year expenditure reductions in operating funds running a deficit.›