City council reviews Signal Hill’s updated 2019-2020 budget

Declining sales-tax revenue a potential problem, staff warns.


Courtesy City of SH

Pie chart based on the proposed Signal Hill 2019-2020 fiscal-year budget, which the Signal Hill City Council reviewed at a special meeting on May 30, showing the distribution of general-fund expenses by department

The Signal Hill City Council held a special meeting on May 30 to update the City’s proposed operating-and-capital budget for its upcoming July 1, 2019, to June 30, 2020, fiscal year, the second year of a two-year fiscal cycle. Though the revenue-and-expense budget totals the same as the council approved it last year, it includes lowered sales-tax revenue and higher personnel costs.

Each of the city’s municipal departments presented on its portions of the budget, including accomplishments and future goals, during the nearly four-hour meeting. The council also adjusted official stipends, council travel and youth-program fees.

Budget overview
Mayor Lori Woods said that the budget reflects the city’s strategic goals and leadership values.

“This is kind of a ‘state of the city’ for our finances,” she said. “It tells you what we’re focusing on, what we’re emphasizing, what we feel is important to the health of our community.”

City Manager Charlie Honeycutt gave an overview of the budget, which the council had approved last June as part of the city’s 2018-2020 two-year budget.

“The budget was constructed using conservative budgeting practices and incorporates priorities considered in the city’s strategic plan,” he said. “Staff also incorporated economic data collected throughout the year.”

Honeycutt added that the 2019-2020 budget is balanced and maintains sound reserve levels.

“The combined general-fund reserve and economic-uncertainty reserve– which we refer to as our ‘rainy-day fund’– represents approximately 60 percent of the general-fund expenditure,” he said.

Sales taxes provide most of the city’s revenue, though that projected income has been revised downward because of a decline in auto-dealership sales, Honeycutt said.

“This is the major change in what we had presented last year,” he said. “The decrease in revenue is primarily due to the recent and unanticipated closure of our Nissan dealership. There’s a general projected slowing in auto sales, as well as a projected decline in sales in major-industry groups, including online office-supply sales.”

Honeycutt also said that pension costs have been increasing, though the impact of that obligation will be offset by pension-reserve funds that the City had built up in anticipation of the current costs.

Future economic development needed to generate more income has been hampered by a lack of state redevelopment funds, Honeycutt said.

“Without economic-development activity, there may be a need for the City to evaluate new sources of revenue to guard against revenue shortfalls in the [next five] years,” he said.

Other adjustments to the budget across all departments since last year are due to contractual salary and benefit adjustments, pension-rate increases, higher general-liability and workers’-compensation insurance premiums and state-mandated stormwater-compliance costs, Honeycutt said.

Scott Williams, finance director, added numbers to Honeycutt’s overview, noting that the budgeted general-fund balance of $8.95 million is the same as projected last year. Total revenues are still $22 million– after about $950,000 transferred in from reserves– against an equal amount of expenses.

Sales-tax revenue accounts for 70 percent of the city’s income, with property taxes accounting for another 11 percent, Williams said.

“This represents strength, as well as vulnerability,” he said, echoing Honeycutt’s expressed concern. “[This] is part of a larger discussion– the need for either revenue diversification or an increased revenue base.”

Williams also said that reserved funds total to about $14 million, with some of those funds having increased after an audit.

Deputy Finance Director Angelina Garcia said municipal salaries increased by about 2 percent overall, including the state-mandated minimum-wage increase from $12 to $13 per hour for hourly workers.

She said that the $3.2 million allocated to the California Public Employees’ Retirement System (CalPERS) represents 14.4 percent of the general-fund operating budget.

Williams projected that in five years uncontrollable costs, such as pensions and risk premiums, may overtake revenues by 2023 because of flat sales-tax projections.

“The financial model does not take into account [possible] recession,” he added.

Each department then presented on its budgets and activities, each highlighting its employee-training efforts and noting that the main cost adjustment in the coming year’s budget was for personnel.

Courtesy City of SH
A graph shared at the May 30 Signal Hill City Council’s budget workshop projecting expenses exceeding revenue by fiscal-year 2023

Administrative department
Deputy City Manager Hannah Shin-Heydorn said that the administrative department supported projects last year– such as the new library, developing a new parks-and-recreation master plan, conducting a utility-bill audit, starting a solid-waste audit, coordinating a Proposition 64 subcommittee, performing legislative advocacy and engaging the community– including a new e-newsletter.

Looking ahead, Shin-Heydorn said that emerging issues include affordable housing, homelessness, marijuana regulation, small-cell wireless facility installation and new state-legislation advocacy.

Honeycutt said that economic development and housing imperatives will focus on sales-tax generation and development projects, including Heritage Square, 700 E. Spring St., a Honda lease at 1400 E. Spring St. and auto-center expansion.

He also noted that his department will consider expanding affordable housing and student/senior housing.

“What we heard through the parks-and-recreation needs-assessment is this desire for teens or students and our senior population to coexist, […] to interact with one another,” Honeycutt said.

Finance department
Williams said that his department has focused on budgeting and auditing, implementing a new enterprise resource-planning (ERP) system and paperless utility-payment option for residents.

The coming year will bring more employee training, auditing and technology implementation.

Community development
Scott Charney, community-development manager, said that his department of six employees has four divisions– planning services, neighborhood enhancement, building safety and oil-field services.

“We are the smallest department; however, we’re mighty,” he said. “You see evidence of our work throughout the city, mostly in the form of private development.”

Colleen Doan, planning manager, said the department’s accomplishments in the last year included remodels, completing the Crescent Square housing development, approving the Summerland residential development and approving conditional-use permits for two businesses.

She also said her department inspected 52 facilities to issue licenses and permits.

Charney said new projects for the upcoming year include developing an industrial park on Walnut Avenue and two residential projects. The department will also continue its efforts toward neighborhood enhancement, stormwater compliance and sustainability.

Police department
Police Chief Chris Nunley said that his department of 51 full-time and four part-time employees has focused on community policing and outreach, employee development and using technology to streamline its efforts.

External grants allowed the department to conduct DUI (driving under influence) checkpoints and acquire first-responder safety equipment, he noted.

“We do want to increase enrollment and engagement of our police volunteer program,” Nunley said, thinking long-term.

His department will also focus more on using social media, homeless outreach, expanding neighborhood-watch programs and bike patrolling.

“You probably already have noticed […] we’re increasing our bike patrol throughout the community,” Nunley said. “People won’t necessarily come up to [officers] when they’re in a police car, but when they’re out there on a bicycle, people flag them down, talk to them all the time.”

Community services
Aly Mancini, community-services director, said her department of eight full-time staff, supplemented by about 30 additional part-time employees, throughout the year worked on library, transportation and animal-control services, as well as parks-and-recreation and after-school programs.

Staff also distributed fresh food to 27 fixed-income residents and provided low-cost transportation to 96 participants.

Mancini estimated that about 7,000 people attended the special events her department coordinated, including concerts and movies in parks and a singing competition.

Looking ahead, Mancini hopes to finalize a new parks-and-recreation master plan and complete View Park.

She also looks forward to the opening of the new Signal Hill Public Library on Aug. 10 and afterward helping to renovate the community center where the library has been temporarily located for two years.

Her department will also develop and install the first historical city exhibit in the library’s History Room with the Signal Hill Historical Society.

She added that the Signal Hill Community Foundation has raised $200,000 so far to provide library services and equipment.

“The library just continues to grow and transform from a place of research and reading to a place of activity and excitement and social connection,” Mancini said.

Public works
Kelli Tunnicliff, public-works director, said that her department of 28 full-time employees, four interns and a Conservation Corp worker is responsible for maintaining public facilities and services, such as the city hall and library buildings, parks, streets, the public fleet, water facilities and the design and construction of capital-improvement projects.

Tunnicliff recounted construction projects and street improvements completed last year, including most of the new library, EV-charging stations, resurfacing a playground, renovating Bixby Trail, LED-retrofitting of streetlights, nearly completing the design of View Park and completing the Los Cerritos Channel Stormwater Capture project.

The upcoming year’s slate includes completing 16 additional capital-improvement projects and beginning 14 new projects with a budget of nearly $12 million, she said. Those include completing an ADA-compliance assessment and implementing changes accordingly, completing a pavement-management plan and reviewing and installing new small-cell wireless devices as per a recent city ordinance, Tunnicliff said.

She noted that an overlay of Spring Street will begin July 1.

Official stipends
After budget presentations, Shin-Heydorn asked the council to evaluate stipends the City gives to councilmembers and commissioners.

She said that the City currently gives councilmembers a stipend of $667.44 each per month– which the council is allowed to increase by up to 5 percent per year, according to state law.

“Something that people may not know is that city populations form a baseline for city-council compensation,” Shin-Heydorn said.

The average and median stipends in comparable local cities are $937 and $808, she said.

The council agreed to increase the stipend but expressed concern that it shouldn’t be too high.

“When we made the [last] adjustment in 2017,” Woods said, “[it] was so that we [would] not see many years go by and then have the public see a 35-percent increase.”

Councilmember Tina Hansen suggested tying the stipend increase to the same cost-of-living-adjustment (COLA) that applies to other municipal salaries.

Shin-Heydorn estimated that to be between 4.5 to 8 percent since 2017– which the city would implement after the November 2020 election and adjust every two years.

The council made the same assessment and decision regarding city-clerk and city-treasurer stipends, currently at $406 per month.

After similarly assessing commissioner stipends, the council also agreed to increase parks-and-recreation and civil-service commissioner stipends from $65 to $75 per meeting.

Planning commissioners currently receive, per meeting, $125, which is higher than stipends in comparable local cities, Shin-Heydorn said. The council agreed to keep it the same.

All the new stipends will be implemented and built into the budget after the next election, Shin-Heydorn said.

Council travel
After some discussion, the council also agreed to increase its travel allowance in order to better advocate for or against local and federal legislation.

Such expenses are currently budgeted at $3,000 for each individual councilmember to attend regional meetings, plus $8,000 for councilmembers collectively to use for lobbying and conferences, Shin-Heydorn said.

The council agreed that instead of paying a monthly retainer to federal-advocacy group Edington, Peel and Associates (EPA) of $2,000 per month, or $24,000 per year, it would reallocate those funds so councilmembers themselves could travel to conduct that advocacy, retaining EPA only as needed.

“Largely, we do deal with a lot of things on a regional bases,” Honeycutt said. “We’re partnering with another city or the Gateway Cities COG (council of governments) if it takes a position on something or seeks out federal funding. But under the current climate, […] we spend more time opposing legislation than we do supporting it. I think it just becomes more important for our individual councilmembers to advocate on behalf of the city.”

The council concurred, with Councilmember Keir Jones also suggesting more transparency.

“If we’re […] going to Sacramento and we’re not successful with the bills that we’re trying to defeat or get passed, we need to look at a different way to make sure we’re bringing funds back to the city or blocking things that we don’t want to see going through,” he said.

Woods said it’s important for councilmembers to attend regional meetings, such as Gateway Cities COG and the League of California Cities, since one decision could have a big effect on the city due to its relatively small size.

“Something we overlook could seriously affect us,” she said.

Councilmembers confirmed that many regional-government meetings do not provide stipends, though some do.

“Councilmembers don’t go to meetings because they’re going to get paid for them,” Hansen said. “They go to meetings because they want us to be represented and to have a place at the table– a voice at the table– and to be known.”

The council agreed to reduce the $24,000 budgeted for external federal advocacy by $9,000, keeping $15,000 in reserve to use as needed, and reallocate that amount to increasing individual-councilmember travel budgets from $3,000 to $4,000 and the collective budget from $8,000 to $12,000.

Youth programs
Finally, the council considered costs and fees for youth-recreation and after-school programs, since fees for those services do not completely cover the city’s costs.

After some discussion, the council agreed to increase fees for the city’s After-School Recreation Club (ARC), which serves about 70 students for 38 weeks during the school year, by 10 percent as of Jan. 1, 2020, instead of the 20-percent staff suggestion. The fee for residents will increase from $20 to $22 per week (with scholarships available) and $30 to $33 for nonresidents.

It similarly agreed to increase fees for the City’s Summer Day Camp program from $60 to $66 per week for residents and from $80 to $100 for nonresidents.

Hansen noted that while many summer-camp programs exist in the area, it’s important to provide a low-cost alternative.

“What I want to see us moving toward is serving the families that can’t afford these other programs,” she said.

The council opted to keep the city’s fees for its Tween Program– budgeted at $35,000 per year and serving only a handful of students– the same, at $40 per month.

As to the sports program, Shin-Heydorn said that the City partners with the City of Long Beach and charges only a $10 registration fee. So, while the city’s cost is budgeted at $85,765 to serve approximately 70 to 100 youth, it receives no revenue.

The council agreed that, starting in the fall, Signal Hill Park will be removed as a sports-program location option, effectively suspending the city’s involvement.

However, the vote was not unanimous, with Councilmember Edward Wilson dissenting.
“I’m all about Signal Hill providing services for Signal Hill residents rather than outsourcing to Long Beach,” he said. “We’re trying to build [a] community, and it starts with the youth and having things that they can call and identify with as ‘Signal Hill.’ I understand there’s a cost associated with it, but there’s also a reward.”

Shin-Heydorn said that the public will have a chance to comment on the updated 2019-2020 budget at the June 25 city-council meeting, when the council votes to implement it as of July 1.

The next regular Signal Hill City Council meeting will take place Tuesday, June 11, at 7pm in the council chamber at 2175 Cherry Ave.