A Winters Express opinion column
By Richard Casavecchia
Special to the Express
Over the past decade, the City of Winters has spent over $2,000,000 more from the General Fund than it has received in taxes and fees. If the average spending habits of the past decade continue, we will exhaust our reserve fund by 2026-2027.
According to the reports on the City website, we spent more than we received in nine of the past 10 years, the pandemic year being the outlier. For the rest of this column, when I mention averages, I am excluding fiscal year 2020-2021 because, due to the pandemic, it cannot be reasonably compared to the other nine years.
The reason for the budget surplus in FY20-21 was the pandemic. Expenses were reduced over fears of a decline in sales tax revenues. Actual revenues were up because of the “free” money given out to local jurisdictions.
Since FY16-17, revenues have increased an average of $212,000 a year with expenses increasing an average of $396,000 a year. But, we have overspent an average of $305,000 a year for the past decade.
Quick math shows our overspend per year is more than the difference between revenue and expense growth. This is because we were budgeting for losses for many years and the city council approved excess expenditures requiring reserve fund spending.
Looking at the budget to actual, it becomes clear we do not have a revenue problem, we have a spending problem.
Staff budgeted revenues have underestimated the actual by 4.4 percent in the budgets put before City Council for approval. This is a good thing and shows a conservative projection of revenue for planning purposes. Actual expenses are where our problem lies. City Council has been spending 7.2 percent more than the amounts they budgeted to spend, likely without realizing the long-term trend they were creating.
Put simply, the combined efforts of our elected City Council members and the citizens appointed to commissions that send expense proposals to the City Council for approval (mainly the Planning Commission) have resulted in poor long-term financial management. All the one-off “necessities” that seem small and insignificant have added up to long-term deficit exceeding $2,000,000.
Without a conscious change in behavior, our General Fund Reserve will be depleted by the end of 2026.
In government, revenue dictates spending. There are three sources of General Fund revenue that will be important in the next five years — Property tax, Transit Occupancy Tax (ToT), and Building Permit Fees.
Looking at the OpenGov portal, property tax seems to be increasing by $100,000 a year. In FY 23-24 Transit Occupancy Tax may increase by about $300,000–$400,000 over the FY 21-22 total once the Fairfield Inn is open if the resulting ToT is comparable to Hotel Winters. It should remain constant after that. Building Permit Fees are tied to new housing development and are essentially constant at about $550,000 a year but are the most volatile. Building permits will decrease once the currently approved developments are complete, I estimate that to be by 2027-2028 at the earliest.
That is a high-level overview. There is likely some nuance to certain numbers that I glossed over for the sake of brevity, but the bottom line remains the same. And the OpenGov portal concurs at the bottom of the General Fund page.
The Winters City Fiscal Policy, subsection on Fund Balance Reserves, subparagraph 3(d)(1) requires the City to have a reserve fund equal to 50 percent of annual expenses, and no less than half of the fund balance (25 percent of annual expenses) available at the end of the fiscal year. OpenGov says the current balance is 14 percent of expenses, that we have not met the requirement for six years, and “the City needs additional reoccurring revenues to fund the General Fund and allow for the accumulation of fund balance to replace the [funds]”.
For the new budget, the reserve fund should be $3.2 Million. OpenGov shows the fund at $1.1 Million.
What is the consequence of not meeting the policy? Apparently nothing.
I disagree with the OpenGov statement though. We need to cut our spending because it is both the responsible thing to do and expense is the variable we have the most direct control over. We are capable of doing it, FY20-21 saw a $625K reduction in expenses compared to the prior year. I am sure we can tighten our belt and find $300K a year to cut.
Being a responsible steward of public funds is the second most important job of government, particularly local government. It would be one thing if the overspending amounted to investments that increased revenues, and to some extent the revenues have increased, but expenses are increasing faster than our return on investment.
We are at a point where we can no longer spend money because the expense is “necessary.” Necessary needs to take a new meaning. Current and future city council members need to start cutting expenses in a big way or the next crop of council members may preside over the depletion of our reserve fund. We need to think differently, to be cliché we need to think outside the box. And yes, that means your favorite city program that doesn’t sustain itself may be cut for a while so it doesn’t get cut permanently.
Decision-makers need to hold themselves accountable for their own actions and not just give lip service to cutting expenses once or twice a year. Budget cutting needs to be a continuous, ongoing process. This year, if the City can keep to its budget, we should be able to increase our reserve fund. If not, then we’re possibly just three short years away from an empty reserve account.