Budgetary Pitfalls

As most of you are neck deep in your budget, we thought we would share some budgetary pitfalls that we have experienced over the years.

GENERAL FUND

1. If you have been diligent about raising fees to match increasing costs, watch out for legislative efforts to cut positions in fee-producing activities as it may decrease the cost of the fee service. In California, that would require reducing the fee.

2. If you have a cost allocation plan to allocate general fund administrative costs to other funds, watch out for attempts to charge general fund positions that are in the allocations to those other funds. You might be charging the other fund twice for the same position.

3. Watch for departments that want to defer on-going maintenance as this could lead to greater financial demands in the future when revenue is even less available but the deferred maintenance needs have piled up.

4. HOAs vs. Others – most cities have imposed Home Owner Associations on new development to avoid providing street maintenance and street sweeping in those areas. In other words, HOAs are paying taxes to provide “others” with services that they don’t receive. Is your agency near the tipping point where there are enough HOAs to change the “game.”

5. Pay attention to the reimbursement schedule for grants and other repayments for work undertaken by the City. A grant project that is completed in say April, May or June of one Fiscal Year, may not be reimbursed until the following Fiscal Year.  This holds true for all revenues. It is imperative that the flow of various revenues is understood, such as the “catch-up” sales tax payments.

6. Provide those within the organization the incentive to raise their fees routinely; don’t grab it all for the General Fund; share in the benefits.

7. Start looking for replacement costs that hit hard every few years (i.e. community center chairs, tables, carpet, etc.) and try to even them out over time. Instead of dealing with a $100,000 cost every five years, consider replacing $20,000 of the needs every year.

8. Check all reimbursements due from other agencies, even the most mundane like any shared intersection reimbursement agreements with contiguous agencies.

UTILITY FUNDS

1. If your area is experiencing drought conditions, remember that your water consumption charge is likely to contain some of the utility’s fixed costs. If consumption goes down, your agency may not be able to meet its fixed cost obligations without possibly significant rate increases.

2. If your agency adopted a sewer fee that was based on water consumption, the same drought conditions could also affect the financial viability of your sewer fund.

3. Decreased water flow into the sewer system may increase the need for ways to “clean” the sewer system. Make sure your maintenance staff is considering this issue and be supportive.

4. Pressure to raise utility fees because of drought conditions may discourage your agency from continuing its on-going capital replacement program. Be proactive by discussing the consequences of deferred replacement.

5. This may be a good time to identify capital projects that reduce the demand on water and the wastage of water, leaky pipes, uncovered water sources, old style watering devices, etc. Perhaps the water agency (either your own or any separate one) may be able to finance water saving projects in city buildings and parks.

Scott Thorpe also contributed to this article.