Burbank is on the road to economic recovery following the pandemic-induced squeeze on municipal coffers, city staff said this week as councilmembers approved a balanced fiscal year 2023-24 budget.
The Council meeting on Tuesday focused on budget discussions which highlighted a healthy general fund balance, utility rate increases, funding for infrastructure projects and growing pension costs that could bring the city into deficit in coming years.
The Council unanimously passed the budget at the meeting, the last in a month-long series of hearings held in preparation for the next fiscal year, which begins July 1. Burbank’s roughly $848 million budget has recovered from the economic impacts of the pandemic, city staff members said, though it is experiencing both benefits and challenges from inflation.
“The city’s revenues are recovering at a faster rate than anticipated, with most revenues at or above pre-pandemic levels,” said City Manager Justin Hess. “Of course, on the flip side, our expenditures have also increased at a high rate due to inflation and supply chain issues.”
HEALTHY GENERAL FUND BALANCE
City finance officials projected that Burbank’s general fund — its main operating fund that includes most of the city’s departments — will end with a positive balance of about $4.6 million in fiscal year 2023-24 compared to $400,000 in 2022-23.
That healthy balance reflects a stark difference from projections given in previous fiscal years, which forecasted a deficit by 2023.
“Clearly, we’ve done very well on the cash side. We’ve been very conservative over the past couple of years, especially during COVID-19, where we were unsure of a lot of our revenues. We did a lot of reductions, we put away a lot of general fund cash … it is a very comfortable place to be for the city,” said Jennifer Becker, financial services director.
The city has done well to limit spending, said financial officials, and has reported an additional $18.4 million in its unallocated general fund balance, which is comparable to its savings account.
Despite reports of healthy reserves, the general fund’s balances are projected to teeter into deficit by mid-2025. By the 2027-28 fiscal year, the city is expected to be operating with a deficit of about $2.2 million.
Amid projected, persistent inflation, several large-scale development projects on the horizon, and the opening of new businesses around town, Burbank’s revenues are expected to increase by 5.9% this fiscal year, according to city financial staff.
But spending will exceed revenues by about $7 million this year, with the city’s biggest costs being the police and fire departments, which both grew proportionally to other departments’ budget appropriations.
“Burbank is realizing higher revenues in the current inflationary environment and at the same time dealing with an increased cost of providing services to the community, in addition to elevated pension costs resulting from stock market volatilities,” wrote city staff in a report to City Council.
RISING PENSION COSTS, LOOMING DEFICIT
In addition to a few large one-time costs — the most significant being the purchase of three new fire engines and a $1.4 million allocation to develop a Rancho Equestrian Neighborhood master plan — the main driver of the projected recurring deficit by fiscal year 2025-26 is the city’s pension plan.
“Managing costs associated with CalPERS pensions continues to be a challenge for the city, leading to a significant fiscal constraint,” said Becker.
Pre-funded pension plans are funded through a portfolio of investment assets managed by CalPERS, the nation’s largest public pension fund. Over the course of a Burbank city employee’s career, funds are allocated and applied to a group pension fund from the city’s general fund.
This money is invested in assets like stocks, bonds and real estate with the goal that, by the time an employee retires, the contributions to the plan will have grown enough to pay benefits for the entirety of the employee’s retirement.
Like all investors, pensions were hurt in the steep stock market declines during the COVID-19 pandemic. Stocks have yet to rebound to growth levels from the times preceding the pandemic. As a result, the city has chosen to cut spending in anticipation of the growing costs of paying out pensions.
“We’re being conservative for the next couple of years. Certainly, the situation could change, but right now the plan that we have in place pushes any kind of general fund deficit to at least four years away. That gives us a lot of time within the next couple of years to reassess the pension fund plan, and to the extent that we can be more aggressive in coming years, we’ll certainly look to do so,” said Becker.
INFRASTRUCTURE PROJECTS PLANNED
The City Council passed roughly $37.3 million in new and ongoing infrastructure projects for the next fiscal year and earmarked $8 million toward street and sidewalk repairs.
The figure was a noticeable increase from the $22.5 million allocated for capital improvement projects last fiscal year and does not include BWP projects or the additional $4.7 million slated for infrastructure maintenance funds in 2023-24.
Infrastructure projects include investment in the city’s streets and sidewalks, along with a variety of capital projects including building improvements, park playground and facility upgrades, street and pedestrian improvements, and initial funding toward the future development of a new Central Library and Civic Center. The city has also allocated funds for the Brace Canyon Park ballfield improvements, irrigation replacements at DeBell Golf Course and McCambridge Park.
DEBATE OVER RENTER RELOCATION ASSISTANCE
Much of the meeting time Tuesday was dedicated to hearing public comment from renters and landlords alike over the small budget item of renter relocation funding, an item that accounts for $600,000 in one-time funding, or about 0.2% of the general fund. The program could assist as many as 240 households, according to city staff.
Most landlords dubbed the item “irresponsible spending” in their comments, though others came out in support of the item. Tenants, meanwhile, many of whom fell victim to a swell of no-fault, just-cause eviction notices in April, said that the funds could be the relief they need to avoid falling into homelessness.
Ultimately, the funds would end up back in landlords’ pockets, as the measure is intended to provide security deposit and additional rent monies for tenants who have been forced to relocate at no fault of their own.
The measure is seen as providing tenants with some financial relief as the Council looks into passing other renter protections, including closing a loophole in state rent control law that allows for landlords to evict tenants if they have an “intent to renovate,” according to state law.
The funds are retroactive back to tenants who received their eviction notices in April.
“There is no out-of-pocket cost to property owners and, if the funds aren’t used, they fall right back into our one-time available funds. We have the means to do it. I can think of no good reason not to do it other than, I guess, some people fundamentally disagree with lending a helping hand. I disagree with that point of view,” said Vice Mayor Nick Schultz during the meeting.
Home Again Los Angeles, the city’s lead homeless and housing services provider, has agreed to take on the relocation assistance service.
The renter relocation funding item was passed with the rest of the budget.
First published in the June 17 print issue of the Burbank Leader.