The Burbank City Council got a first look at the upcoming year’s budget in a report by Financial Services Director Jennifer Becker, who signaled an upswing in local revenue growth and easing economic tensions locally.
The city projected a general fund balance of $2.2 million for the fiscal year 2024-25, and while city staff reported that revenues exceeded expectations, councilmembers indicated they plan to keep a tight grip on municipal purse strings as they cited ballooning pension costs.
Those increasing pension liabilities will be enough to push coffers into the red by 2027, but the city is primed to adopt a plan aimed at addressing the problem by generating additional savings to offset a future deficit, said Becker, at the Tuesday City Council meeting.
Budget expenses are expected to grow by about 5.7% over the next five years, outpacing revenue growth of 4.1% and leading to the projected deficit of $200,000 in 2027. Staff estimates that figure will further rise to a $1.7 million deficit in 2028.
Property tax revenues spiked 7.4% between 2022 and 2023 as a result of commercial development in Burbank, city staff said. New construction like Sphere Studios and the Warner Bros. Second Century developments also brought significant revenues.
The city also saw a 1.7% increase in sales tax revenues in the 2023-24 fiscal year compared to the prior year, despite a 47.1% plunge in motion picture sales as a result of the SAG-AFTRA and Writers Guild strikes last year.
As for spending, fire and police departments account for about half of the budget for the upcoming year.
The Burbank Fire Department has requested additional funds to expand the EMS division, the fire recruitment academy, and to replace medical equipment.
The Burbank Police Department seeks funding for additional parking enforcement and patrol vehicles.
Meanwhile, the city attorney’s office will look to hire new staff to support a pilot program that will enforce new tenant protection laws and mediate landlord-tenant disputes.
About 75% of the city’s operating general fund budget is comprised of salaries and benefits, including pension costs
Sacramento’s mounting $27.6 billion deficit crisis means CalPERS pensions remain partially unfunded by the state, placing the liability on the city to pay the remaining obligations to retired police, fireman and city staff.
Estimates on those increasing pension costs grow by about $2 million per year.
Because of this, financial services staff developed a plan to double the money Burbank sends in payments to CalPers, a jump from $9 million to $18 million over a three-year period. “The expanded pension funding plan will help address our unfunded liabilities and generate additional recurring budget savings to help offset future recurring deficits,” said Becker.
DEPITE GROWTH, CITY MOVES FORWARD WITH CAUTION
Overall, Becker said the city is experiencing consistent growth and resilience after economic fluctuations in the years following the COVID-19 pandemic, “providing a positive financial outlook for the upcoming fiscal year.”
The city’s current unemployment rate is below the national average, and, with several large-scale development projects and new business openings on the horizon, the city’s revenues are increasing steadily.
“Inflation is easing a bit, but we know there’s no going backward to the prices we saw before the pandemic,” Becker said. “What we need now is to find the equilibrium where the cost of goods and the overall cost of living isn’t growing faster than our revenues and incomes.”
Combined with the likely end to related interest rate hikes, Becker said economists are hopeful for steady growth in 2024.
Despite the positive outlook, Becker warned that the city must proceed with caution moving forward.
“The entertainment-related labor strikes in late 2023 had a profound, albeit short-term, impact on Burbank’s business economy,” she said.
Additionally, Becker said the November 2024 election has the potential to create instability within financial markets and the federal government itself.
“Those impacts would certainly trickle down to local governments. Fortunately, prior City Council decisions to increase reserves and set aside funds for future liabilities have placed Burbank in a favorable position to weather any future economic events.”
The public hearing and adoption of the citywide budget and fee schedule is scheduled for June 4.
First published in the May 11 print issue of the Burbank Leader.
