Sausalito council approves budget for new fiscal year
The city will have a deficit of nearly $1 million in 2024-25, mostly caused by higher costs for insurance and pension-related debt payments.
The Sausalito City Council has unanimously approved a $31.6 million budget for the new fiscal year.
The city will have a deficit of nearly $1 million in 2024-25, mostly caused by a change in the city’s insurance provider and increased pension-related debt payments. The city expects to end the current fiscal year with a surplus of about $500,000.
“I’m sure we’re going to continue to fine-tune this,” Mayor Ian Sobieski said at the council’s meeting Tuesday. “I think there is a case for optimism, not least because of the clear and proving excellence of our staff that is on display on how we handled the insurance and handled the entire budget this year.”
After losing its insurance provider because of its loss record, Sausalito will have an increase of about $1 million in insurance premiums. The city has more than $35 million in pension-related debt, and unfunded accrued liability payments will increase $470,000 from the previous fiscal year.
The city also has a $4 million capital improvement budget for fiscal year 2024-25, which is primarily funded by tax measures such as sales and gas taxes.
In the general fund specifically, the city expects to bring in $17.2 million in revenue and have $20.7 million in expenditures. Net transfers from other funds to the general fund add up to $2.4 million. The city will balance its budget using $1 million of unassigned funds from its excess reserves — money that is above the city’s policy for rainy day or emergency funds, according to Chad Hess, the city’s director of finance.
As of the last audit in 2023, the general fund had $3.1 million in reserves — 15%, according to city policy — and $7.7 million in excess of reserves. However, the City Council also voted 4-1 at the meeting to approve a new budget reserve policy of 25% by requiring an additional 10% for economic emergencies. With the new reserve policy, the city has around $5.2 million in reserves and $5.6 million in unassigned funds.
Councilmember Jill Hoffman voted against the reserve policy because she felt it should be closer to 30%. Zapata recommended not going above 25%, calling the number adequate for the city’s needs, and said any extra cash should go into projects that would improve the community.
The city’s previous 15% general fund reserve policy included 5% for budget stabilization and 10% for shortfalls. However, the city has often kept 25% in general fund reserves despite no formal resolution requiring it, according to Zapata.
“Having a rainy day fund is really important for a city,” Zapata said. “But the amount of that rainy day fund, how they are categorized, what funds they are put into, that’s something that is a little bit different in almost every community.”
Zapata said the city has a practice of keeping money in other accounts, like the parking and MLK campus fund. These funds have helped keep the city from needing to use its budget reserves.
“These are set up as quasi enterprise funds so that if there is something that is needed at MLK, there is something there to fix it,” Zapata said. “All that is to say the city has been very well managed financially. It has not ever dipped into the 5% and 10% since their inception in 2011.”
Hess said the 25% is justifiable and sufficient based on the current and historical needs of the city. He said if the city wanted to refine the number more, it would need to do a detailed risk analysis and a financial analysis of what those risks could cost.
Zapata said there will always be some unexpected risk to present financial challenges, citing, for example, the dot-com bust at the turn of the century, the Great Recession in 2007 or the COVID-19 pandemic. He added that cities are rarely completely on their own in these cases because of insurance and state and federal aid.
“Cities run through cycles of trouble and it’s constant and the question is if what you have in your reserve is enough to hedge against those,” Zapata said. “We’re always going to have conditions that are going to create need and emergency.”