San Diego faces nearly $ 600 million in projected budget deficits over the next five years, despite estimates that the city’s revenues will fully rebound after the pandemic and exceed $ 2 billion per year for the first time. in 2027.
The projected deficits, which are part of a long-term budget document called the Five-Year Outlook, are primarily the result of state mandates requiring San Diego to spend around $ 80 million per year on new green recycling campaigns. and clean water.
Another factor in the deficits is Mayor Todd Gloria, including about $ 50 million a year to fund quality of life efforts focused on graffiti, potholes, abandoned vehicles and garbage in parks.
Gloria staff said this week that these efforts are so essential and so anticipated by San Diego residents that they must be included in the city’s financial projections.
“Everyone would agree that we are not doing the basics where we should be,” said Jessica Lawrence, the mayor’s director of policy.
The outlook projects a deficit of $ 98 million for fiscal year 2023, a deficit of $ 143 million for fiscal year 2024, a deficit of $ 137 million for fiscal year 2025, a deficit of $ 121 million for fiscal year 2026 and a deficit of $ 87 million for fiscal year 2027.
When city finance officials remove planned new spending for green recycling, stormwater efforts, and quality of life programs, those deficits all turn into balanced budgets or planned surpluses.
In this scenario, the city is expected to have a surplus of $ 63 million for fiscal 2023, balanced budgets for the next two fiscal years, a surplus of $ 28 million for fiscal 2026, and a surplus of $ 65 million. for fiscal year 2027.
In either scenario, the city would use $ 149 million in federal pandemic aid, just under half of the $ 300 million in aid San Diego provided in March. The first half of the money has been included in the budget for the current fiscal year.
Federal rules require the city to spend all the money by fiscal 2025.
Planned spending for stormwater projects could be offset by a plot tax that city officials say they could put on the ballot next year.
The millions in new spending that the city faces under the state’s green recycling mandate could also be wiped out by a ballot measure that council member Sean Elo-Rivera is pursuing to eliminate the free garbage collection from the city. city ââfor residential homes.
City finance officials warn in the 70-page outlook, which was unveiled this week, that the projections do not take into account a potential economic slowdown, the costs of an expected municipal pension settlement and any changes. future linked to COVID-19.
They say there is still “uncertainty regarding the containment and suppression of disease, the increase and persistence of inflation, the magnitude and potential impacts of supply chain constraints, as well as the timetable for a full economic recovery “.
Given this uncertainty, the outlook is for the city’s overall revenues to reach pre-pandemic levels by fiscal 2023, which begins next July. Revenue from hotel taxes – the source of money most affected by the pandemic – is expected to fully recover by fiscal year 2024.
Overall revenue is expected to grow from $ 1.74 billion in the current fiscal year to just over $ 2 billion in fiscal 2027.
During this period, the annual property tax is expected to drop from $ 672 million to $ 864 million, the annual sales tax is expected to drop from $ 321 million to $ 406 million, and the annual hotel tax is expected to drop from $ 96 million dollars to 152 million dollars.
Regarding future wage increases for the city’s 11,000 or so workers, Gloria has decided to include them in the outlook for the first time.
The document provides for annual increases of just over 3% per year for all workers, as this is the percentage used by the city’s actuary, but the actual increases received by workers in the coming years will be determined by collective bargaining.
The outlook also assumes the city will relaunch a pre-pandemic plan to increase its reserves to recommended levels.
San Diego was able to avoid depleting its reserves during the pandemic with federal relief money, but city officials reversed planned increases in reserves that would have brought them to recommended levels.
The outlook assumes the city will contribute $ 22.2 million to its general fund reserve of just over $ 200 million, which will help it meet the target level.
The roughly $ 50 million a year that Mayor Gloria wants to spend on quality of life issues would target reducing weeds and graffiti, repairing potholes, improving sidewalks, resurfacing streets, tree maintenance and increased garbage collection in parks and beaches.
It would also fund more workers to enforce the city’s 72-hour abandoned car rule, reducing complaint response times to six days, from 45 to 60 days currently.
Lawrence, Gloria’s assistant, said city officials used the volume of requests submitted to Get it Done! tipster app to help determine which quality of life issues to prioritize.
Another potential source of spending in the coming years is a new strategic plan Gloria plans to unveil in January. The plan should address mobility, sustainability, housing, the economy and neighborhoods.
The five-year outlook will be presented to the city council‘s budget committee on Friday.
The outlook projections for fiscal 2023 assume the city will end up with a surplus of $ 26.7 million in the current fiscal year, which city finance officials are now predicting.
Council members must submit their spending priorities for the next fiscal year by January. The mayor is expected to include some of these suggestions in a budget proposal he is due to unveil by April 15.