What started as a predicted city deficit budget is expected to turn into a $1.3 million surplus.
On Tuesday, the Napa City Council received what may have been the most positive fiscal report in years. The 2011-2012 budget year is expected to end with a $1.3 million surplus rather than the $4.2 million deficit that was originally projected.
“I think for the first time in eight years, I feel good, certainly a lot better than I have after some of these reports,” Councilman Mark van Gorder said.
Though the report is preliminary and the annual financial audit is not scheduled to begin until the end of the month, the city’s three major revenue sources — property tax, sales tax, and hotel tax — seem to have performed better than expected, said Finance Director Joe Gray.
The largest increase in revenue is expected from transient occupancy tax charged to visitors who stay overnight in Napa. The city should end the fiscal year with $2.1 million more in the hotel bed tax than it originally budgeted, Gray said.
Property tax revenues are expected to come in $1.4 million above what was originally budgeted, according to Gray’s report. He attributed the increase in part to a rise in median home prices.
“All the economic indicators for this revenue source have been very positive,” Gray said.
The city expects to end the year with an additional $1 million in sales tax revenue, Gray said. It’s estimated that about half that revenue came from pent-up demand from people buying items like new cars, increased construction and more tourism.
“Once again, it shows a sign of a slightly rebounding retail economy and this source has done very well,” Gray said.
The city also expected to save money by leaving unfilled positions vacant throughout the year, Gray said. There are 13 unfilled positions in the police department, four in the fire department and two in the finance department.
City Manager Mike Parness said the city is working to fill those positions and has created potential hire lists for public safety.
“I anticipate that with the progress we’ve made in filling positions that we’ll start seeing that gap close,” Parness said.
Gray said the city is still watching the national economy closely but will begin in January to zero in on how to maintain the higher flow of revenue and restore some of the cuts that were made in recent years.
“One of the tasks that we will work with our consultant on is to make sure the sales tax and (visitor tax) are sustainable, that they’re ongoing and not one-time revenues,” Gray said. “One of the challenges we will have when we do the council workshop in January is to make sure we make strategic restoration of (capital improvement project) reserves, try to restore program cuts, service cuts, compensation adjustments.”
Van Gorder noted that for the first time in a decade, the city balanced its budget this year without the use of reserves.
The city had expected to deplete its operating reserves, while leaving its emergency reserve fund in tact, to balance the 2011-2012 and 2012-2013 budgets. This was avoided because of the increased revenue, department savings and employee give-backs.
Over the past year, all of the city’s labor groups renegotiated their contracts with the city and made concessions, helping to balance the budgets of future years. Employees agreed to contribute more toward their retirement and healthcare benefits, adopt a two-tier retirement system for new hires and continue to work with frozen wages.
“The city has weathered some extremely tough times without wholesale eliminations of some departments,” van Gorder said. “We’re still providing services at a very high level, and the employees have always done a lot more with less. Departments have found ways to accomplish what they need to do while spending less.”