Our top story the stock market is booming and unemployment is low and the economy is growing so why is the city of San Diego projecting deficits? City financial analysts are put -- predicting growing deficits for the next three years. They're looking at wage increases in pension costs. Joining me is David Garrick. How big are the deficits being projected?I guess they are not that big. It depends on your perspective for fiscal 2019 it is 10.9 million in the next year 34 .6 million in fiscal 2021 it is 19.8 million.We are in the midst of a strong economy. Is and that the revenue growth is sluggish?I guess you can say that. It was on the upswing and now they are projecting small gains like 4% a year in property tax and 5% a year and hotel taxes. I'm not sure that's the problem. It seems like the big part of the problem is they are giving large raises to employee groups. Now there is demand for raises.The mayor announced a deal to boost police pay to make it more competitive. Do we know how much that may be affecting the deficit projections?They should have specific numbers on that. It will affect over 6 million. There's another chunk that would affect the pension payment. So it is 66 million a year.I don't understand with the economy and investments doing well, why is the city struggling to make the pension payments?The city had just how long people were going to live years ago. They made a big correction about a year ago acknowledging the fact that people are going to live longer than they expected. They will have to pay these people more money and that change dramatically the pension. It increases the annual pension payment. Even though it's doing well long-term projections for investment gains are lower than they have been in the city lowered their outlook which also increased the annual payment.What other factors may cause the deficit to rise?It's a complicated city. They have a lot of priorities that they are pursuing. The city has a climate action plan. It costs money to reduce greenhouse gases and study the ways to do that and come up with master plans for bicycles and pedestrians. There's a lot of different ambitions that they are pursuing in every one cost money.This analysis that they've come up with is based on continuing growing economy, right?That is the biggest concern that came out. This is based on no economic slowdown which a lot of analysts are predicting. So if that happens, these deficits could quadruple. That is bad news if the economy is not strong.Has the city are ready-made cuts in the budget?They did but last spring, they were facing cuts but they did some magic math where they used some reserve funds. They really did not make the hard, painful cuts. The initial proposal was to cut it like 7 million. This is projected to be where more painful cuts would come.Weird you see the city being able to cut funding?That is a good question. Maybe they will have to eliminate some positions in areas that are not priority areas. I think 70% of their budget is labor. It has to come from human beings. Maybe they will have to cut down rec centers or library hours. I think maybe that is an area but I'm not sure.How about that reserve fund that the city officials tap into could that soften the blow of any of these budget cuts?They had a pension reserve last year of $18 million and they wiped that out. They moved some money out of the workers comp reserve another reserves. I don't know how much reserves are left but they've actually increased the size of their reserve to meet some government accountability recommendation. They are paying in to try to increase the overall reserve. I don't think they will want to lower that number when they been making a private -- party to increase it.What about the 5% tax on the sale of recreational marijuana? That tax kicks in January 1. Has had been factored into these projections?It has but in a way that they're walking around in the dark. They don't know how much money is going to generate. They don't know how many of the medical dispensaries will be selling recreational marijuana and they do not know how quickly they will be up to speed. The admit that they are taking a guess. They do know that they are going to hire four people to enforce it. The revenue is more question marks.We talked about the next three years were deficits are projected. What does the financial outlook say about the longer-term?For the longer term, I think it is a surplus in the fourth year and then a larger $60 million surplus in the fifth year. But those are like voodoo and those are Wilder gases. The farther you get into the future, the wilder the guesses are.I've been speaking with David Garrick. Thank you.Thank you.
City finance officials Wednesday presented a five-year plan to the San Diego City Council's Budget Committee outlining revenue growth and critical spending needs over the next five years.
With moderate growth in revenues and expenses, the baseline balance sheets are in the black for four of the five fiscal years, running through June 30, 2023. But when expenses for some critical needs in order to meet "core service levels" are figured into the equation, the city faces a potential for budget shortfalls in the next three fiscal years.
"It's important to note this is not a budget," said Rolando Charvel, the city's chief financial officer. "We still need to make important decisions."
Otherwise, city financial officials foresee surpluses of $2.4 million in 2018-19, and $21.6 million, $61.3 million and $126.5 million, respectively, in the three out years. A $9.6 million deficit is projected in 2019-20.
RELATED: Report: San Diego Faces Potential For Budget Shortfalls
When the critical needs identified in the report are added in, the result is two additional deficit years, and lower surplus projections.
Those shortfalls begin with the next fiscal year at $10.1 million, according to the report. The next two years are projected to bring deficits of $34.6 million and $19.8 million.
Projected surpluses in the final two years are lowered to $5.6 million and $59.3 million.
One potential for additional revenue is the 5 percent city tax on the sale, production and distribution of recreational marijuana beginning Jan. 1. The tax will increase to 8 percent in July 2020.
It's still difficult to estimate just how much money the city will make from marijuana sales, city officials said. The report estimates $2.8 million in the next fiscal year and $13.7 million in the 2023 fiscal year. They said they'll have more accurate numbers after the first few months of sales next year.
Among the major funding needs identified in the report are:
–Initiatives to deal with the homelessness problem and an associated outbreak of hepatitis A.
–Higher salaries for police officers to stem the tide of experienced personnel leaving for other agencies that offer better pay.
–Purchasing a replacement helicopter for San Diego Fire-Rescue Department and staffing three new fire stations.
–Staffing three new libraries.
–Operating numerous new park and recreation facilities.
–Installing a new electronic voting system in the City Council chamber.
The number of dollars required for each item is broken down over the five-year period, often varying over time as programs get started.
Financial staff said city departments will be asked to submit spending reduction proposals, like they were for the budget of the current fiscal year.
Staff also suggested dipping into certain reserve accounts that might have funds available, and carrying over a nearly $18 million fund balance from the fiscal year that ended June 30.
