City administrator reports balanced FY21 budget, warns of $3.5M FY22 gap after market and union costs

City Administrator Johnson told the West Palm Beach City Commission on the budget review that the city adopted a balanced fiscal year 2021 general fund budget amid pandemic-related revenue losses but now faces an estimated shortfall for fiscal year 2022.

Johnson said the commission “did adopt as is required by law a balanced budget for FY21,” maintained the current millage rate of 8.3465 and set the general fund operating budget at $193,470,640. She emphasized the context: “we developed a balanced budget for this year in the midst of an unprecedented budget challenge,” driven by the global pandemic and resulting shifts in revenue and expenditures.

Why it matters: Johnson told the commission the city closed an estimated FY21 operating gap by a mix of one‑time funding, service cuts and personnel reductions, but many of those shifts create recurring obligations or will return to the general fund in later years. That combination — one‑time remedies plus rising personnel and market costs — produces an estimated FY22 base operating shortfall Johnson put at about $3.5 million unless the commission takes further action.

Key details and how FY21 was balanced Johnson said the administration began FY21 budget development by removing a $4,200,000 vacancy allowance that previously reduced budgets on paper. On the revenue side for FY21 the city recorded net increases tied to property values (an 8.1% rise that Johnson said yielded $7,713,765) and roughly $1.4 million from five other revenue sources, which together produced about $9 million in operating revenue increases. Those gains were partially offset by pandemic-related revenue losses Johnson quantified at $7,099,357, notably hits to state revenue sharing (including the half‑cent sales tax) and franchise fees.

On expenditures, Johnson said base operating costs rose by about $9.9 million for FY21. That produced an operating gap of roughly $7.9–$8.0 million, which the city closed through multiple strategies: cuts to materials and services (travel, training, professional services), eliminating the usual $1 million contingency, removing small capital outlay, pausing education reimbursement and withholding cost‑of‑living increases for certain management tiers. The administration implemented a 5% across‑the‑board personnel service reduction in general fund departments (excluding police and fire), and said that reduction eliminated 43 funded positions from the adopted FY21 budget.

Shifts to other funds also reduced the general fund burden: Johnson reported shifting the cost of six public‑works employees to the gas tax fund for about $433,000 and shifting roughly $304,000 in a position and benefits to the fire assessment fund. A police grant allowed the city to shift roughly half of several grant‑funded positions off the general fund; Johnson said those shifts totaled about $1.8 million and warned the general fund will be required to absorb those costs later when grant funding ends.

Johnson said the city avoided large layoffs and furloughs and preserved existing programs and most of the workforce; she noted one part‑time employee was laid off. She also said the adopted FY21 budget included negotiated pay steps and COLAs for several bargaining units (3% COLAs for SEIU and PMSA and step pay for the police bargaining unit then PBA, now FOP, and IAFF).

FY22 outlook and main budget pressures Johnson said preliminary FY22 projections show about $10.7 million in new revenue (including a 6.66% property‑value increase she estimated would yield about $5.3 million) but an estimated $14.2 million increase in base operating expenditures. The larger expenditure drivers she listed were market and benefit mandates (~$1.5 million), personnel expense increases (~$3.2 million), planned cost for step/COLA and VIVO for certain units (~$3.7 million), and market adjustments for police and fire (about $5.8 million), some of which are tied to executed or tentative labor agreements.

Johnson said those numbers produce an estimated base operational gap of about $3.5 million for FY22, but she cautioned that final union negotiations (with SEIU and PMSA, and pending matters for police captains) and other pending threshold issues could change that figure.

Overtime, recruitment and service delivery Johnson told the commission the city expects overtime needs to decline once recruitment fills vacant public‑safety positions but said staff are studying overtime drivers (sick calls, special events, protests, pandemic responses) to determine an appropriate FY22 overtime budget. She said overtime used to fund market adjustments was drawn from FY21 police and fire overtime lines and will not be available on the FY22 base unless specifically budgeted.

Administration next steps and schedule Johnson outlined a schedule of public engagement and work sessions: community Zoom budget meetings in July (morning and afternoon), work sessions including August 5 (fire assessment fund and ARPA/American Rescue Plan funds), August 11 (proposed FY22 balanced budget and capital improvement program), August 23 (preliminary FY22 balanced budget, final fire assessment rate hearing and chronic nuisance assessment hearing), and the statutorily required September public hearings on the tentative and final balanced budgets and millage rate. She said staff will return to the board with options for addressing outstanding gaps and with legal guidance on what one‑time federal ARPA funds can and cannot be used for.

Commissioner questions and comments Commissioners asked whether service levels changed because of cuts, and Johnson said departments identified targeted operational efficiencies (virtual services, drop boxes, procedural streamlining) and that services such as permitting and library operations were maintained though staff strain increased. Commissioners asked whether previously enacted 5% reductions had been restored; Johnson said FY22 base budgets start at those reduced levels and “none of the 5% reductions were restored.”

On American Rescue Plan funds, Johnson said one‑time capital needs — for example vehicle replacements or gate replacements — could be appropriate ARPA candidates if legally permissible, but cautioned ARPA cannot be used to supplant general‑fund ongoing obligations.

Closing Johnson closed by asking commissioners to continue to raise clarifying direction during work sessions so staff can incorporate clear guidance into the proposed FY22 balanced budget. At the end of the discussion one commissioner summarized the expected gap: “we've got about 3 and a half million dollar gap that we gotta fill over the course of the next few weeks in terms of the budget,” to which Johnson confirmed that was correct.