Clear Lake finance director reports midyear budget gains, proposes $229,000 in adjustments and new revenue ideas

Finance Director Matt Pressey presented a midyear budget review to the Clear Lake City Council, reporting stronger-than-expected property-tax receipts but weaker sales-tax collections and proposing $229,000 in net revenue adjustments to align the budget with current receipts.

The review, given at a March council meeting, showed property-tax growth driven by rising home sale prices and faster turnover in the local market. ‘‘The budget never decreases. It only grows, but they did balance the budget this year,’’ Pressey said, summarizing state-level trends he used to frame the city’s outlook. He told the council the state ended the year with a larger-than-expected revenue balance but is projecting multiyear deficits that will require ongoing attention.

Pressey said Clear Lake’s property-tax line was the primary upside: median sale prices in the city rose about 11 percent from the prior year, and homes now spend roughly 39 days on the market versus 61 days a year earlier. By contrast, city sales tax receipts declined about 5 percent year-over-year, and most sales-tax categories showed drops; restaurants and hotels were one category that rose.

City staff proposed a $229,000 net increase in projected revenue that would be shifted to specific needs in the current fiscal year. Pressey said the allocations include additional funding for code-enforcement salaries and benefits, technology and IT consulting, and upgrades tied to the Chamber of Commerce, and that the general fund must temporarily cover a timing gap related to a new CDBG award. He said the city has been notified it will receive a $1.5 million Community Development Block Grant (CDBG) award but the state housing department had not yet provided a signed agreement; that delay requires the general fund to ‘‘pick up’’ roughly $70,000 in the current fiscal year and another roughly $120,000 over time while the agreement is completed.

Pension liabilities and CalPERS assumptions also came up. Pressey and council members discussed the city’s practice of prepaying unfunded pension liabilities and the effect of CalPERS’ long-term smoothing of returns; he cautioned that future market returns and CalPERS adjustments will affect long-term cost.

Pressey also outlined a list of revenue options for council consideration, asking whether staff should do further research. Ideas included: - A property-transfer tax implemented through a city charter change and a voter ballot measure (some California cities pursue this route for an additional transfer tax); - Revisiting franchise fees charged to utility companies operating in city rights-of-way (PGE, Golden State Water, waste haulers and cable providers were mentioned as potential fee sources); - A modest increase in transient-occupancy tax (TOT) from the city’s current 9 percent rate (Pressey estimated a 1 percentage-point increase could yield roughly $100,000–$150,000 annually); - Closer enforcement and possible tightening of exemptions on the TOT form for stays longer than 30 days (staff said some hotels were treating long-staying contractors as exempt); - Creation of a landscape/lighting assessment district that would finance additional street lighting and free up gas tax money for other projects; and - Implementation of a registration/inspection program (staff described a registration-inspection program that will charge fees to offset personnel costs for enforcement and building inspections).

Council members voiced interest in follow-up research on franchise fees, a property-transfer tax, and a lighting district. Councilmember Mary Wilson specifically urged staff to include solar options when studying new lighting solutions. The presentation concluded with staff noting the proposed adjustments would be included in the consent agenda and that the council would vote on them as part of that packet.

Ending: The council approved the consent agenda, including the budget adjustments described by Pressey, during the meeting’s consent vote. Staff said they will bring back more detailed analyses of the revenue options if the council directs them to proceed with studies and potential ballot measures.