Council hears midyear budget update: Andy Heath outlines $1M‑plus general fund surplus, policy options to protect reserves

At a workshop‑style presentation, financial consultant Andy Heath told the El Centro City Council that the city’s four major funds — general fund, Measure P (local sales tax), water and wastewater — are projected to end fiscal 2024–25 in stable positions but face medium‑term pressures tied to pension (CalPERS) costs, insurance and planned capital carryovers.

Heath said midyear estimates show roughly $2.25 million more in general‑fund revenue than the revised budget and about $1.28 million more in expenditures, resulting in a roughly $1.0–1.2 million surplus for the current fiscal year. He highlighted three revenue/expenditure drivers: higher property‑tax receipts (first secured roll payment received), steady sales‑tax collections, and a roughly $1.5 million increase in “other revenues” tied to reimbursements (for example, school resource officer and strike‑team reimbursements). On the expenditure side Heath noted realized vacancy savings, higher overtime costs for public safety, increased insurance premiums and capital outlays for emergency park repairs and equipment.

Heath walked through reserve projections and constraints. Without additional actions, the general fund undesignated reserve was expected to be about $27.9 million at year end; that figure would fall to roughly $21.4 million if the council follows through on a previously authorized potential use of up to $6.5 million for the El Centro Regional Medical Center (ECRMC) asset transfer. Heath characterized both totals as prudent for a city of El Centro’s size but said the $6.5 million draw would materially reduce the cushion available for multi‑year planning.

To smooth future budget pressure, Heath presented several policy changes for council consideration: (1) eliminate the overfunded unemployment internal service fund (currently funded at about 5% of payroll), reassign routine termination payouts and unemployment claims to operating budgets, and rebate the overfunded balance (he estimated roughly $1.4 million remaining) back to the funds that contributed; (2) use a portion of the city’s Section 115 OPEB (retiree health) trust to contribute $250,000 per year for five years toward CalPERS unfunded actuarial liability (UAL) to reduce operating budget pressure; and (3) redistribute overfunded internal service‑fund balances (workers’ compensation, health, GASB‑related reserves) back to contributing funds as appropriate. Heath estimated redistributing roughly $6.9 million overall from overfunded ISFs, of which about $6.0–6.9 million would go back to the general fund on a one‑time basis.

Heath also summarized staff position requests and capital needs that departments had submitted during budget development. Departments requested a net 12.8 full‑time equivalent positions for the general fund, with an estimated ongoing cost of about $1.84 million if all were funded. He stressed the city is awaiting a compensation study and recommended caution before approving new ongoing personnel costs until that study is completed. He flagged two larger potential planning items — a general‑plan element update and a specific‑plan study for East El Centro — with estimated one‑time costs up to $200,000 and $550,000 respectively.

Heath said the changes he recommended would increase one‑time resources available in the short term and reduce reliance on operating revenue to cover pension cost increases, but he cautioned that long‑term CalPERS costs remain the principal fiscal risk and will need continued monitoring and strategy.

Council members asked clarifying questions about the assumed vacancy‑savings rates, the ECRMC transfer scenario and the timeline for the compensation survey; Heath said the compensation study is expected in early fall and that the budget is being prepared conservatively with no labor pay increases assumed. Resident Peter Rodriguez offered public comment praising the presentation and urging conservative budgeting.

No formal vote was required; the item served as a workshop and staff sought council feedback to incorporate into the recommended FY 2025–26 budget.