Seaside reports balanced Q1 results but flags fund balance drawdown and pension risks

Jessie Riley, Seaside’s finance director, presented the city’s condensed first-quarter financial report and told the City Council that revenues are tracking close to the adopted FY 2024–25 budget but the city continues to draw down unassigned fund balance to finance capital work.

Riley said the adopted operating budget projects $48.2 million in both revenues and expenditures and a small planned operating surplus of $21,000. The city’s reserves were stated as $14.5 million and the beginning fund balance for the fiscal year was $42.2 million. The adopted budget included use of $4.3 million in unassigned fund balance for capital improvements and $2.3 million for street operations. Q1 general fund revenues totaled about $8.3 million — an 8% increase from the prior year’s Q1 — with $2.0 million in sales and use tax collected in the quarter.

Riley told council that personnel services are expected to increase year over year, largely because of pension liability and a 4% cost-of-living adjustment approved in the budget. She said personnel expenses were below budget in Q1 by roughly $1.4 million because of vacancies; those savings are expected to moderate as recruitments continue. The city’s capital project spending can be project-timing sensitive; Riley said the Q1 capital category is difficult to use to infer long-term trends.

Riley presented an amended five-year forecast showing risks and potential improvements. She said the city is drawing down $6.6 million of unassigned fund balance for the current budget cycle and that — absent new revenue from four anticipated development projects — the unassigned fund balance could be nearly spent down and could turn negative in a future year. That outlook, she said, depends on several assumptions; the forecast also reflects the expectation that several development projects will generate new revenue in the next few years. Riley listed key “headwinds” that could alter the forecast: a potential economic slowdown, high construction costs, rising pension liabilities and geopolitical risk.

Council members asked about specific line items, an apparent typo in an earlier slide and the extent to which headwinds are incorporated in the long-term forecast. Riley said subjective headwinds such as geopolitical risk are not directly modeled but that flattening revenues are reflected in the revenue assumptions and that pension liabilities are included in long-term projections. She also said the report is unaudited and will be updated online. Riley said the midyear review will take place in March 2025 and the final audited numbers will be presented in January.

Riley’s presentation and council questions made clear that the city continues to face pressure from rising personnel and pension costs even as short-term revenue metrics remain on target. The council did not take action on the report; staff said they will post a corrected Q1 report online and will return with the midyear update in March.