Controller projects nearly $400M year‑end balance but reserves remain below target

Michelle Eller Smith of the Controller’s office presented the nine‑month budget status report, which projects an ending general fund balance just under $400,000,000 — an improvement from the earlier projection of roughly $73,000,000. The office attributed most of the upside to stronger-than-expected property tax collections, fewer assessment appeal refunds, and better revenues and savings at the Department of Public Health and the Human Services Agency.

Eller Smith highlighted a roughly $28,000,000 improvement tied to a retroactive restoration in medical reimbursement rates that benefitted Laguna Honda Hospital and other public health accounts. Despite the improved outlook, she said the city is not currently projecting a deposit to the rainy day reserve and that economic reserves are projected to end the year at about 5.9% of General Fund — short of the city’s 10% target.

The Controller’s office cautioned that several revenue sources remain sensitive through May and June, notably transfer taxes, some business taxes and supplemental property taxes; staff will provide updated projections as more data arrive. The office also reviewed special revenue funds and enterprise projections, noting that water and wastewater enterprises face declining balances.

Following questions, the committee agreed to continue item 6 to the call of the chair in case it needs to be recalled during budget deliberations.

Why it matters: The Controller’s projections frame the supervisors’ upcoming budget choices. A larger-than-expected ending balance provides more flexibility, but reserves below the policy target limit contingency capacity for unanticipated downturns.

Next steps: Controller staff will continue monitoring transfer tax and other sensitive revenue streams and provide updated projections to the mayor and Board through June 1 and beyond.