There were lots of ponies to go around Monday.

Mayor Kevin Faulconer’s first proposed budget includes money for larger police academies, expanded library hours, a temporary fire station in Skyline and $1.9 million for various homeless programs. And that’s just a sampling.

Somehow, Faulconer managed to dig up excess cash just months after city budget wonks predicted a $19 million shortfall.

The secret is in the assumptions. They’ve changed significantly since then-interim mayor Todd Gloria bluntly said the city didn’t have enough cash to “accommodate all the wishes and desires” the City Council had already voted to support.

Faulconer, who presided over significant budget cuts as a City Councilman, declared Monday that the city’s fortunes were changing thanks to past sacrifices and course corrections following the its pension crisis.

“We’re seeing the results of the reforms and the issues that we had to tackle,” Faulconer said Monday when he unveiled a roughly $1.2 billion day-to-day budget. (The total budget is nearly $3 billion.)


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Rosier economic predictions helped too.

New forecasts unveiled early this year added up to about $35 million in cash that Gloria wasn’t anticipating, and allowed Faulconer to direct significant resources toward the city’s long wish list.

Here’s a breakdown of the major elements behind that change.

Property Tax Hauls

The city expects county tax collectors to reap about $13.7 million more in property taxes than it penciled in the end of last year.

The new assumption is that the city will get about $437 million from property taxes, which adds up to about 37 percent of the city’s total day-to-day budget.

City CFO Mary Lewis pointed to rising home values across the county from early 2013 to early 2014 as one of a handful of reasons the city adjusted this projection.

Faulconer’s proposed budget also cites a reported 55 percent decline in county notice of defaults, which are filed after a homeowner falls behind on mortgage payments, between 2012 and 2013.

Sales-Tax Collections

The city’s also forecasting a roughly $13.2 million more in sales taxes.

The $257 million in cash the city’s now expecting makes up a cool 22 percent of its operating budget.

The city’s sales-tax consultant reported increased consumer spending it expects to continue at places like car lots and clothing stores. City budget folks also noted the that State Board of Equalization’s most recent forecast predicted 5.6 percent average growth, though the city is expecting a smaller 4.5 percent increase.

Property Transfer Tax

When you sell your house, the city gets some extra cash too.

Faulconer’s budget estimates $2.1 million more from this source than budget wonks projected last year.

His budget proposal offers a 15.1 percent increase in countywide median home prices between February 2013 and February and a 4.1 percent spike in sales during the same period as the rationale for this updated figure.

Hotel Taxes

The city’s expecting more visitors.

Faulconer’s budget proposal assumes another $5.2 million from additional taxes from hotel stays, known as transient occupancy taxes.

Faulconer’s team envisions funneling a total of $91.1 million from this source into the city’s day-to-day budget next year.

This assumption relies on the San Diego Tourism Authority’s projection of roughly 2 percent spikes in overnight visitors in 2014 and 2015, plus increased hotel occupancies.

Franchise Fees

Budget wonks also foresee a windfall from agreements with big companies with which the city does business.

Those corporations include San Diego Gas and Electric, Cox Communications, Time Warner Cable and AT&T. All rely on city systems – commonly known as the public right-of-way – to provide their services.

Faulconer staffers penciled in a roughly $1.1 million more than initially expected from this source following analyses of past year-over-year growth associated with these deals.

    This article relates to: City Budget, City Council, Government, Kevin Faulconer, News, Share

    Written by Lisa Halverstadt

    Lisa writes about San Diego city and county governments. She welcomes story tips and questions. Contact her directly at lisa@vosd.org or 619.325.0528.

    9 comments
    Brian Peterson
    Brian Peterson subscriber

    Don’t forget, some of the City’s new-found property tax revenue is because Governor Brown terminated redevelopment.Property tax that used to go to the Redevelopment Agency is now going to the City General Fund.And Faulconer fought the termination of redevelopment every step of the way.But, I am glad he is now putting the money to better use.

    La Playa Heritage
    La Playa Heritage subscribermember

    @Brian Peterson  Financial staff documented that only an annual $3.0 million in Tax Sharing Pass Through Payments will go to the City's General Fund for better uses in the 5 year Financial Outlook. (see Page 10)


    http://tinyurl.com/20131209a 


    This means the annual @ $200 million in former RDA Tax Increment is still being collected, separately outside the General Fund and controlled by the private Civic San Diego.  The $1.6 Billion in ROPS-6 will take  at least the next 15 to 30 years to paid.  Therefore the Successor Agency will be winding down the former Redevelopment Agency (RDA) for at least the next 15 to 30 years.  


    http://tinyurl.com/20140210c


    In addition, there is still $123 million in Unencumbered Bond proceeds, and an unknown amount of Reserves and Other Income from leases and previous agreements, with an annual @ $20 million in Revenue that is still coming into the Redevelopment Property Tax  Trust Fund (RPTTF).



    shawn fox
    shawn fox subscriber

    @Brian Peterson  28 million is hardly a massive increase.  My temporary property tax decrease due to the housing market is gradually being eliminated.  Therefore I can only assume that the same is happening for hundreds of thousands of other people.  

    David Crossley
    David Crossley subscriber

    He certainly isn't the first mayor in recent times to base a budget based on rosy (and unrealistic) projections on income.

    shawn fox
    shawn fox subscriber

    @David Crossley  Why do you think that they are unrealistic?  Property values are going back up which does mean that our property taxes are starting to creep up.  The temporary reductions due to the housing collapse are gradually being eliminated as housing prices increase.  Likewise, it doesn't seem to hard to believe that a small increase in sales taxes will occur if the economy really is stabilizing.  

    David Crossley
    David Crossley subscriber

    @shawn fox @David Crossley --The numbers are based in fantasy.  Taken right out of the Jerry Sanders (among others) playbook.  You put in place plans to spend money that you THINK you will be receiving.  When that money doesn't come in, the mid-year budget cuts begin.  Or, you borrow more money.

    Chris Brewster
    Chris Brewster subscribermember

    How nice to be elected when revenues are rising. Everyone loves having their programs funded.

    Dean Sprague
    Dean Sprague

    lots of assumes ... you know what that means.