Penny Wise & Pound Foolish!

Information on the City's Funds and Fund balances, although not included in the CITY OF CARMEL-BY-THE-SEA CALIFORNIA DRAFT BUDGET FISCAL YEARS 2006/07 THROUGH 2008/09, is included in the CITY OF CARMEL-BY-THE-SEA California Annual Financial Report June 30, 2005.

Of the 12 Total Unreserved Funds, totaling $8,322,653, the “Undesignated” Fund Balance is $1,240,439.

The cost to the city of restoring library hours to 2004 levels is $123,000.
$123,000 represents less than 10% of the “Undesignated” Fund Balance.

Recommendation: To restore hours to the Harrison Memorial Library and Park Branch, take $123,000 from the “Unreserved, Undesignated” Fund balance of $1,240,439, leaving $1,117,439.

Similarly, of the 12 Total Unreserved Funds, the “Unreserved, Designated for capital improvements” Fund balance is $1,370,334.

The Capital Improvements Program was $321,166 in Fiscal Year 2004/05 and $772,135 in Fiscal Year 2005/06. The Proposed Capital Improvements Program is $69,594 for FY 2006/07, $344,321 for FY 2007/08 and $394,000 for FY 2008/09.

With the magnitude of Carmel-by-the-Sea’s deferred maintenance, (ex. Sewer, Stormwater System, Streets, Restrooms, Pedestrian Paths, Public Buildings/Historical & Cultural Assets, Parks, etc.), the Capital Improvement Programs should be funded at a consistently high level of at least $600,000 to $700,000/year. To achieve these levels, the difference between $600,000 and the proposed expenditures, should be funded from the “Unreserved Designated for capital improvements” Fund, totaling $1,370,344.

Instead of having wildly fluctuating Capital Improvement Programs from year to year, that is, $321,166 in FY 2004/05, $772,135 in FY 2005/06 and $69,594 in FY 2006/07, the Capital Improvement Programs should be funded at consistent levels of $600,000 - $700,000/year.

For example, the Capital Improvement Program for Fiscal Year 2006/07, instead of being $69,594, should be at least $600,000. To achieve this level, the deficit of $530,406 should be taken from the “Unreserved Designated for capital improvements” Fund.

A total Fund balance of $8,322,653, or 70% of the City’s annual budget, indicates that the City has allowed the city’s infrastructure to deteriorate beyond a reasonable condition, thereby causing deferred maintenance to balloon out-of-control costing Carmel-by-the-Sea taxpayers significantly more money later on for more costly projects.