Costa Mesa’s $189M general fund budget supports housing, safety and capital projects

Costa Mesa officials this week opened the hood on a 2024-25 budget proposal that dedicates $99.7 million to public safety and earmarks $27.9 million for active transportation projects and improvements to city parks, streets and facilities.

Themed “When We All Pull Together,” the $240-million all-funds budget includes $189.9 million in general fund revenue — a $9.5 million increase from fiscal year 2023-24 — and incorporates new initiatives pertaining to housing and tenant protection and assistance.

In a study session Tuesday, finance director Carol Molina walked the City Council through some highlights of the proposal, developed without having to draw from the city’s reserve funds.

“It takes a countless number of hours to put this together for you tonight to ensure a fully balanced and fiscally responsible budget,” Molina said.

Officials reviewed the various revenue streams anticipated to come into the city and primary expenditures for the fiscal year ahead. For example, Costa Mesa is projected to take in an estimated $60.5 million in property taxes and collect another $10.1 million in transient occupancy tax from hotel stays.

Sales tax receipts are expected to generate $81.6 million in the fiscal year ahead, a $900,000 decrease from the year prior. Molina attributed the decline to increased interest rates, which can prevent people from refinancing mortgages for major home improvements, and a general reduction in retail sales.

“Instead of purchasing goods [people] are going for an experience — going out to dinner or maybe going to the theater,” she said. “They’re realigning their expenditures.”

Among one of the newer streams of revenue coming into Costa Mesa’s coffers is the 7% tax collected from the retail sale of cannabis and from the permitting and fee collection associated with establishing the new businesses.

City officials anticipate total revenue of $3.4 million, an increase of $350,000 from FY 2023-24. Voters approved using 1% of tax revenues to fund an arts and culture master plan fund and a first-time homebuyers program. Each of those programs is expected to receive $238,000 in the coming fiscal year, according to city figures.

Meanwhile, among $189.9 million in expenditures 52.5% will go to public safety, with 32.6% going to Costa Mesa Police Department and 19.9% planned for the city’s fire department.

That commitment will fund 142 sworn staffing positions at CMPD and includes a $700,000 reallocation for the replacement of body-worn and vehicle cameras along with $50,000 for the replacement of a K9 police dog and $150,000 for a wellness program.

“This program is really wrapped around a holistic approach to an employee, particularly in public safety where they’re exposed to a lot of traumatic incidents and making sure we’re taking care of that emotional trauma they may experience over a 20- or 30-year career,” Chief Ron Lawrence told the council members.

Costa Mesa Fire & Rescue, which employs 85 full-time sworn personnel, will receive $1.3 million for salary and benefit increases and $702,000 for the department’s ambulance program and emergency medical supplies, along with $95,000 for a light truck.

Numerous city projects will be covered by the $27.9 million proposed for capital improvements, including replacement of the Senior Center’s HVAC system, rehabilitation work on Harbor Boulevard, 17th Street and Gisler Avenue, the undergrounding of utilities on Adams Avenue and the restoration of fields at the Jack Hammett Sports Complex.

Although there is no budget surplus this year, Molina reported the city’s reserve fund balance was about $4 million beyond the $55-million savings benchmark established by the City Council. That includes $9 million in economic reserves and $14 million for declared disasters.

After using $1.8 million in federal American Rescue Plan Act (ARPA) funding to set up a $2.5-million affordable housing trust, the more than $26 million in funding the city received will have been spent. The funds were used for pandemic-era small business grants, rental assistance, a Project Homekey supportive housing project and to help set up the city’s new tenant eviction protection program.

Mayor John Stephens said at a time when other cities are seeing budget shortfalls — including the city of Orange, where officials are contemplating a $19-million deficit — Costa Mesa is doing fairly well.

“I’d like everybody to put this whole budget presentation into perspective and look at where we are, relative to where we could be if we didn’t have the expertise that we have in the city at every level,” he said. “When we have an issue, we address it right away. We cannot take that for granted.”

The City Council will officially consider the 2024-25 proposed budget in a first public hearing on June 4, with a second hearing set for June 11, if needed, ahead of a June 18 adoption deadline.