WILDOMAR: New city's budget is flexible

Wildomar will be OK if projected revenues come up short

By AARON CLAVERIE - Staff Writer | Friday, July 25, 2008 5:16 PM PDT ∞

WILDOMAR ---- The city of Wildomar's finance department, headed by Finance Director Steve Stark, will be closely following economic trends in the next few months.

Stark, a former finance director in Pasadena and Santa Monica, said he needs to know which direction the economy is headed because that data will help him estimate how much the newly formed city of Wildomar will eventually be able to take in as tax revenue.

"We need to see the trends," he said.

When Stark sifts through all the data and figures out how much money Wildomar will be taking in later this year and early next year, he can start crafting the 2009-10 budget.

That budget will be an important milestone for the city because Wildomar will be responsible on July 1, 2009, for providing all the services that the county is covering during the first year of the city's existence.

Also, the city will have to start working on paying the county back for providing those first-year services including road maintenance, public works, code enforcement and law enforcement.

Based on his preliminary studies, Stark said, Wildomar has some budget flexibility because the consultant who crafted the hypothetical $13 million budget that was used to justify putting incorporation before voters earlier this year built in a $1.1 million contingency reserve.

"There's a little room if the numbers fluctuate," Stark said.

That's the good news, but there's a problem with the hypothetical budget, called the comprehensive fiscal analysis: It's outdated.

Or, as Stark puts it, the numbers that make up the budget projections need to be refreshed.

2005 vs. 2008

The fiscal analysis was put together using numbers from the 2005-06 fiscal year. The consultant, Gary Thompson, of Rancho Santa Margarita, determined what sort of revenue the Wildomar area would be collecting if it were a city and estimated the costs for providing all the services residents were getting from the county.

A look back to December of 2005 finds a gallon of gas costing about $2.20.

New construction was pumping revenues into the coffers of Southwest County cities.

Home prices were just starting to dip but they were still high.

Flash forward to today and in Lake Elsinore, the city has seen its revenue from home developers slow to a trickle and the high number of foreclosed homes has one of the city's building inspectors out looking for properties that have fallen into disrepair.

In Canyon Lake, the city has slashed expenses across the board to balance its budget. And the odds of hiring a new police officer in a few years don't look good because revenues aren't expected to rise as fast as public safety costs.

Critics of Wildomar's incorporation effort point to the dire economic news ---- rising gas prices, soaring costs for police and fire service and home foreclosures ---- as evidence that the area was not ready for cityhood. And some residents are criticizing some of the council's early budget decisions, saying the council is making a bad civic fiscal situation worse.

Wildomar resident Martha Bridges, one of the 14 candidates who ran for a seat on the council, has criticized the council for not doing enough research when it signed deals with an insurance provider and authorized buying computer equipment for its temporary city hall. City staff members recruited by Wildomar's City Manager John Danielson recommended both deals.

"I feel strongly that all these concessions to cutting corners with the lack of business 'best practices' policies are simply convenient political expediencies which will leave Wildomar saddled with a boat load of mistakes that need correcting and hastily taken decisions which will need to be undone at the expense of the taxpayers," she said in an e-mail to The Californian.

Wildomar City Councilwoman Bridgette Moore said the council hired former Elk Grove city manager John Danielson as Wildomar's city manager because he has hands-on experience working with new cities.

"We have to trust his opinion. That doesn't mean we're not going to question him; but we hired him and we should respect his expertise," she said.

Regarding the insurance provider deal, Moore said each of the council members researched the joint powers authority the city eventually joined before voting to approve the deal. That authority, consisting of California cities, pools its resources to offer insurance coverage to its member cities.

It's not as large as some of the other authorities the city could have joined but city officials and council members say the smaller authority ---- which includes the city of Elk Grove ---- gives Wildomar more of a voice in authority business.

Falling home values

The county assessor's office has begun adjusting property tax bills to account for falling home values. Numerous residents are expected to appeal for lower bills as well.

Stark said he plans to schedule a meeting with the county assessor, Larry Ward, to find out how Wildomar area home values are being adjusted and how that adjustment will affect the city's 2009-10 budget, which projects property tax revenue making up 32 percent of the $13 million budget.

One of Wildomar's strengths, according to Thompson, is the diversity of its revenue streams.

In some cities, sales tax makes up 50 percent of a budget. In other cities, property tax revenue is extremely important.

Thompson said Wildomar has a diversified revenue stream that will help the city avoid falling into financial trouble if a particular segment of the economy is slumping.

Stark agreed with Thompson's analysis and said Wildomar will be able to weather the current economic slump.

Mayor Bob Cashman said Wildomar, as a new city, has advantages that an established city doesn't have.

"A new city isn't fully staffed," he said. "We're going to get to hire just the number of people that are warranted by the economic times."

For instance, the city will bring on planners, or pay a consultant that offers planning services, as new plans are coming in, he said.

Regarding the public safety contracts, which are still being negotiated, Cashman said he has heard that they are some of the more difficult contracts to broker.

In many cities, public safety is the first stated priority of a city council and that vaulted status is reflected in the large percentage of budget resources that are devoted to police and fire departments.

Wildomar will contract police and fire services instead of trying to start its own departments, but that doesn't necessarily mean police and fire service won't be expensive.

"It's not going to be simplistic," Cashman said.

Still, the mayor was optimistic, saying all of the parties involved seem ready to work on an agreement.

While he'd like to have something finalized sooner rather than later, Cashman said the top priority is crafting a good contract with the county public safety agencies.

Contact staff writer Aaron Claverie at (951) 676-4315, Ext. 2624, or aclaverie@californian.com.