Sales tax revenue is the city's second largest revenue source, accounting for more than 21% of total revenues. Again, based on economic projections at the start of the past fiscal year on July 1, 2010, Finance Director Emily Wagner and her staff projected receipts of $17,348,298. It wasn't as bad after all. Fiscal year-end receipts were 6.7% better than projected.
Besides increased revenue, expenditures also were down as the city ended the fiscal year with 41 unfilled authorized positions. Every department cut back, scheduled replacements of older vehicles were put on hold, and capital expenditures after the completion last year of the $10 million Firehouse Arts Center are close to zero. In addition, the city employees union agreed to a new contract that will have employees paying 2% of their pension costs for the first time, 4% starting next year. Negotiations are under way with unions representing the police force and firefighters, seeking similar agreements.
In good economic times, revenue surpluses have usually been added to the city's "rainy day" reserves to provide a financial cushion in a budget shortfall. Or part of the extra funds is set aside for capital expenditures. In its wisdom this year, the City Council, at the recommendation of Wagner and City Manager Nelson Fialho, approved using the $3.5 million surplus for replacement and repairs that have been delayed too long and to add $1 million to the city's self-insurance fund, which was drawn down by $3.5 million as a result of costly lawsuits by Urban Habitat and the State Attorney General over the city's housing cap, which the courts ruled illegal.
Still more to its credit, the council agreed to set aside $1 million of the surplus to establish a fund that will start paying down the city's unfunded pension liabilities that total as much as $121 million. Much like paying off a home mortgage, the city can continue paying the obligatory CalPERS payments to stay even or it can make booster payments to actually start paying down the principle. Trimming the unfunded pension liability was the right step for the council to take.
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