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Oceanside forecasts modest surplus next several years

OCEANSIDE — The city is forecasting modest annual budget surpluses for the next five years, including a projected $1.32 million surplus for the upcoming fiscal year.

Financial services director Jill Moya presented the city’s annual five-year financial forecast on Feb. 1 demonstrating the surpluses to the City Council.

Moya described the five-year forecast as “an important tool” for the city to project the cost of maintaining current service levels and additional operational changes that could affect the city’s general fund.

The fiscal year 2023-24 starting in July, is expected to see a $1.32 million surplus.

Next year’s revenues are expected to see a 7.7% increase compared to the current FY 2022-23, which saw a 3.7% increase in revenues compared to FY 2021-22. Property, sales and transient occupancy taxes account for most of the revenue increase.

“We consider these projections to be conservative and align with our consultant’s projections in the current year’s revenue trends,” Moya said.

The city projects a lower surplus of $1 million for the following FY 2024-25, which Moya said is something the city needs to keep in mind when considering additional costs.

The forecast projects a $4.1 million surplus in FY 2025-26, $2.7 million in FY 2026-27 and $1.2 million in FY 2027-28.

The city’s expenditures are also rising due to an assumed 3.5% consumer price index (CPI) increase over the next two years.

Other expenditure increases come from known and negotiated labor contracts, placeholders for future increases, and an overall $6.9 million increase in CalPERS public employee pension benefits.

“This forecast assumes that we maintain current service levels and does not include any new programs,” Moya said.

The city’s pension benefits costs begin to decrease in later years due to the growing number of PEPRA (Public Employees’ Pension Reform Act) employees who have “less generous benefits” than classic CalPERS employees, Moya said.

Classic members are employees who joined CalPERS benefits before Jan. 1, 2013, while PEPRA  applies to those hired on or after that date. PEPRA changed how benefits were applied to public employees and placed compensation limits on them.

To further address its unfunded pension liability, the city makes additional one-time payments using half of its general fund surplus at each year’s end. A third of the city’s interest earnings also contribute to those one-time payments.

The City Council unanimously accepted the five-year forecast. However, before his vote, Councilmember Peter Weiss cautioned city staff and the rest of the council.

“For a $200 million budget, we have a 1.3 million dollar surplus that we can hiccup away in one meeting,” Weiss said. “If we want to do something significant or special, we have $1.3 million to do it.”