Budget Review Committee Hearing - May 1, 2024: FY2025 Proposed Budget Overview and Department Presentations

The San Diego City Council convened as the Budget Review Committee on May 1, 2024, beginning at 9:00 AM and continuing into the evening, to review the Mayor's proposed $2.15 billion general fund budget for Fiscal Year 2025. The day included presentations from the Independent Budget Analyst (IBA), the Chief Financial Officer, and departments under the infrastructure branch (public utilities, stormwater, transportation), as well as a public hearing in the evening where over 180 speakers commented on the budget. The proposed budget is structurally imbalanced, relying on $210 million in one-time resources to support ongoing expenditures. Discussions highlighted significant equity concerns, particularly cuts to programs serving low-income and communities of color.

Consent Calendar

• No consent calendar items were presented.

Public Comments & Testimony

• Morning Session (Sub-item A - Budget Overview): Several speakers opposed cuts to equity programs. Amanda Brown and Michael Singletary (No Shots Fired) urged restoration of funding for their gang-violence prevention program, emphasizing trust built with the community and police. Lori Saldania questioned the city's energy independence fund and short-term rental tax compliance. Sally Small (D4) and Lila Aziz criticized the disproportionate impact on Districts 4, 8, and 9, noting cuts to climate equity, youth drop-in centers, and cannabis equity programs. A caller from District 3 praised the historical context presentation and called for a deeper equity analysis.
• Evening Public Hearing (Sub-item E - FY2025 Budget): Over 180 speakers provided testimony, overwhelmingly opposing the Mayor's proposed cuts. Key themes included:
  • Affordable Housing & Homelessness: Stephen Russell (San Diego Housing Federation) noted a net $24 million decrease in housing funding, warning that redirecting housing commission funds would harm production and preservation. Multiple speakers (e.g., Jason Ritchie, Tyler Renner, Joanne Franciscus of Legal Aid) urged restoration of eviction prevention (EPP) and rental assistance programs, citing cost-effectiveness ($1,000/person vs. $50,000/year for chronic homelessness).
  • Equity & Climate: Sonia Robinson and Genevieve Jones-Wright condemned cuts to the Climate Equity Fund ($8.5 million), youth programs, and the Office of Immigrant Affairs. Many referenced the January 22 floods as evidence of underinvestment.
  • Youth & Parks: Youth from Mid-City CAN Youth Council and Youth Will advocated for $2.5 million to renovate Officer Jeremy Henwood Park in City Heights, highlighting unsafe conditions. Speakers also opposed cuts to library services, after-school programs, and free Wi-Fi.
  • Cannabis Social Equity: Advocates (e.g., Donovan Dove, Sinara Velazquez) argued the program would generate revenue and remedy war-on-drug harms, calling the cut counterproductive.
  • Arts & Culture: Represented by groups such as Guitars in the Classroom and Fern Street Circus, speakers requested restoration of CPPS and ACCF grants, noting arts generate $1.2 billion in economic activity.
  • Police & No Shots Fired: Bishop Cornelius Bowser and Mauricio Torre (SBCS) acknowledged contract challenges but defended the program's effectiveness, with Councilmember Foster citing a 65% reduction in gang violence. Several residents supported restoring funding.
  • Other: Speakers opposed cuts to streetlight repairs, tree planting, and the small business enhancement program. One speaker supported cutting the cannabis equity program, citing youth mental health concerns.

Discussion Items

• IBA Presentation (Charles Mattica and team): The IBA presented a 25-minute overview of the FY2025 proposed budget. Key points:

  • Total general fund expenditures: $2.15 billion, balanced with $2.15 billion in identified resources, but structurally imbalanced with $210 million in one-time resources (nearly $200 million supporting ongoing costs).
  • Revenue projections: Up $61.2 million from FY24 adopted budget, driven by property taxes ($48.8M), but sales tax down $9M. The IBA deemed projections reasonable.
  • Major additions: $26.6M for homelessness strategies, $26M citywide program expenditures, $4.8M for parks, $4.3M for fire rescue.
  • Mitigations: $229 million total, including $96M departmental adjustments (e.g., $18.9M from infrastructure fund, $15M withheld from Housing Commission, $8.5M waived from Climate Equity Fund).
  • Equity impacts: $18.7M in notable equity additions (e.g., $9M in DIFF for communities of concern) but $36.5M in reductions (including $15M withheld from Housing Commission, $3.1M elimination of Community Equity Fund, and cuts to youth drop-in centers, immigrant affairs, cannabis equity, No Shots Fired).
  • Infrastructure: $5 billion capital shortfall over five years; $457M in projects awaiting financing (would rise to $652M if budget approved).
  • Potential modification options: $16.8M in general fund and $2.7M non-general fund options identified for council consideration.
  • Councilmember reactions: Council President Elo Rivera and several members expressed deep concern about inequities; Councilmember Foster questioned mayoral accountability for implementing council-approved programs. City Attorney clarified council cannot force mayor to expend funds.

• CFO Historical Context (Matt Vespie): Vespie reviewed the city's financial history, noting:

  • The structural deficit stems from chronic underfunding of the general fund, deferred capital maintenance, and suppressed employee compensation (e.g., MEA salaries cumulatively increased only 15.6% from 2010-2023 vs. 48.6% wage inflation).
  • The FY25 deficit grew from $136M in November to $172M in March due to reduced cash ($56M to $5M) and higher pension costs.
  • The city has a $4.8 billion CIP funding gap over five years. Cumulative revenue from 2010 if sales tax, TOT, storm drain fee, and refuse collection had been aligned with peers would have generated an additional $4.5 billion.
  • Pension underfunding from 1997-2003 increased liability by $1.4 billion; the city still pays $131M annually to amortize that.
  • Discussion included trade-offs between closing facilities vs. cutting programs; CFO noted the decision was to maintain facilities but reduce programming.

• Police Department: Presentation by Exec. Asst. Chief Paul Conley:

  • FY25 proposed general fund budget: $651 million, up $28M from FY24, with a net decrease of 10.5 FTEs.
  • Key reductions: 8 juvenile service team positions, 7 front counter officers (closing substation front counters), 5 police investigative service officers, reduced academy recruits from 43 to 30 per academy (saving $3.9M), and $754K fuel savings by moving to two-officer units (reducing patrol vehicles).
  • IBA noted overtime budget of $45.8M (net reduction of $3.5M) but FY24 mid-year projected $57.1M in overtime, raising concerns about achievability.
  • Council members questioned the impact on response times and juvenile prevention; expressed support for No Shots Fired but noted contract compliance issues. Councilmember Campbell and others stressed accountability for taxpayer funds.

• Fire Rescue Department: Presentation by Chief Stoll:

  • FY25 general fund budget proposed at $900K less than FY24, primarily due to efficiencies and reductions.
  • Additions: 12 FTEs for new Tower Pines fire station (Station 52), 1 battalion chief for alternative energy (UASI-funded), and 1 program manager for the LIFT program.
  • Reductions: Elimination of one fire academy (going from three to two), reduction in wellness services ($720K), and not staffing a second helicopter during peak hours (saving $384K).
  • Overtime budget reduced by $4.1M to $44.3M; IBA noted $51.6M projected for FY24, making the target challenging.
  • EMS fund: $6.1M one-time transfer to general fund proposed, but IBA warned fund may not support it due to negative balance.
  • Council praised progress on EMS alliance model, paramedic program accreditation, and wildfire preparedness, but questioned cuts to third academy and potential impacts on response times.

• Infrastructure Branch Overview:

  • Public Utilities: Director Juan Guerrero noted FY25 budget within approved rates; proposed reductions include closing El Capitan Reservoir in January 2025, extending Hodges closure to February, and limiting Sutherland to weekends-only. IBA highlighted looming rate increases (6-7% sewer, 7.4-11.8% water) starting FY26 due to lower revenues and higher water purchase costs from CWA. Council members expressed concern about affordability and requested CWA representative update.
  • Stormwater: Director Todd Snyder detailed increased efforts post-January floods: cleared 17 miles of channels vs. typical 1-2 miles. FY25 budget shifts one pipe repair team to full-time channel maintenance. IBA noted $136M operating funding gap vs. need, and $1.6B capital deficit (excluding WIFIA). Councilmembers emphasized need for dedicated revenue source and prioritized work in Choyas Creek watershed ($235M in WIFIA projects).
  • Transportation: Director Bethany Bizak reported accelerated slurry seal program (250 miles in FY24) and streetlight repairs (6,500). Proposed reductions include cutting 80 proactive traffic signal replacements and reducing tree planting by 1,000 trees outside structurally excluded communities. Additions: third mill-and-pave team (10 miles of pavement restoration), urban forestry grants, and a team for street preservation ordinance compliance. IBA noted funding gaps: $104.6M overlay vs. $168.3M need; $36.1M slurry seal vs. $59.5M need. Council questioned the addition of an assistant deputy director position ($217K) and asked for analysis of trench cut fee transfers.

Key Outcomes

• No formal votes were taken; the meeting was informational. The committee will continue hearings through May 7, 2024.
• The IBA's report highlighted potential modification options totaling $16.8M in general fund and $2.7M in non-general fund for council consideration.
• Council members directed the IBA to continue analyzing overtime trends, police patrol vehicle deployment impacts, EMS fund transfers, and options to mitigate future water rate increases.
• The Mayor's May Revise is expected on May 14, 2024, and will be heard by the committee on May 16.
• A final budget adoption hearing is scheduled for June 11, 2024, with a new dedicated hearing for budget amendments on June 7.
• Public feedback overwhelmingly urged restoration of equity-focused programs, with specific calls to reinstate the Climate Equity Fund, eviction prevention, youth programs, cannabis social equity, No Shots Fired, arts funding, and the Office of Immigrant Affairs.