The city typically has two big financial events annually. The first, and the one that gets the most attention, is in the Spring when the budget is discussed and adopted. That’s where the Council decides, in some detail, how it intends to provide for public health and safety and maintain or improve the quality of life for the community.
The second big budget event occurs right around…now. It gets far less attention than the Spring one because it occurs during the holidays and is a look backwards, not a look forward. Plus it has a real sleeper of a title (actually two titles as it comes in two parts).
Which is unfortunate because recently it’s been at least as significant as the budget process.
What is it you ask? Here you go:
- Accept the Comprehensive Annual Financial Report (CAFR) for the Previous Fiscal Year
- Decide How to Allocate or Offset a Surplus or Deficit
Yawn…except we ended the last fiscal year — they end on June 30th, so these numbers are for the period 7/1/2018 thru 6/30/2019 — with an $8,887,586 surplus. You read that right — the city took in more money than it spent by just shy of $9 million dollars.
That’s impressive given that our primary budget is around $40 million so the surplus amounted to a bit over 20%. It’s also on top of a $7 million surplus for the 7/1/2017 – 6/30/2018 fiscal year.
It’s even more impressive when you realize we expected to end last fiscal year with a $2.8 million deficit (big projects or initiatives sometimes cause us to spend more money than we take in during the year). So things were actually “better” than expected by about $11.7 million (11.7 – 2.8 = 8.9).
Better is in quotes because spending less cash due to not hiring people to do work as fast as you planned or because a project got delayed isn’t necessarily a good thing. We want work to be done and projects to be executed or we wouldn’t budget them. Part of the nearly $9 million surplus stems from things like that.
But only part. A big chunk comes from structural changes, like hotel taxes paid by new hotels and higher property taxes because land and homes have gotten very valuable. Those additional sources of income aren’t fixed. They can and will vary based on economic activity (e.g., business travel to the area, regional business activity).
But when you remember that the median assessed value of a home in San Carlos — the base on which property taxes are calculated — is likely still around $700,000 while the average price of homes selling today is likely around $1.5 million or more you can see that the shift towards better city finances is likely to persist even during economic downturns, albeit more slowly.
Bottom line, there has been a structural shift in our community’s finances. It’s less likely, maybe much less likely, that San Carlos will be living mostly hand-to-mouth as it did for its first 90 years as a city.
There are substantial new commercial developments on the horizon as well. We could easily see 2,000,000 square feet of new commercial office space built in San Carlos in the next few years, enormously expanding the 1,400,000 square feet that was built in our first 90 years. That, too, will generate new property and sales tax income, as well as developer fees, etc. Not to mention that there is more hotel capacity being built as we speak.
All of this is why I titled the state of the city address I gave last March A Pivotal Moment (you can watch it online here). We are at one of those points where we owe it to ourselves, and those who will come after us, to think about what we want San Carlos to look like and be like going forward.
Yes, we have a plan. We always have a plan (it’s the law; it’s called the General Plan). And it’s working pretty well, based on these numbers.
But given how spectacularly well things are going I believe we really ought to revisit that plan. If for no other reason than we have more options available to us now as a community than we did when we last revised it about a decade ago.
Unfortunately, I have to tell you that I don’t believe that’s going to happen. Unless the community speaks up.
So take a moment while you’re celebrating the holidays with friends and family to consider what you want your Council to do…and let it know.
You can read more about the details of both the audited financials and the financial results online here.