Where City of San Diego’s Extra $43 Million Came From

A first-quarter budget-monitoring report the City Council is set to review next week includes an extra $35 million in property taxes and another $8 million from the disintegration of the city’s former information technology provider.

Originally posted at Voice of San Diego.
By Lisa Halverstadt.

This spring, city leaders were dealt a budget deficit, or so they thought.

Former Mayor Bob Filner and his staff worked through May to close a $38.4 million gap in the city’s day-to-day budget.

Fast-forward about six months and the city has come across about $43 million in cash it hadn’t factored into its budget for this fiscal year. Now it’s projecting a similarly sized surplus for the year – at least for now.

These aren’t cash cows the city will ever access again. Both are actually the byproducts of city entities that are now defunct.

The extra influx in property taxes comes as a result of the end of the city’s redevelopment agency. State legislation ended the program that once funded urban renewal projects in the city.

The state collected nearly $170 million from the city’s former redevelopment agency and then doled it to the county, which then gave roughly $35 million back to the city.

But the state quickly swept away some of that extra cash, meaning the city will only see about $14 million of the money from the county. The city previously relied on redevelopment funds to cover annual debt payments on Petco Park upgrades, the second Convention Center expansion and more. State officials recently sought about $21 million from the city to cover past debt payments covered by redevelopment money and it’s expected to do so again within the next couple years.

The extra $8 million comes from the end of another program.

For years, the city relied on the San Diego Data Processing Corp. for its IT services. In May, the City Council opted to do away with the arrangement and thus, the pseudo city-nonprofit agency dissolved.

As part of the arrangement, all the cash the corporation had on hand flowed to the city.

City budget wonks take a cautious tone in explaining the influx.

“The positive year-end projection is based on three months of activity and unforeseen events may impact expenditure and revenue projections,” the city’s financial management department wrote in the report.

The city’s longer-term financial outlook looks less rosy.

Last month, interim mayor Todd Gloria released five-year budget projections that show as much as a $78 million deficit for next year if the City Council commits to new programs it’s approved in the past couple years.

The City Council is also set to review those numbers next Monday.