INGLEWOOD – The Inglewood City Manager’s office presented the modified midyear budget for fiscal year 2023-2024 which shows a projected $35 million deficit.
The City adopted the 2023-2024 fiscal year budget in September 2023 which projected revenue of $189,494,516 and expenditures projected at $203,244,522, which would create a budget surplus of roughly $6.5 million.
The June 4 staff report indicated “$21.4 million in expenditures for carryover of prior year encumbrances and amendments” contributed to the projected $35 million deficit. The report also indicates the modified budget “does not include anticipated carryover of $20.3 million in revenue” that was factored into the budget when it was adopted in 2023.
“If at such time the deficit is realized at year-end, General Fund Reserves will be used to support the deficit.”
During the budget presentation, which was made during the June 4 city council meeting, Budget Manager Keauna Buchannon made no mention of the projected deficit indicated on the staff report but rather alluded to the “good news” of the anticipated $20 million surplus which was removed under the modified budget.
“We have received 62% of the projected revenue thus far,” said Buchannon. She later corrected herself saying that the revenue collected only represented four months and not six months of receipts.
According to Inglewood Mayor James T. Butts, which was corroborated by Interim City Manager Mark Weinberg, the City is in its best fiscal health over the last four years.
Mayor Butts routinely points to the City’s robust general fund reserves as an indicator that the city is financially solvent and flush with cash.
According to the most recent publicly available financial reports on the City’s website, the reserves were attained through refinancing its Pension Obligation Bonds (POB) which the City then dumps into the General Fund instead of paying down the pension debt.
According to the 2021-2022 Inglewood Basic Financial Statements indicate the outstanding general bond debt on its general obligation bonds at the end of 2022 was $205,770.
The auditors indicated that “general bonded debt is the debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds (of which the City has none).
Despite this, the City issued $52 million in new POB in 2017 and another $101 million in new POB in 2020.
The 2021-2022 balance sheet indicates the City has total assets of $711,290,926 and liabilities of $763,016,045 leaving a negative net position of nearly $60 million. The City’s pension liabilities total $231,152,884.
According to publicly available documents on the City’s website, the City has been able to cover its deficits through the general fund reserves which is comprised of proceeds from the selling of the new bonds.
The midyear budget review is expecting $29 million of bond proceeds, that they will count as revenue. The City unanimously voted to issue new Pension Obligation Bonds on the September 12, 2023, regular city council agenda.
Despite the City being flush with cash through increased revenues from the refinancing of the pension bonds and not paying down the pension debt, the City declared a fiscal emergency in August 2021 after receiving $31 million in American Rescue Plan Act (ARPA) due to the COVID-19 pandemic.
The fiscal emergency allowed the City to push for increased taxes. Voters approved raising the Transient Occupancy Tax from 14% to 15.5% and rejected raising the Real Estate Transfer Tax to a sliding scale based on a property’s sale price.
The latter tax was designed to create a revenue stream to finance the Inglewood Transit Connector project. The City continues to frontload costs associated with the project while waiting for reimbursements from the Los Angeles County Metropolitan Transit Authority (Metro) under its joint powers agreement.
Another source of contention with the midyear budget was the amount derived from Admission Taxes from the Sports and Entertainment District.
When the City adopted the current budget they projected they would receive close to $16.2 million which was a $200,000 decrease from the prior year.
The City notes that Admission Tax is capped at $15 million from SoFi Stadium, based on their calendar year, and have so far collected only $718,071 during the first six months of the City’s current fiscal year which began October 1, 2023.
Councilwoman Gloria Gray asked how they came up with the numbers cited for the Admissions Tax.
“The Admissions Tax rates were passed in 1980,” answered Weinberg.
There was no discussion as to why the city capped SoFi Stadium at $15 million when the Inglewood Municipal Code (IMC) indicates the City is entitled to more.
According to the I.M.C., the Admissions Tax rate is $0.56 cent per ticket and 10% on tickets in venues with over 22,000 seats.
“July 1st of each year, the rate will be adjusted upward by the percentage of annual change in the Los Angeles/Long Beach Consumer Price Index (CPI) as identified each June 1st. Should the June 1st change in the CPI be a decrease over the prior year, the tax will remain the same.”
Mayor Butts, Buchannon, and Weinberg verbally stated that SoFi Stadium will pay $17.3 million in Admissions Tax receipts, due to inflation, which isn’t reflected in either the adopted or modified budget that was presented to the public on an official City document.
When the Intuit Dome opens in August, it is presumed they will pay Admissions Tax in accordance with the established tax rate of $0.56 per ticket due to the venue’s maximum occupancy of 18,000 seats.
The City didn’t indicate how much Admissions Tax revenue was derived from the Kia Forum and YouTube Theatre.
Buchannon indicated revenue was flat but shows it is “trending up” and City spending is up 7% across all departments, except for Public Works, due to recent changes in labor contracts.
Mayor Butts insisted the City will post a $20 million budget surplus by September 30 which is the last day of the 2023-2024 fiscal year.
1 Comment
Great article Emilie!