Malibu needs more income, less spending

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Debt payments on the new city hall begin next fiscal year, and city officials say it cannot maintain its current level of spending: a $236,000 surplus has turned into a projected $677,000 deficit.

By Knowles Adkisson / The Malibu Times

Malibu council members and high-ranking city officials say the city needs to produce more revenue in the future as payments due from the purchase of the new city hall looming.

Starting with a partial payment next year, the city by fiscal year 2015-2016 will be on the hook for annual payments of $1.7 million. The payments will pay off $20 million worth of Certificates of Participation (COPs), similar to bonds, which were taken out in 2009 and 2010 to purchase and renovate the former Malibu Performing Arts Center building.

Assistant City Manager Reva Feldman, at the city’s Administration and Finance Subcommittee last week, said revenue from property and sales taxes have evened off. In the future, she said, the city would need to rely on rent collected from its three commercial properties-Malibu Lumber Yard mall, Malibu Coast Animal Hospital and the former Coldwell Banker building on Pacific Coast Highway and Webb Way-to raise revenues.

“The big revenue growth is not going to come from property taxes or sales taxes, it’s going to come from having more participation rent,” Feldman said.

The city currently takes in $1.3 million annually in rent from the three commercial properties it owns from the purchase of Legacy Park. While Malibu Lumber Yard and the animal hospital have been occupied for some time, the Coldwell Banker building has been partially leased to Supercare Drugs for less than a year. Approximately 1,800 square feet of space at that building has remained vacant since 2009.

The city pays $1.2 million annually on $15 million in debt from COPs taken out in 2006 to buy Legacy Park.

Feldman said the city has enough money to pay for necessary expenditures, such as payroll and employee insurance, but that it could not sustain its current level of spending without either raising revenues or cutting spending. City Manager Jim Thorsen said the city could tighten its belt on capital improvement projects. The most pressing projects to keep, he said, would be street pavement overlays and matching funds for state grants related to traffic safety. Another option that other cities have used, Thorsen said, was to postpone capital projects for a year to allow revenue to build up.

“So we have to get more or spend less,” Councilmember Lou La Monte said. “It’s as simple as that.”

The discussion over budgetary matters comes on the heels of nearly $1 million in appropriations the city council has made that were not part of the fiscal year 2011-12 budget when it was passed in May. The majority of that figure was a $755,000 appropriation, which the city council made in August for legal fees related to its defense in an ongoing lawsuit filed against the city by the environmental groups Santa Monica Baykeeper and the Natural Resources Defense Council.

Other expenditures included $40,000 to an engineering firm for the design of Kanan-Dume Road improvements, and a $75,000 matching grant for a Caltrans safety study of Pacific Coast Highway. The appropriations turned what was projected to be a $236,000 surplus into a projected $677,000 deficit for 2011-12.

“This year we’re definitely dipping into spending more than we’re bringing in,” Feldman said.

Sibert said while the city’s financial position was strong, the appropriations made it difficult to maintain a healthy reserve fund, on which the city in April passed a resolution.

“It’s not a disaster, but it’s certainly not what we wanted,” Sibert said.

Malibu resident Ryan Embree asked why the city had been unable to rent out the 1,800-square-foot space in the former Coldwell building, despite interest from the Malibu Chamber of Commerce and the martial arts studio, The Pit Malibu, in the space.

Thorsen said the plumbing for a bathroom was present at the site, but that a bathroom still needed to be built before it can be rented. Mayor John Sibert added that the largest obstacle to renting out the space was “the 9 percent vacancy rate in the City of Malibu… if you can find somebody to move into that place, we will laud you at the next city council meeting.”