Budget Background Information

Posted on May 23, 2024

Over the past several years the City Council has been aggressive in addressing the concerns of the community. These issues include enforcement action against and demolition of blighted nuisance properties; acquiring the Animal Hospital and Animal Sanctuary to ensure adequate Animal Control and Veterinary Services for the community; and purchasing, renovating, and opening and operating The HUB, a Homeless Access Center and Emergency Overnight Shelter that provides services to and addresses the growing unhoused population in the City of Desert Hot Springs. During this time the legal Cannabis industry has faced challenges which led to a significant loss of cannabis tax revenue.

Recognizing the need to follow through with the major initiatives to address the concerns of the community, the City Council directed staff to proceed with these initiatives and bring back a balanced budget that offsets the loss in cannabis tax revenue while still accommodating the community’s priorities. To achieve this goal, staff recommended significant changes in the City’s expenditures. These changes included budgetary cuts amounting to over $2.9 million dollars, which, in combination with a one-time approval to use City reserve funding of up to $1 million dollars for the continued operation of The HUB Access Center and Emergency Shelter, resulted in a balanced budget for FY 24/25.

City reserves play a vital role in maintaining the financial health and stability of our community. These funds are set aside to be used for emergency situations, unforeseen expenses, and long-term capital projects. These funds ensure a city can continue to provide essential services and respond effectively to various challenges. The Government Finance Officers Association’s best practice dictates that cities should maintain 17% of their General Fund budget in reserves. The City of Desert Hot Springs is estimating to start FY 24/25 with $7.5 million dollars in unrestricted reserves which equates to 22% of the City’s $33 million dollar budget, and could potentially end FY 24/25 with $6.75 million in reserves, which equates to 20% of the City’s $33 million dollar budget. However, staff continues to work to reduce costs or increase revenues for The HUB to reduce the impact on the reserve balance. With the exception of cannabis, all other revenue streams for the City are either meeting or exceeding revenue expectations. Additionally, staff continues to work hard to create a structurally balanced budget to eliminate reliance on one-time revenue.

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