The Arcata mid-year budget report indicates the city's revenue will fall short of the amount budgeted by almost $534,000, but officials said there is no cause for alarm.
"Arcata is doing fine financially, and our revenues were a little bit shorter than we had anticipated," City Manager Randy Mendosa said. "We will not go into the red. That's why you have reserves."
The Arcata City Council approved the report last Wednesday, and authorized staff to make adjustments to the $30 million budget for the remainder of the fiscal year.
The city's revenue is less than expected because the excessive electricity tax was put into effect later than planned, giving growers an opportunity to move, staff said. With the number of suspected grow houses in the city decreasing significantly, the tax is estimated to bring in $400,000 less than the anticipated $1 million.
Measure I, the so-called marijuana grow tax, assesses a 45 percent tax on households that use more than 600 percent of the energy baseline -- or the energy used to power three average homes. It was passed by voters in November 2012, with the hope of reducing the city's greenhouse gas emissions after they rose by 30 percent from 2000 to 2006.
The tax was implemented late last year. In the first month, 96 PG&E accounts were over the baseline. Of the 9,500 residential meters in Arcata, 633 previously exceeded the 600 percent mark.
"I don't think it's a huge problem," Councilwoman Susan Ornelas said. "We'll see how it is in another six months, but so far, the economy in the town seems to be OK."
The city is also still in the process of ironing out a plan with the California Department of Finance to pay back redevelopment funds it owes, resulting in less revenue from property taxes. Once a payment plan is approved by the Department of Finance, the city will start remitting funds to the Humboldt County Auditor-Controller, and will receive 15 percent, the city's portion of the general property tax, back, Finance Director Janet Luzzi said.
Arcata's wastewater treatment plant is also in dire need of a cleaning, along with routine repairs and maintenance. The last cleaning was 12 years ago, under emergency circumstances. Staff estimates the cost at approximately $80,000.
Staff has identified $318,000 in budget reductions from salary savings due to unfilled positions, and an over-estimate of various expenditures, particularly employee benefits.
After reviewing all other general fund revenue, staff found an overall increase of about $91,000 in additional transient occupancy taxes from the opening of the Red Roof Inn on Valley West Boulevard.
With the decrease in revenue estimates, the city's reserve is anticipated to be at 14 percent at the end of the fiscal year. While that is less than the city's policy of 20 percent, it is still within the recommended governmental standards of 8 to 17 percent.
"It's nothing too tremendous," Mayor Mark Wheetley said. "If it was a much larger number, we would have concerns.
"I feel pretty confident that we'll be able to come out even, if not ahead, by the end of the year, and staff does too," he added.
Lorna Rodriguez can be reached at 441-0506 or firstname.lastname@example.org. Follow her on Twitter @LornaARodriguez.