Desert Hot Springs hopes to avoid $1 million deficit as it boosts services for homeless
Desert Hot Springs is looking at a $1 million budget deficit over the next year if it doesn’t find a way to fund the majority of its new homeless “access hub” without using city reserves.
The hub opened in October and has been offering a variety of services, like lunch distribution, showers and a cooling center. It is also an overnight shelter for up to 26 people, who can have breakfast and dinner there.
But finding long-term funding to keep it open has been a challenge. The city has $500,000 for the hub in its budget, but its annual operation costs $1.5 million.
The hub initially only accepted Desert Hot Springs residents, but has since expanded to a regional approach in order to be able to receive money from Riverside County.
Desert Hot Springs has recently been working to balance its budget due to other expenses, such as road repairs after storm damage during last year's Hilary, and a revenue drops due to its reduced cannabis cultivation tax rate. It used reserves to cover an estimated $1.5 million deficit for fiscal year 2023-2024, which will end June 30.
On Tuesday, the city council voted 4-1 to approve budget adjustments for fiscal year 2024-2025 that mention the potential for a shortfall. Councilmember Russell Betts was the dissenting vote.
Hoping to avoid a deficit
The council voted in early May to authorize spending $1 million from the city's reserves and housing funds to keep the hub open for a year. But city staffers are working to find other funding sources to avoid falling into a deficit that would force it to use that $1 million from reserves, said Deputy City Manager Doria Wilms.
“We are working hard to identify other funding sources to alleviate the need to tap into those reserves, however, the authorization to use those funds was given to ensure homelessness services at The HUB continue should other funds not be identified,” she said in an email.
Need for ‘future fixes’
The city’s consolidated general fund balance is estimated to begin at $7,622,389 and end at $7,659,087 for fiscal year 2024-2025, according to Geoffrey Buchheim, the city’s administrative services director. This would give the city a surplus of $36,698.
But the ending fund balance will be around $6.6 million if the city uses $1 million in reserves for the hub. The city staff report states that this is not sustainable long-term and lower than what is best practice for the emergency reserves of a city of Desert Hot Springs’ size.
Buchheim said that the significant revenue adjustments in the city include the following:
Reduction of $2.1 million in cannabis tax revenue, but a new cannabis facility annual renewal fee will bring in $305,000.
One-time increase of $415,000 for building permits from permit fees for the new Amazon warehouse.
Increase of $350,000 in property taxes.
Increase of $300,000 transient occupancy tax.
One-time reimbursement of $200,000 for Hilary storm clean-up from the Federal Emergency Management Agency.
To cut spending, Buchheim said Desert Hot Springs eliminated or froze 15 full-time and part-time positions. But it also added a 2.5% cost of living increase for all remaining positions for the first time since 2019.
Some other savings include eliminating contract code officers that had cost $450,000, having Desert Valley Disposal fund the debris abatement program so the city doesn’t have to spend $200,000, spending less on supplies, and lower contract costs for the city attorney, according to Buchheim.
But some other expenses are rising: The city is expanding its animal care and control division and faces maintenance costs for aging city buildings, insurance premium increases of about $300,000 and, of course, the hub.
“There needs to be future fixes,” said City Manager Frank Luckino. “There’s some structural imbalances (in the budget) that either additional revenues and/or additional expenditure cuts are going to be needed.”
Councilmember perspectives
Betts, the sole vote against the budget adjustments, said the city only has a balanced budget for 2024-2025 because it pulled from savings and received one-time money. He said residents and the council should have had more time to review proposed changes before they were voted on.
“It takes your time to get your head around what’s here, and I haven’t had enough time to do that,” he said.
He made a motion to adopt the budget but continue its final ratification to the next council meeting, but it failed to get support.
Councilmember Gary Gardner said there are some concerns for the long term the city needs to figure out.
“But I think we are sticking with our priorities. Our wants are always going to exceed our ability to fund them,” Gardner said. “And our residents have told us their priorities, and I think this keeps well within that, so I’m in favor of making these changes.”
Mayor Scott Matas said the city isn’t in a great place with its reserves, but city staff have made sacrifices and are putting together a plan. He said that he has no issue with the city’s budget process and was able to understand it.
Homelessness in Desert Hot Springs is a serious situation and has been taxing the city, Matas added.
“So putting these services together, I didn’t think it was an option,” he said. “I think it's a mandate that we have to go forward and find a way to fund this.”
Ani Gasparyan covers the western Coachella Valley cities of Desert Hot Springs and Cathedral City. Reach her at ani.gasparyan@desertsun.com.
This article originally appeared on Palm Springs Desert Sun: Desert Hot Springs boosts homeless services and faces $1 million gap
