City of San Diego facing $250 million budget gap, set to announce budget cuts

Here's an interactive pie chart of budget increase drivers. The visualization breaks down the five main drivers of the approximately half a billion dollar increase:

1. Capital Improvements Program at $167.8M, primarily for water and wastewater projects
2. Special Revenue Funds at $141.7M, mainly due to Fire/EMS transport program changes
3. Enterprise Funds at $82.5M for various utility operations
4. General Fund at $65.8M for personnel costs and core services
5. Homeless Strategies at $10.9M for shelter expansion and related programs

The chart includes tooltips for detailed values and a legend for easy reference. The total budget increase shown is approximately $468.7M, with the visualization capturing the major categorical increases from the source document. You can hover over each segment to see the exact dollar amounts in millions.

San Diego's 2025 Budget Sees Major Increases Across Key Sectors

Only in government is a reduction from a planned increased budget considered a cut. The City of San Diego is facing significant budget increases in fiscal year 2025, with projected expenditures rising by approximately $500 million across multiple sectors. What we are seeing is a relatively fixed income being reallocated to fund new projects, which may yield income down the road. Such works are frequently funded by bonds, but given the financial climate, the city has chosen not to do that. In the meantime regular city works must bite the budget bullet. The largest budget increases are concentrated in public safety, infrastructure, and social services.

Infrastructure investments account for another major portion of the increase, with the Capital Improvements Program seeing a $167.8 million rise. These funds are largely directed toward water and wastewater-related projects, including improvements to the Otay Water Treatment Plant and the implementation of the Pure Water program.

The Fire and Emergency Medical Services sector represents one of the most substantial increases, with the EMS Transport Program Fund rising by $101.6 million. This spike is primarily linked to the city's transition to the EMS Alliance Model for ambulance services, though Fire Chief Colin Stowell has indicated that initial revenue projections from this program may have been overly optimistic.

Enterprise Funds are set to increase by $82.5 million, with $34.3 million allocated to the Water Utility Operating Fund for various needs including compensation increases, pension contributions, and water treatment chemicals. An additional $21.1 million is earmarked for Municipal and Metropolitan Sewer Utility Funds.

The city's response to homelessness also factors into the budget expansion, with an increase of $10.9 million dedicated to expanding shelter capacity and maintaining various programs. This includes funding for 1,000 new shelter beds and expansion of the City's Safe Parking Program.

The General Fund, which supports core city services such as public safety, parks, and libraries, will see a $65.8 million increase, primarily due to rising personnel costs including wages and benefits.

However, these increases come at a challenging time for the city, which is simultaneously facing a $252.2 million deficit following the failure of Measure E, a one-cent sales tax measure that could have provided additional revenue. City officials are now exploring various measures to address this shortfall, including increased parking rates and new fee structures for city services.

SIDEBAR: Understanding San Diego's New Ambulance Service Model

San Diego's Switch to "Alliance Model" Brings New Revenue and Risks

In a significant shift from its previous ambulance service structure, San Diego is transitioning to an "Alliance Model" for emergency medical services, a change that accounts for over $100 million in the city's 2025 budget increase.

How It Works:

• - The city purchases set hours of ambulance coverage from providers Falck and AMR
• - San Diego Fire-Rescue gains direct control over system management
• - The city takes over billing and revenue collection
• - Falck provides 780 advanced life support and 120 basic life support hours daily
• - AMR contributes an additional 72 advanced life support hours

Financial Impact:

• - Projected annual revenue: $113.3 million
• - Expected annual costs: $106.7 million
• - Anticipated surplus: $6.6 million
• - Initial transition requires up to $14.6 million in startup funding

Key Revenue Source:
A major benefit comes from the Public Provider Ground Emergency Transportation (PP-GEMT) program, which increases Medi-Cal reimbursements to $1,065 per transport, up from previous rates. However, this program requires city investment and carries some risk if state funding changes.

Why the Change?
The transition follows Falck's consistent inability to meet contracted service levels since 2021. Under the previous model, Falck only met required ambulance hours three times in their first year of operation and frequently missed response time targets.

Looking Ahead:
Fire Chief Colin Stowell indicates this may be a temporary solution. The department plans to evaluate the model's effectiveness and potentially issue a new Request for Proposal within a year to either continue this approach or explore different service delivery methods.

SIDEBAR: San Diego's Water Infrastructure: A Costly but Critical Investment

Big-Ticket Water Projects on the Horizon

Pure Water Program:
- Major wastewater recycling initiative already underway in San Diego
- Part of citywide effort to develop local water supplies
- Aims to reduce dependency on imported water
- Expected to significantly impact water rates through 2029

Regional Mega-Projects in Planning:

1. Delta Tunnel Project

- Estimated cost: $20 billion
- Would transport water from Northern California
- San Diego committed $142 million for planning
- Controversial due to high costs and environmental concerns

2. Pure Water Southern California

- Estimated cost: $8 billion
- Large-scale sewage-to-drinking water recycling
- Based in Los Angeles but affects regional water pricing
- Could help reduce Colorado River dependence

Infrastructure Maintenance:

- Critical upgrades needed for Lake Hodges dam
- Twin Oaks treatment plant requires modernization
- Earthquake-related upgrades needed for aqueducts
- Maintenance delays could risk water service interruptions

The Cost Impact:

- 61% water rate increase projected through 2029
- Average household bill to increase about $57 monthly
- Additional costs from new projects not yet factored into rates
- Rate increases described as "painful but necessary"

Risk vs. Reward:

• Benefits:

- Enhanced water security and independence
- Reduced reliance on imported water
- More sustainable local water supply
- Protection against drought

• Risks:

- Significant rate increases for customers
- Potential impact on agricultural operations
- Uncertainty about final project costs
- Overlapping infrastructure investments

The city faces a difficult balance between securing its water future and managing costs for residents. As one water district manager noted, even a 1% increase could force some farming operations to shut down, highlighting the delicate balance between water security and affordability. 

Budget Driver Breakout

The approximately $500 million increase in projected expenditures for the City of San Diego's FY 2025 budget is primarily attributed to the following areas:

1. Special Revenue Funds:

   • Increase of $141.7 million, or 16.7%, mainly due to a $101.6 million rise in the Fire/Emergency Medical Services (EMS) Transport Program Fund linked to the transition to the EMS Alliance Model al Fund**:
   • Increase of $65.8 million, or 3.2%, largely due to higher personnel costs, including wages and benefits .

2. **Ente:

   • Increase of $82.5 million, or 6.2%, due to:
     • $34.3 million for Water Utility Operating Fund costs, including compensation, pension contributions, water treatment chemicals, and Pure Water implementation.
     • $21.1 million for Municipal and Metropolitan Sewer Utility Funds for compensation, pension contributions, wastewater treatment chemicals, and equipment upgrades .

3. Capital ImprovemeIP):

   • Increase of $167.8 million primarily due to water and wastewater-related projects .

4. **Homeless Strategies and SolutiIncrease of $10.9 million to expand shelter capacity, maintain interim shelter operations, and support safe sleeping programs .

These figures highlight the significant drivers of the budget increase, particularly in public safety, infrastructure, and social services.

Here is a detailed breakdown of the budget increase drivers for the City of San Diego's FY 2025 budget:

1. Special Revenue Funds:

   • Increased by $141.7 million (16.7%) mainly due to:
     • $101.6 million increase in the Fire/Emergency Medical Services (EMS) Transport Program Fund. This is linked to the transition to the EMS Alliance Model for ambulance transportation services.
     • Additional increases in the Engineering and Capital Projects Fund, Infrastructure Fund, and Environmental Growth Funds.
     • These increases were partially offset by decreases in the Transient Occupancy Tax Fund, Low- and Moderate-Income Housing Asset Fund, and Facilities Financing Program Fund.

2. General Fund:

   • Increased by $65.8 million (3.2%) due to:
     • Higher personnel costs, including wages and benefits.
     • Continued investments in core city services such as public safety, parks, and library services.

3. Enterprise Funds:

   • Increased by $82.5 million (6.2%) primarily due to:
     • $34.3 million in the Water Utility Operating Fund for citywide compensation increases, pension contributions, water treatment chemicals, Pure Water implementation, and operations.
     • $21.1 million in the Municipal and Metropolitan Sewer Utility Funds for compensation increases, pension contributions, wastewater treatment chemicals, debt payments, and equipment upgrades.
     • $12.9 million in the Development Services Fund for compensation increases and pension contributions.
     • $6.1 million in the newly created Solid Waste Management Fund, associated with restructuring costs from the amendment of the People's Ordinance, which allows for cost recovery for City force solid waste collection services.

4. Capital Improvements Program (CIP):

   • Increased by $167.8 million mainly due to:
     • Water and wastewater-related projects, including improvements to the Otay Water Treatment Plant and the implementation of the Pure Water program.
     • Expanded infrastructure projects to support growth and maintenance of existing facilities.

5. Homeless Strategies and Solutions:

   • Increased by $10.9 million to:
     • Add 1,000 new shelter beds.
     • Expand the City's Safe Parking Program.
     • Maintain operations at interim shelters and support lease expenses and ancillary costs.
     • Continue the Safe Sleeping Program and support portable restrooms and security.
     • Provide cost-of-living and living wage adjustments for front-line staff of service operators.
     • Support site improvements and operating cost increases at the Day Center and expand family shelter bed capacity.
     • These increases are partially offset by a one-time reduction of $15.0 million associated with the assumed use of San Diego Housing Commission resources.

These detailed explanations show how the City of San Diego is allocating its budget increases to address public safety, infrastructure, social services, and homelessness challenges. 

 

Sources:

Here are the citations for the document sources and data used:

City of San Diego. Fiscal Year 2025 Proposed Budget. City of San Diego, 2024.

• This document provided detailed information on budgetary allocations, expenditure increases, and income sources, including special revenue funds, general fund, enterprise funds, capital improvements, and homeless strategies.

City of San Diego. General Fund Expenditure Summary and Capital Improvements Program Overview. City of San Diego, 2024.

• Data on department-specific expenditures, personnel wages, pension expenditures, and capital expenditures by item were extracted from this section.

City of San Diego. Citywide Budget Overview and Revenue Sources Breakdown. City of San Diego, 2024.

• This section provided details on income sources, including charges for services, property tax revenue, other revenues, and transfers in.

All data and figures, including the breakdowns and percentage changes, were sourced directly from the official City of San Diego Fiscal Year 2025 Proposed Budget document.

 

Mayor of San Diego, facing $250 million budget gap, set to announce budget cuts

Eric S. Page

nbcsandiego.com

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Mayor Todd Gloria will announce a series of budget cuts Tuesday "designed to generate cost savings and minimize service-level reductions," according to his office.

Gloria's announcement comes as the city faces a significant budget deficit "following the narrow failure of Measure E — and after months of careful review and consideration of potential reductions and consolidations," officials said, adding that, at 11 a.m. at city hall, "Mayor Todd Gloria will announce a series of operational efficiencies to generate cost savings and help preserve city services for San Diegans."

A reader of Monday's announcement could interpret the phrases "reductions" to possibly mean "layoffs," and "operational efficiencies" to possibly be interpreted as "service cutbacks."

A one-cent sales tax measure that could have shored up the impending deficit narrowly failed in November. Gloria discussed the looming $252.2 million deficit during his Jan. 15 State of the City address. As expected, the budget shortfall — comprising around 12% of the city's total spending — made up the majority of that speech.

City of San Diego's Money Moves in Wake of $250 Million Shortfall

The mayor said in his speech that San Diegans are natural innovators who will find ways to make things work.

"The stark financial realities we face today will test our resolve," Gloria said. "This is not the time for retreat. This is not the time to slow down. This is the time to double down. We are moving forward."

Since that time, city officials have doubled parking rates around town and are mulling extending the hours for parking meters into the evenings and Sundays — and adding meters where there currently are none, a figure one official speculated could (but probably will not) raise as much as $40 million. Also, San Diegans finally learned how much they may pay for trash pickup in single-family homes (a change passed at the ballot box way back in 2022 but which is just now getting organized), which could theoretically add another $60 million to the city's coffers. Also being considered is a roughly 20% increase in the costs of fees for everything from park rentals to fishing licenses. However, the city, which is currently losing money over its service fees, only hopes to make up that shortfall, since it can't charge more than the services cost. Still, any additional revenue from the fees would allow it to put its subsidies back into the general fund and help defray the shortfall.

Even if all that comes to pass, the city — and Gloria — seem likely to face still face some tough choices to zero out the budget.

Gloria also said in his State of the City speech that it was time for the city to get a fair deal from entities such as the county and Caltrans when it comes to homelessness. He said the city has for far too long shouldered the financial burden of homeless residents suffering from substance abuse and/or mental health issues.

"It's long past time for all the cities in this county to do their part and not simply rely on you, the taxpayers of this city, to continue to foot the bill," Gloria said in January. "My fellow San Diegans, it is my hope that, anytime you see a person on the street suffering from extreme mental illness or addiction, you think of the county of San Diego and ask them: 'When will they step up to provide the services needed to end this crisis?' "

The cit250y of San Diego spent about $230 million last year on homelessness in the 2024/2025 budget year, with an annual budget that year of roughly $5.8 billion.

Gloria also said at the time that police, fire and paramedics remain a top priority for the city despite the structural deficit.

 

San Diego FD reconsiders ambulance service models

May 09, 2024 09:20 AM

ems1.com

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Fire Chief Colin Stowell to start a review comparing the current system with in-house or hybrid EMS service

A Falck ambulance speeds along El Cajon Boulevard on Wednesday, Jan. 5, 2022 in San Diego, Calif.

Sam Hodgson / The San Diego Union-Tribune

By David Garrick
The San Diego Union-Tribune

SAN DIEGO — Ambulance service in San Diego may soon undergo significant changes despite the recent success of a new model where private ambulances transport patients and the city oversees deployment, staffing and billing.

The new set-up called the alliance model, has improved emergency response times since it began in October, and fire officials say it’s on track to generate millions in revenue the city could use to enhance services.

But Chief Colin Stowell says he will soon launch a comprehensive analysis to determine whether to stick with the alliance model, bring ambulance service completely in-house or go with some sort of hybrid approach.

Bringing the service in-house means ambulance workers would become city employees and no longer work for private ambulance companies. Los Angeles, San Francisco and Chula Vista have in-house ambulance services.

“The alliance model has stabilized our system, but where do we take that?” Stowell told the City Council’s Budget Review Committee last week. “We’re in for a very exploratory next year on the EMS front.”

Stowell estimated that fire officials, with help from a consultant, will come forward this winter with recommendations for what the city’s ambulance system should look like moving into the future.

The analysis will evaluate the three options — alliance, in-house or hybrid — on emergency response times, financial risks, financial benefits and other factors, he said.

“Those are all going to be options on the table, and we’ll evaluate the risks and benefits of those,” Stowell said.

Officials had been expecting millions in profits from the switch to the alliance model — but that has been slow to materialize because of delayed payments for ambulance transports and what city officials characterize as flawed projections.

Before the switch, the private ambulance company Falck USA handled staffing, deployment and billing for the city. Under the alliance model, the city took over those roles — and the financial risks and potential benefits that come with them.

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Officials forced Falck to add AMR in October to increase service

November 16, 2023 11:03 AM

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The shift was prompted by frustration with poor response times and a new state law that boosts reimbursement rates on ambulance transports for government agencies. A consultant had estimated the city would generate $15 million in surplus cash during the alliance model’s first three years.

The consultant projected $6.5 million during the ongoing fiscal year that ends in June, another $3 million in fiscal year 2025 and $5.5 million in fiscal 2026.

But Stowell said the city is certainly going to lose money this year. Fire officials have projected a $6.1 million surplus in fiscal 2025, but Stowell and the city’s independent budget analyst said that’s also in doubt.

Stowell said the main problem has been the long lag times between when an ambulance transport takes place and when the city gets paid by Medicare, MediCal, private insurers and the state reimbursement program.

“There is a significant lag time, and we have to remember that the money will eventually come in and we will eventually be whole,” Stowell said. “We’re still on track.”

But Stowell also conceded that some of the projections from last year have turned out to be off the mark.

He said projections for collection rates and the percentage of patients who are covered privately seem to be accurate, but that estimates of call volumes and state reimbursement money have been off.

“We’re working completely on projections that were done,” he said. “We are seeing things that maybe weren’t as accurate on those projections.”

The boosted reimbursements come under the state’s public provider ground emergency transportation inter-governmental transfer program.

But Stowell stressed that the lag time was the main problem, explaining that the city was more than $8 million in the red during the first month of the alliance model last October.

The city pays roughly $9 million a month total to primary ambulance provider Falck USA and secondary provider American Medical Response for ambulance services on a per-hour basis.

Because of lag time, the city received only $135,000 in payments last October. That’s why it was well over $8 million in the red for that month.

While payments and reimbursements have been rising, city officials don’t expect to be in the black during the ongoing fiscal year and have expressed doubts about fiscal 2025.

Councilmember Marni von Wilpert, who leads the council’s Public Safety Committee, said last week she was disappointed that the city is not meeting the earlier projections.

Stowell said last year he hoped to have enough excess revenue to add new programs like nurse triage, telemedicine and street-based interventions.

Signaling a major shift in priorities, he said last week that the goal is to have enough excess revenue to have adequate “seed money” to possibly bring ambulance service in-house.

But Mayor Todd Gloria’s proposed budget for fiscal 2025, which relies significantly on one-time revenue sources to close a large deficit, anticipates taking $6 million in projected surplus from the city’s ambulance fund.

The city’s independent budget analyst cautioned last week that such a move could be problematic because of the alliance model’s disappointing results so far.

The IBA says revenue will exceed expenses under the alliance model in fiscal 2025, but probably not by enough to generate the $6 million Gloria wants to take away to balance the city budget.

The IBA says Gloria should consider reducing that amount when he releases a revised version of his budget proposal next week.

Stowell recommended waiting until this fall to revisit the situation. He said the doubts fire officials expressed to the IBA were partly based on being uncomfortable making projections 14 months into the future.

©2024 The San Diego Union-Tribune.
Visit sandiegouniontribune.com.
Distributed by Tribune Content Agency, LLC.

Rising Water Costs in San Diego Is a Never-Ending Story

MacKenzie Elmer

voiceofsandiego.org

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The cost of water in San Diego will continue to skyrocket but we don’t have a good idea where or whether it will stop.  

The city of San Diego recently revealed its own water rates will rise a whopping 61 percent through 2029, adding about $57 per month to the average water bill. Part of the reason is the San Diego County Water Authority, which sells water to the region’s 22 water districts, is paying off debt and deals it took on many years ago to claim more Colorado River water and tap into ocean water for drinking. Another reason is cities like San Diego are building their own expensive wastewater recycling systems. 

But this year’s price spike – or any water rate forecast in San Diego right now – doesn’t account for some of the largest and most expensive water security solutions being pondered in Southern California right now by the Metropolitan Water District of Southern California and beyond. 

San Diego would also be on the hook for those. 

One is a $20 billion plan to build a tunnel to carry more water south from northern California, called the Delta tunnel project. The Water Authority’s been both booster and skeptic on this state project supported by multiple governors past and present. San Diego is currently a booster again, voting just last week at Metropolitan to spend over $142 million on planning the project.    

The other is an estimated $8 billion sewage-to-drinking water recycling project in Los Angeles called Pure Water Southern California. Dan Denham, general manager of the Water Authority, said both the Delta and recycling projects are in very early stages, but have the potential to help California reduce its demand on the Colorado River – where most of Southern California drinks from right now.    

A view of Lake Mead on Jan. 31, 2023. / Photo by Joseph Griffin for Voice of San Diego

Rebecca Kimitch, a spokesperson for Metropolitan, confirmed the agency’s budget doesn’t include or forecast any of those costs into its own water prices. That means San Diego doesn’t have a clear idea how much water will really cost in the future.  

“Any increase at Metropolitan is going to affect the rates at the Water Authority,” said Amy Reeh, general manager of Yuima Municipal Water District. “It all rolls downhill.”  

Fights in Southern California water politics look the same no matter where you look right now. Everyone is trying to develop their own local supplies, like recycling sewage, with the hope of getting off the teat of evermore expensive water wholesalers like the Water Authority. The Water Authority is doing everything it can to avoid buying water from Metropolitan. And Metropolitan, which maintains Southern California’s lifeline aqueducts to the Colorado River and Sierra Nevada mountain water, is doing everything it can to find new water supplies and protect cities like Los Angeles from water shutoffs during drought.  

“What’s happening at Met with rates and water demand is happening at the Water Authority and with the city of San Diego,” Denham said. “The industry is changing right before our eyes.” 

San Diego’s Runaway Rate Train 

Headlines about rising water rates were everywhere this year in San Diego County: “Painful but necessary,” “water bills double,” “tough to swallow.”  

It all began when the Water Authority proposed a whopping 22 percent water rate increase for 2025 on its 22 customer water districts, the largest single yearly spike in 15 years. Each water district has to then figure out how to absorb the Water Authority’s increased costs into their budgets or pass it on to customers through water bills. It hurts everyone differently.  

“Even a 1 percent increase (on the cost of water) could mean someone shutting down a (farming operation),” Reeh of Yuima said. 

The city of San Diego, the region’s biggest water purchaser and therefore the most politically powerful on the Water Authority’s board, looked at that number and said: No way.  

San Diego Mayor Todd Gloria pushed his 10-member stronghold on the 33-member board (known in water world as “the city 10”) to fight the hike, no matter the cost.  

He succeeded, because as long as his contingent remains loyal, San Diego needs only one other water district to agree with them to achieve their will. The rate hike dropped to just 14 percent; a result Mayor Todd Gloria celebrated as a victory during his re-election campaign.  

Not everyone cheered, including some members of Gloria’s own contingent. Dropping the rate now meant putting off major work the Water Authority needs to do like delaying some anti-earthquake-related upgrades on its lifeline aqueducts that supply the majority of San Diego’s water.   

“If I decide not to do (pipeline work) and one goes out, I have a few customers interrupted for a day or two,” said Gary Arant, general manager of Valley Center Municipal Water District, which purchases all its water supply from the Water Authority because it has no local supplies. “But if a Water Authority aqueduct blows out, we have hundreds of thousands of people out of water.”   

But San Diego wanted more.   

A large chunk of the Water Authority’s rate increase goes toward paying off debt and contracts for Colorado River and de-salted ocean water the agency made years ago. Mayor Gloria’s administration wants the Water Authority to sell off some of those hard-fought supplies to save money.  

“(The Water Authority) has contractual obligations to purchase water supplies that exceed the total water demand of the San Diego region,” said Ally Berenter, deputy director of external affairs for the Public Utilities Department at a city budget hearing. “This poses a long-term structural issue for the Water Authority that threatens its financial stability.”  

Juan Guerreiro, the director of the city of San Diego’s Public Utilities Department, points to the new Pure Water North City facility under construction on June 11, 2024. / MacKenzie Elmer

And, it threatens the city of San Diego’s financial stability, they believe. It’s not in the city’s interest to be buying water from outside San Diego County because they’re developing their own local resource: Recycled water. 

Denham, the Water Authority’s general manager, admitted that the Water Authority has more water than it can use, something general managers preceding him resisted saying for years. But instead of getting rid of contracts for Colorado River and desalinated water altogether, Denham posted San Diego’s extra water for sale.  

“We don’t have the ability to just back out of (those contracts),” Denham told me. “We’re trying instead to balance our resource mix to see if we can move water to different places.” 

In 2023, Denham struck a water trade deal with major southern California water agencies, saving the agency a reported $20 million or a 3 percent water rate decrease for customers, he said. The dealmakers replicated that agreement again this year – something that’s easier to do now after a few years of good rain when California has plenty of supplies to go around.  

Nick Serrano, deputy chief of staff to Mayor Gloria and the new chair of the Water Authority, thinks San Diego should be looking to make more transfers like these with Metropolitan. He’s skeptical the Delta tunnel project and Los Angeles’ water recycling projects are necessary. 

“We have local supply projects we’ve invested in san diego and, to some degree, it’s supply we can offer up or transfer,” he said.  

Not knowing how the Delta tunnel or Los Angeles’ recycled water projects further north will trickle down to the Water Authority and ultimately her budget concerns Lindsay Leahy, the city of Oceanside’s public utilities director.    

Leahy sits on the Water Authority’s finance committee. She said she hasn’t seen any budget projections to date that include the Delta or Los Angeles’ Pure Water project. Nor has she seen full-cost projections of other anticipated costs at the Water Authority – like a fix to the failing Lake Hodges dam or upgrading the agency’s main treatment plant called Twin Oaks.    

“We need to have a full picture on all the potential upcoming projects and understand the financial impacts,” Leahy said.