A new financial consultant, a good economy in San Leandro, and a little bit of old-fashioned belt-tightening is bringing a small surplus to the city for the upcoming fiscal year, according to an early budget presentation to the City Council Monday night.

San Leandro Finance Director David Baum projects the city will have a $48,000 surplus on a $117 million operating budget when the new fiscal year begins on July 1. San Leandro dipping slightly into the black to start the fiscal year may not seem impressive, said City Manager Jeff Kay, but the news is far better than recently worries of an $8 million deficit.

“Eight million dollars in not much more than a year swinging from the negative to the positive is not small on a $117 million budget. That’s a huge swing and that’s very positive,” said Kay.

“There are some headwinds,” Kay also noted. “There will be challenges. There are some costs going up faster than our revenues.” Capital Improvement Project costs are rising, and public employee pension costs continue to be a concern, as is a proposed $2.6 million increase in the city’s service contract with the Alameda County Fire Department.

The specter of a downturn in the economy over the next two years is also on the minds of city officials. Because of rising expenditures and a projected dip in sales tax revenues starting in fiscal year 2020-21, San Leandro is estimated to have a $2.5 million deficit.

The city’s financial consultant projects sales tax revenues will drop by 1.1 percent in 2020-21. Never before has San Leandro’s Finance Department calculated a possible recession into budget forecasts, said Baum.

San Leandro’s overall economy appears to be humming. The rate of building permit volume is at an all-time high, said Baum. In addition, the city’s consultant projects a 3.3 percent increase in property tax revenue during each of the next two fiscal years.

Median home prices, however, slightly dipped during the past year from $644,000 to $613,500. But Baum sees the decrease as a positive cooling of home prices in San Leandro, which has seen the average median home price double since 2012.

Unemployment also remains stable at 3.6 percent, although it ticked up from 3.5 percent a year ago, which is also the same rate for all of Alameda County.

Even if San Leandro is forced to tap its general fund reserves in upcoming years, the surplus will likely be able to handle the expenditure. General fund reserves are pegged at $35 million for 2019-20, and $34 million in the next fiscal year.

But despite the small projected surplus next year, San Leandro officials are more encouraged by a revised long-term financial forecast that estimates its general fund reserves, if city officials did nothing, will not be depleted until 2026 instead of 2022, as previously predicted.

“So we bought some time,” Baum told the council. “We’re not going to solve this problem overnight, but by thinking about it and working on it, we can chip away at it and buy ourselves some time.”

In order to squeeze out savings within the existing budget, San Leandro decided this year to change its system of budget accounting. City department heads were told to hold the line and “roll back the clock” by basing budget requests on 2017-18 fiscal year spending. Departments were then required to justify any extra expenditures, said Kay, who admitted the new approach also created more work for staff, but was nonetheless, a success.

The level of detail for the plan to work even went as far as making sure city employees printed photo copies with black and white ink instead of color, said Mayor Pauline Russo Cutter.

“It’s a way of scouring the budget to make sure anything we don’t need isn’t in there,” said Kay.

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