As the city manager describes in his first budget preview for the 2013-14 fiscal year, “There are both challenges and opportunities ahead as the City prepares its FY 2013/14 budget.”
Upon perusing the budget and the series of challenges, one quickly assesses that the city manager is actually putting a positive spin here. While there are positives in terms of the savings through the labor contracts, those positives are three years from being fully realized.
Moreover, the rest of the “good news” is of minimal impact to the city’s general fund, certainly over the long term, “The City has new rates in place that can fully fund a new water treatment facility and expanded wastewater facilities. In partnerships with the business community and UC Davis, we have implemented Davis Roots and are jointly funding a position through TechDAVIS.”
City Manager Pinkerton writes: “These activities should lead to greater business growth, new technology opportunities and hopefully, more revenue to the City.”
But not now. The worst news is that, while the city faces a structural imbalance of over $2 million in the General Fund, this does not factor in the “difficult choices” the city faces on how and when to “fund deferred maintenance and infrastructure needs.”
The city manager suggests that the city will likely “need to explore additional revenue sources since the supplemental Sales Tax expires in 2016 and the Parks Maintenance tax expires in 2018. The one-half cent supplemental Sales Tax annually generates approximately $3.7 million and the Parks Maintenance Tax brings in about $1.3 million per year.”
The budget faces a structural imbalance of up to $2.02 million in the General Fund for 2013-14, which represents 4.7 percent of the budget.
“This means that the City doesn’t have enough ongoing revenue to meet its ongoing expenses,” the city manager writes. “In order to close the gap, the City has to choose between making cuts, raising revenues, using one-time resources; or, a combination of these measures to balance the budget. Approximately 71 percent of the General Fund goes toward paying for Police, Fire, Parks and Recreation and Infrastructure services.”
This budget is based on some critical calculations about several critical issues.
First, the city is now assuming water and sewer payments are included in the budget.
Writes the City Manager, “This budget assumes the General Fund will be paying for water ($859,471 this year and $1.47 million next year and sewer ($13,774). There is a projected offset of lease revenue from the Utilities of $800,000 which results in a net increase for utility costs of approximately $700,000 in FY 2013/14.”
The bad news is that the budget only includes $2.3 million for street maintenance. While that is about $1.3 million more than the $1 million that was originally budgeted, it falls well short of the city’s infrastructure needs in this area.
The city is considering pavement maintenance as a separate item. However, this falls well shy of what the city would need to avoid what will become a $444 million unfunded liability.
Some scenarios call for annual expenditures of $7 to $8 million per year, which would more than triple current expenditures. Another scenario floated would be an infusion of $25 million over the first two years and then steady funding at the $3 million level thereafter.
As staff wrote in that item, “While the City will be discussing ways to increase the funds budgeted for pavement maintenance over the rest of this year, all scenarios make assumptions about increasing existing revenues, reducing expenses and generating new revenues, which are not certain to occur in any near-term time frame. The hope is that the City will be able to increase the funding level over time, but it may not be possible to quickly achieve this.”
The heat suddenly will be turned on the wayward bargaining groups and, in particular, the firefighters. The firefighters’ union, along with DCEA (Davis City Employees Association) are the two holdouts in agreeing to new collective bargaining agreements.
Right now, the budget assumes that all labor groups will have settled by July 1, but if they do not, the cost to the General Fund will increase by $144,000 per month and $1.7 million per year without an agreement.
In addition, well ahead of the council’s fire staffing decision, the city manager has simply cleverly budgeted for 11 firefighters per shift, and then notes ominously that the cost of staffing for that 12th person per shift would result in an additional cost of $443,663.
The gauntlet is now thrown down, between the labor contracts and fire staffing, the city is looking at another nearly $2.2 million in deficit, more than doubling the $2.02 million that currently sits there.
Finally, there is an item on parks infrastructure, as well. We have not talked about this a lot, but this is an area to watch closely, as well.
City Manager Steve Pinkerton writes, “A review of the Parks operations showed that, in some areas, the City is spending more than the industry norm on maintenance. Much of this is due to outdated irrigation systems, labor intensive plantings and deteriorating infrastructure.”
“In addition, the FY 2013/14 Parks budget will have to be adjusted to implement conservation measures which will help reduce our water consumption for irrigation,” he continues. “If water consumption is not reduced, the City’s water bill could exceed $3 million in FY 2016/17. Staff has budgeted $500,000 in next year’s budget for the initial costs of implementing conservation measures and updating infrastructure.”
The bottom line is, the city manager writes, that “over the past two years the Council has been responsibly reshaping the City’s finances to address the challenges caused by the national economic downturn: the loss of long-term funding sources as well as dealing with unsustainable and unfunded costs.”
“Over twenty percent of payroll was going to pay for current and future retiree medical costs. As a result, little money was left for infrastructure or other services that residents expect and deserve. The first step on this path was to work with the City’s labor partners to reshape the agreements over the next three years. During the life of the contract, this will result in avoided costs of $7,782,784 across all funds. The General Fund portion of this is $5,271,177.00,” he writes.
“The second step is to address the unmet infrastructure and service needs,” he continues. “In early February staff brought a report forward which discussed a pavement management program. Tonight we will be going over some of the related policy choices to help craft an infrastructure maintenance program which includes bike lanes, streets, sidewalks and lights.”
“The third step in the process of creating a financially sustainable budget is to objectively examine our levels of service for each city function. In order to do this, we will be setting aside funds in the budget for updating our information systems along with documenting and evaluating every work flow process within the city. Armed with better performance data and a modernized workflow system, we will be able to objectively view the cost and benefit of every city service and bring back recommended changes to the City Council,” he continues.
Steve Pinkerton concludes that the five-year budget cycle has been challenging for every municipality in California, but it is “staff’s goal to provide the Council with a budget plan that puts the primary focus on long term sustainability. This will require the Council to consider a significant increase in capital expenditures and serious consideration towards increasing the types and/or rates of revenue received from voter approved measures.”
—David M. Greenwald reporting
“In addition, well ahead of the council’s fire staffing decision, the city manager has simply cleverly budgeted for 11 firefighters per shift, and then notes ominously that the cost of staffing for that 12th person per shift would result in an additional cost of $443,663.”
What a shame the council didn’t take the opportunity to approve this option when it had the chance for a nice, clean decision to improve service and lower costs for decades to come.
Instead, it held out the hope to the firefighter union members that they can suggest some short term “savings” of $443,663 that will allow continuation of the lower-service, 4-person trucks.
We are already falling from, or otherwise on the rooftop heading to the edge of a tall skyscraper of overspending and over-committing. Yet, we still want to form committees and work toward consensus for what to do about it. Welcome to the state of denial where the dysfunctional can feel right at home until that home is taken away.
We know what needs to be done. As the Nike tag line says, we need to “just do it”.
If I were to liken this public versus public-sector-union-Democrat-party relationship to a marriage, the public is the justified complaining bitch being constantly slapped and abused. Unfortunately for everyone, the Stockton model divorce is where we are all headed.
We are a long way from Stockton.
“This budget assumes the General Fund will be paying for water ($859,471 this year and $1.47 million next year and sewer ($13,774). There is a projected offset of lease revenue from the Utilities of $800,000 which results in a net increase for utility costs of approximately $700,000 in FY 2013/14.”
So Harrinton and Munn are going to save us $700,000 a year divided by how many accounts? 10,000 or 20,000 decreasing your bill by a few dollars a month. Sigh.
[i]We are a long way from Stockton.[/i]
Not really.
The city has, conservatively, four or five million dollars in equity in the DACHA homes. Perhaps it’s time to get out of the rental business and liquidate?
The city has, conservatively, four or five million dollars in equity in the DACHA homes. Perhaps it’s time to get out of the rental business and liquidate?