The city council got a first look at its 2016-17 budget proposal and it wasn’t pretty. During its regular meeting last week, staff presented a preliminary budget showing the general fund with $415,000 in red ink.
That follows years of general fund reserve decline. With a $5.6 million reserve just a few years ago, the city was projecting $1.5 million in the kitty at the end of this year. However, one bright note in the overall bad news scenario was a revised ending to this year, with $1.8 million left in the reserve.
For the past three years, the city, while losing money, has cut costs enough to slow the rate of decline. Ending figures show the city will lose $101,000 in its general fund by the end of June, which completes the current fiscal year.
To stop further erosion of the general fund, the council was presented a variety of options: reduce expenses, recover some costs and increase revenues. Councilmen began tackling all those issues last week and will meet at least one more time to finalize other recommendations.
Trying to come to middle ground on general fund spending, City Manager Dr. Kindon Meik told the council there will be extra expenses that have to be taken into consideration. A one-time savings of $75,000 to the city’s fire contract has to be addressed, as does a loss of administrative funding for the successor agency (previously the redevelopment agency, which the state suspended) of about $100,000.
A redistribution of overhead expenses has also been recommended following the city’s water rate modification report: it was determined that taking over 90 percent of the finance department’s budget from city enterprise funds (those funds that pay for themselves, such as water and sewer) cannot be justified and must be reduced. That could add another $160,000 strain on the general fund.
The overhead study showed that 94 percent of the finance budget of $462,000 was derived from the enterprise accounts. Only six percent came from the general fund. The recommended range of allocation would see the department receive 65-75 percent of its budget from the enterprise funds.
Mayor Jerry Robertson said the city needs to be creative in solving its budget issues. He has stood alone in voting against deficit budgets over the past three years.
“We need to look at it from a different angle,” he suggested. “We need to determine what percent of the general fund budget goes where and cut by percentage based on use of the dollars.”
The council did agree on several specific cuts, including janitorial services and pest control services. Staff will work with the local school district to attempt to recover costs for the school resources officer and crossing guards.
As for increasing revenues, a small sales tax increase seemed to gain traction at the meeting. There is the potential that Measure K will be revived for the November ballot, but a local sales tax increase was also discussed.
Terry Kwast told the council he could support a sales tax increase to help rebuild reserves, so long as the city keeps its compensation levels under control.
“You have a heck of a problem,” he said. “All the focus seems to be on adding new burdens to the community or cutting services. I think you need to look at your salary schedule.”