The city of Ceres will dip into cash reserves to give back its employees the 10 percent salary cuts they surrendered four years ago when the city faced recession-related revenue shortfalls.
The Ceres City Council gave direction to the city manager at Monday's special Study Session to make all city employees whole as of Jan. 1 rather than drag the process out two years as originally planned. The council originally planned to restore the final five percent in the next budget year.
City Manager Toby Wells said that despite expecting revenues to be four percent better through the current 2014-15 fiscal year, the city will need to draw down reserves to make the salary restorations happen. He estimates that $428,418 needs to be pulled from reserves, leaving a $3.5 million pot of money left. Without dipping into reserves, Wells said, the city would be faced with laying off approximately four employees.
The council decided earlier this year that it is willing to lower the minimum reserve level of 25 percent to 20 percent. Wells said the council has been prudent in guarding the "rainy day fund" but noted that "it's a light sprinkle now and we're starting to get better but we're getting better very, very slowly so the use of reserves - that's what it's there for."
"You're not being careless either. You're being very measured and very calculated in the way you're doing this."
The council also decided on Monday it will unfreeze salary steps to help keep employees from feeling like they are capped on moving upward and search for employment elsewhere. The unfreezing of steps is expected to cost the city $229,292 this year. Step increases would be phased in at the time of satisfactory annual evaluations.
"What it does is remove a mental cap," said Wells. "We're trying to retain our employees. We're trying to give back concessions. Right now that idea that ‘I have no movement' is something that gets people looking (to go somewhere else)."
Councilmember Linda Ryno agreed, saying employees deserve step increases. She also for making the employees "whole now."
The city had given three percent of the 10 percent salary cutback already. On Monday they directed the remaining seven percent to be restored by Jan. 1, 2015.
"It's time," said Councilman Ken Lane. "These employees have been without for four years and you know what I see things getting better ... I think it's time to really just give back to the people who have stuck with us."
Wells said the city may need to issue layoff notices or be forced to streamline operations during the 2015-16 fiscal year. The council will not have the option of dipping into reserves next year because of its self-imposed minimum 20 percent level.
"I have a hard time making layoff decisions that are two years down the road based on projections," said Wells. "You make the decision when you get closer and have better numbers."
The council will be asked to formally take the budget actions on Monday, Oct. 13.
The budget talk also noted that:
• A vacant police position fighting high tech crimes will be kept frozen to save $110,000;
• An Information and Technology (IT) analyst will be hired in January and paid from savings from IT projects and not be a general fund hit;
• All department heads will be instructed to keep a tight rein on expenses and to freeze most positions if they become vacant;
• Funding the full-time economic development manager (Steve Hallam's position) will occur until June 30, 2015 or longer. A part-time position may be created afterward;
• The city wants to minimize use of Measure H tax funds and end the practice of using $500,000 annually as a general fund offset by 2016-17;
• A five-year plan to make the Community Center less of a financial burden on the city will be crafted.
Earlier this month the council decided to dip into Measure H by $100,000 as part of a way to cover the $393,000 expense for the remainder of the year to keep the six firefighters who were scheduled to be released. The six firefighters were only hired because the city won a two-year federal grant that ran out on Sept. 22.
The city remains hopeful that it will be able to snag a retention grant to receive SAFER grant funding for the six firefighters for another two-year period, thus saving general fund monies.