There will be no easy way to reduce a structural deficit of $1.81 million in the city of Ceres general fund budget, councilmembers noted during Monday evening's Study Session.
The council approved the 2014-15 fiscal budget in June with the deficit with the intent of dealing with the gaping budget gap by September. To get the ball rolling on reducing spending this fall, members were asked Monday to weigh in on directions and policy decisions. City Manager Toby Wells asked the council to make narrow down the alternatives to close the gap.
The council decided that it may, if necessary, dip further into reserves below the current 25 percent of the budget. Wells recommended the city keep a minimum of 15 percent and if so only for one year. Mayor Chris Vierra said he wasn't comfortable dipping deeper into the reserve pool, noting the levels never have risen once they have been lowered. He said he had no problem taking it down to 20 percent but it made him "nervous."
"I'm just concerned that if we go to 15 percent , yes, we made it a little easier now but man, if one hiccup hits us or something, we're dangerously close ... it becomes a slippery slope that we've been riding since I've been on this council in 2003 I don't think we've ever increased the reserves. We've just taken them down, down, down."
The city is required by law to have a 12 percent reserve. According to Finance Director Sheila Cumberland, the city could live off of its reserves for only three months.
Councilwoman Linda Ryno stated the city should maintain a 25 percent minimum reserve for emergencies.
"We've allowed ourselves to get in this situation for the last six years," said Ryno. "We haven't been living within our means. I don't see us drop that low that we have to try and build it up and how are we going to build it up when we don't have additional revenue coming in."
Wells said sales and property tax revenues have been increasing since bottom-lining in FY 2011-12.
Councilman Ken Lane said there would be employee layoffs if the council stuck with the 25 percent reserve level.
Allowing the city to drop reserves to 20 percent gives the city $340,000 more to spend on the deficit. The council may consider dropping reserves to 17 percent if it helps stave off layoffs.
While stating that economic development is of vital importance to improving the tax base of Ceres, members decided against allocating permanent funding of $325,000 on economic development activities.
Wells suggested not making it a priority over public safety despite the importance of stimulating the local economy.
"That's a good chunk of change," said Vice Mayor Bret Durossette. "That's two or three employees."
Vierra said if the city keeps cutting without creating new revenue through economic development "we're going to continue to drive tax dollars out of our city to other jurisdictions and I'd hate to see that happen."
The council also agreed to include IT infrastructure and staffing in the current budget. A report suggests that the city needs to spend $650,000 on information technology hardware infrastructure, including the telephone system, and support staffing. Wells suggested postponing an IT analyst position for another year to save $150,000 annually. However, Mayor Vierra said IT is too vitally important not to upgrade. City IT technician Farren Williams said IT has been neglected since 2009. Ryno said she can't see hiring an IT analyst "if we don't even know what's going to happen to our existing staff. We don't know if we're going to have layoffs or not."
"IT gets pushed a year further and a year further," said Vierra. "If we want to move it to 2015 I'm not sure we'll address it in 2015 because we have kept pushing it off."
The council also decided against redirecting $510,000 in Measure H funding. Fifteen positions are funded by Measure H tax monies. The council decided against a plan to use those monies for general fund uses.
Measure H, said City Attorney Mike Lyions, is intended for enhanced public safety services but can legally be used for existing positions and offset public safety operations as long as the city spends the same percentage on police and fire as 2007, the year Measure H was passed. Lyions said the city runs the risk of being sued if it becomes "ambitious" in supplanting rather than supplemental use.
In 2007, the city was spending 68 percent of the general fund on police and fire services. It is now spending 71 percent. A total of 10 officers and five firefighters are paid for by Measure H tax monies.
To maximize the most resources for police patrols, the council decided to shift officers assigned to the Street Crimes Unit to patrols which Wells called "the highest priority of citizens."
The council said it would be open to reorganizing the spending plan of Measure H to spread out hirings over a longer period of time.
The council next confronted the matter of the SAFER grant funded firefighter positions. Ceres stands to lose the six firefighters paid by the federal grant, which is expiring. The city could qualify for another round of SAFER grant monies, if offered again, and thus fund the continuance of the six firefighters. Wells asked if the city was willing to use Measure H funds to fund the positions until the fate of the grant is known.
Vierra suggested waiting until September to see if the federal government opens the grant and if Ceres wins a "retention grant."
The council was asked what to do about restoring employee concessions, including the unfreezing step pay increases. Wells said it is easier to talk about unfreezing step increases the first year - which will cost $229,000 - as the city works back to restoring pay to employees.
Giving back the 10 percent pay cut would cost the city $632,000. Some of those concessions would be funded out of enterprise funds and not the general fund.
Mayor Vierra reminded the council that full quick restoration of pay concessions to all bargaining units would likely result in the loss of 25 layoffs of city staff.
"If we lean toward doing it right away, people get their concessions back almost immediately but 25 percent of the staff may go," said Mayor Vierra.
Ryno pressed Wells for clarification that "you're absolutely sure that if you balanced in one year it would be 25 employees?" Wells replied: "I am confident that it's going to be more painful than you're willing to bear."
The council asked Wells to put together alternatives for September that starts the process of slowly giving back all concessions in the hopes that the economy and budget has improved in three years.
Any changes must be approved by the various labor groups.
"I think if you gave us, on option 1, the definitive of how many employees would get layed off, I think that would probably take care of it right there," said Ryno. "I mean, I'm not going to be happy with losing a total of 25 public safety (employees)."
The council spent a very brief time looking at the Community Center, which has amassed a $600,000 deficit since opening. Wells said it's not realistic to think the Community Center can be revenue neutral in the five to 10 years and will require general fund support.