City revenues have fallen short for the past eight years, with the Ceres City Council dipping into reserves to balance the city's budget. The coming fiscal cycle is expected to be no different, but members decided at a May 26 Study Session that cash reserves will not go be allowed to drop below 18 percent of the overall budget. That could mean some layoffs.
The 2015-16 spending plan will be up for public input during a 5:30 p.m. Study Session on the budget set for Monday, June 8. The budget talks could be continued to Monday, June 22 with adoption during either meeting in time for the July 1 start of the 2015-16 fiscal year.
General Fund revenues are projected to be $18.2 million with expenses at $19.8 million and a $1.6 million deficit. Part of that deficit traces back to the September 2014 decision to restore the 10 percent salary cuts to employees. The restoration of pay as of Jan. 1 was heralded by employees but cost the city $664,000 for FY 2014-15 and expected to cost $1.3 million in FY 2015-16.
"Unfortunately our revenues and expenditures really haven't gotten a whole much better," City Manager Toby Wells told the council. Revenues are projected to be around the same as in FY 2007-08.
Wells said the new spending plan is awaiting the final outcome of the current fiscal year which ends June 30. The 2014-15 budget is projected to end balanced.
At its worst-case scenario, Wells said the city would have to dip into reserves, sinking them to 16 percent. But the council determined that it wants a minimum of 18 percent in reserves. That could mean layoffs, likely in the area of public safety since police and fire use up nearly 80 percent of the General Fund.
Historically, the council set a policy of maintaining a 25 percent reserve for rainy day use. Last September the council dropped that number to 20 percent.
"From the grand scheme of things, looking at other agencies around ... some cities have as low as five percent," said Wells. He recommended to the council going no lower than 15 percent.
"Obviously more is better, there's no doubt about it," said Wells. "The reserve is a rainy day account and I would argue that it is still raining on us. It's lightening up. It's becoming a light drizzle."
"And when are we going to learn to start living within our budget instead of always counting on our rainy day money?" asked Councilwoman Linda Ryno of Wells. He replied: "That's the council's priority; that's why I'm asking."
Ryno said she is concerned that the city has been deficit spending for eight year and that average citizens cannot do the same.
"If my husband and I just kept living on credit cards or savings account, you just can't keep doing that," said Ryno. "And at what point are we going to say we can't keep reducing our reserves? We keep getting into our savings account and we shouldn't be doing that."
Ryno said 20 percent in the reserve is her bottom line. She also reminded Wells that he had a three-year plan to get the budget on track, saying, "If we keep dipping into reserves, how are we going to get there?"
"We'll have to make changes to the organization, that's a given," said Wells, who pressed for a council set minimum for reserves before determining what cuts need to be made.
"This is a difficult discussion for me because I don't like to keep dropping the reserves," said Mayor Chris Vierra. "Once you open Pandora's Box it never goes back ... We're getting into very, very dangerous percentages. I would not go lower than 15 percent."
Each percent of the reserves represents $190,000. The difference between keeping a 20 percent reserve and a 15 percent reserve is $950,000, which is equivalent to the cost of seven or eight firefighters or police officers.
Wells said his budget was proposed to avoid layoffs.
"They're all valuable to me. I don't want to lay anybody off. That's why I'm proposing the budget I'm proposing. The damage to the organization and culture has really taken us really five years to get back to where there's some comfort level from the last layoffs."
Wells said he remains optimistic that the city is on the cusp of seeing an increase in sales tax revenues, which provide 26 percent of the general fund.
When Councilman Mike Kline asked what kinds of cuts have to be made to retain an 18 percent reserve, Wells said "about a $280,000 change to the budget as it's proposed."
Vice Mayor Bret Durossette suggested going as low as 16 percent but went along with the majority with 18 percent.
Another big unknown for the budget is whether or not the city will snag the federal SAFER (Staffing for Adequate Fire and Emergency Response) grant to fund six firefighters. The city hired six firefighters in 2012 but the two-year grant ran out in 2014 and firefighters launched a public relations campaign to have the council keep them on. The city agreed to use $100,000 of Measure H half-cent sales tax monies and institute an alternative staffing plan - which included the browning out of Ceres Fire Station #3 on Service Road and overtime savings - to retain the six. The "rescue" plan ends June 30 but the city may not be awarded a SAFER grant until Sept. 30, if it's awarded at all.
The budget is proposed to include new positions, including a street maintenance operator to train street sweeping operations with a street sweeper the city plans to buy. The position would be paid by gas tax funds.
The proposed budget adds another police lieutenant in exchange for freezing a sergeant position. A public works administrative analyst is also being proposed to help track sewer, gas tax, and lighting and landscaping district funds.
Other items that impact the budget:
• Paying for the salary of the crime analyst to the general fund and out of Measure H;
• Measure H revenues are projected to be approximately $2.6 million with a deficit;
• The Ceres Community Center has been a cumulative drain on Ceres taxpayers to the tune of $837,000 since it opened doors.