Too much spending for too little revenue.
For seven years now the Ceres City Council has stared at that reality at budget time. But members said Monday they don't want to see the trend continue with the use of reserves to make up the difference. Although the City Council voted to adopt a spending plan in time for the July 1 start of Fiscal Year 2013-14, members ordered another reorganization of the city and make deep cuts to erase a $1.8 million structural deficit.
City Manager Toby Wells said the city has suffered from its seventh consecutive year due to the economic downturn where sales and property tax revenues have slumped.
"We're starting to climb out of it but it has been slower than any of us had ever hoped," said Wells.
The city's property tax revenue peaked at $2.24 million in FY 2007-08 but is projected to hit $1.67 million during the upcoming budget year. Revenues peaked to $18 million in 2007-08 but fell to $14 million in 2010-11 and have only started rising slowly since.
The city projects it will receive $16.93 million in revenues but spend $17.38 million in the budget for a $451,241 deficit. However, the budget reality is that $229,292 more of a shortfall exists from frozen employee step increases; $632,724 in savings from the salary concessions; and a $498,835 gap has been backfilled police and fire overtime from Measure H tax funds which were intended to pay for additional services.
In looking at the bleak budget numbers, Councilmember Linda Ryno asked, "I'm just wondering why no one is talking about actually living within our revenues. I can't do that at my house. I cannot continue to spend more than I'm bringing in."
Mayor Chris Vierra agreed.
"It seems like we keep playing the same old record over and over and over again and the same issues keep coming up over and over and over," said Vierra. He then immediately launched into his assertion that the city should give back the 10 percent pay concession which employees forfeited four and a half years ago. If that's done the deficit would grow by $862,092 and layoffs would likely be necessary.
"The reality is, you can't have your cake and eat it too," said Vierra. "We can't give all the concessions and keep everybody here because there isn't enough money to do that."
Talk of restoring the concessions could stall current labor negotiations, said the mayor. The city last offered the Miscellaneous Bargaining Unit a two percent restoration for the 2013-14 year and two percent in 2014-15.
Layoffs and other drastic measures are probable under any scenario, however.
"We need to make the difficult decisions that we've kind of put off to get through these difficult times," said the mayor. He suggested reorganizing the entire city operation.
Councilman Mike Kline agreed, saying the city needs to quit tapping into reserves and Measure H tax funds.
"We need to turn around and get this aligned and put things back where they need to be," said Kline. "Measure H is one of them."
"I almost think that if we're talking about restructuring that we don't hire anybody right now," said Vice Mayor Bret Durossette. We're talking about an HR guy, we're talking about an IT system analyst, we're talking about a deputy police chief. I don't think we hire anybody."
Ryno added if the city is to live within its revenues, it can't hire anyone new.
Wells recommended that the council not fill the deputy police chief position left vacant by Mike Borges in March. Freezing the position would save $175,000 annually. His recommendation did not sit well with Police Chief Art deWerk who called it "such a bad idea" and "a highly risky move that we would be taking." DeWerk suggested the position is necessary and that a continued absence would make the city's police management too thin and could expose the city to greater liability due to a "lack of proper management oversight."
He said running a department with 54 sworn officers by a chief and two lieutenants and managing oversight was like "shoveling a bowling ball through a garden hose."
"It's something I have a great concern about," said deWerk.
Some on the council were not as sympathetic. Ryno said she would personally pay for three officers on the street rather fund a deputy chief at $175,000. Councilman Ken Lane suggested that the city could continue doing without a deputy chief as it has done the past three months.
"In order to have the job done correctly ... we have to have a deputy police chief for us to be safe," said Durossette.
Ryno suggested freeze all hiring except for that of a Human Resources analyst position. Wells plugged away for the position to help find a new city engineer, which he is doing in the interim.
Durossette suggested Wells could continue serve as city engineer to save money. Ken Lane agreed. However, when he was hired to do the city manager job, Wells made it clear that he could serve as city manager, public works director and city engineer but that "doing all three jobs, it's not likely that I'm going to do any one of those three perfectly as well as I'd like to."
Ryno stated she doesn't want to see Wells doing the city engineer job and manage the city.
The city is also potentially facing the loss of six firefighters currently being funded by the SAFER firefighter hiring grant, which may or may not be renewed this spring. If the city wants to keep them, it will have to find $50,000 per month since the cost of the six firefighters comes to $522,000 and has been paid for by the federal grant. The city won't know when or if it can apply for funds.
Nobody - not even Wells - can predict where the cuts will occur. Ken Lane mentioned the idea of closing a fire station to save $1 million per year.
The council voted 5-0 to adopt the budget with the intent that a reorganization take place and other cost-cutting measures starting in September.
Years of balancing the budget by dipping into reserves have caused the city's reserve level to dramatically fall. The city held a $7.6 million reserve in the FY 2006-07 but with the current budget reserves fall to $3.8 million, or 22 percent of the city's budget. Wells warned that the city cannot see those reserves dip lower because it threatens cash flow when the state is late in making payments to the city.
The Community Center is another drain on the city budget, falling into the red by $200,000 annually, said Wells. That prompted Ceres Chamber of Commerce President Renee Ledbetter to ask the city to look at generating more revenue through user agreements.
Lane said another possibility would be closing a fire station to save $1 million.