The Ceres City Council has approved a budget for the 2019-20 fiscal year that was billed as balanced, but not without a lively conversation about successive years of red ink from the Community Center operation.
The budget approved on June 10 projects the city to maintain an 18 percent reserve of $4.5 million.
“Our budget is improving,” said City Manager Toby Wells. “From my perspective it’s a whole lot better budget presented this year than it was the first budget I presented back in 2014.”
The General Fund, which is a discretionary pot of money where mostly public safety is funded, is projected to include $24.4 million in spending and $24.3 million in revenue. The overall budget – which includes enterprise accounts like water and sewer funds – totals $73.5 million.
Public Safety consumes $23.1 million of the general fund while Public Works and Engineering accounts for $32.9 million in spending. Administration, which includes the city manager, city clerk, city attorney, building inspections, finance, human resources, recreation and Information Technology, accounts for $17.5 million in spending.
The General Fund budget is balanced primarily from an increase in tax revenue, the sale of adult use and medical cannabis, and adjusting expenditures. Revenue from cannabis operations for FY 2018-19 and the projected revenue for the next two fiscal years are significant and represent approximately 8 percent of the revenues for the new budget.
Sales tax revenues are increasing as well. Over 30 percent of the general fund revenue comes from sales tax and $6.8 million is projected for the new budget cycle, which represents “a significant increase,” said Wells.
Eighteen percent of the General Fund revenues come from property taxes. Wells said those revenues are returning from the peak in 2007-08 before the mortgage crisis.
The city expects to reap $2.3 million from the three developer agreements forged with cannabis operations in Ceres. That amount doesn’t include tax revenues from the sale of medicinal and recreational marijuana.
Wells said that while Ceres appears to be headed for several years of revenue growth, the city should be poised for the next recession. He pointed out that the city’s healthy general fund reserve, coupled with service level reductions and employee concessions allowed the city to survive the Great Recession. From 2008 through 2017, over $5 million in reserves was used to keep the city functioning.
Because revenues have improved, the council is continuing to restore positions which were cut during budget shortfalls of recent years. The budget calls for the unfreezing of a senior parks maintenance worker position and two police officer positions. The city is eliminating an overstaff Fire Engineer position, and adding a senior civil engineer position, an associate engineer position, a full-time secretary position, a records clerk, and two police dispatchers to handle the Newman Police dispatch contract. The budget also carves out one new facilities maintenance worker and makes one secretary as full time for code enforcement.
Last year the city hired two additional police officers and is adding two new officers this year.
Wells noted that while the Community Center is running at smaller and smaller deficits as time goes on, the center has accumulated an overall drain on the city by $1.6 million since it opened a year ago. He said the council would need to decide how to repay the losses to the Community Center fund and how much the city will continue to subsidize the operation.
Vice Mayor Linda Ryno said for years the city hasn’t tackled the problem of the Community Center operating in red ink and will one day have to reflect the debt in the general fund.
Wells said the center is operating at a narrower debt gap now, pointing out that the center was going into debt annually at a rate of $250,000 but now projected to be around $120,000. Recreation Manager Matthew Lohr said he is working on ways to increase use of the center and raise revenues. But Wells said the council will need to determine how to tackle the negative balance.
Ryno said if the Community Center’s negative balance were reflected in the General Fund, the city would be projecting less than an 18 percent reserve.
City Finance Director Suzanne Dean said that since the center is used for recreation, it should be placed in the General Fund and not in it’s own separate account as was set up a decade ago.
“The (council) conversation has always been ‘we’re going to deal with it next year,’” said Dean, “and we haven’t got to that point where we deal with it.” She said one idea has been zeroing out the account through loans from other accounts and finding a way to pay back. Wells said it’s up to the council how long it will take to pay back the community center debt.
Mayor Chris Vierra said the council needs to make a decision and “quit rehashing” the debt and “quit beating a dead horse” each year.
Councilman Mike Kline said the debt on the center needs to be reckoned with soon.
Councilman Bret Durossette said the center was never intended to be a cash cow. He suggested a study session “as soon as possible.”
Vierra cautioned against filling in the gap by taking it from reserves since the city may need those funds. He said perhaps the city can liquidate assets as the city strives for a balanced community center operation.
Councilman Channce Condit had Wells read off the new positions in the budget and their costs. He then asked about line items in the City Council’s expenditures, touching first on professional development expenditures. Condit then asked how much of the budget is spent on the City Council. When Dean said she didn’t have the number, Condit answered his own question by saying $168,228. He then needled about the $94,000 in health insurance costs for the council.
“I think that could potentially be a 10-year plan for the Community Center (payback),” said Condit. “That’s close to $100,000.”
Without giving time for any discussion, Condit said he wanted to make a motion to have the council “relinquish health benefits” which were enacted in 2007.
“With our city’s low median income, our health insurance should not be put on the back of the taxpayers,” said Condit. “That’s not why we ran for office; that’s certainly not why I ran for our office.”
He asked for a second but received none.
“I personally would like to hear all the options for the Community Center before making any decision,” said Mayor Vierra.
“Sure, well I’ll be bringing it up then, thank you,” replied Condit.
Ceres resident Gene Yeakley wondered why the council was offered the same health insurance policies given to full-time employees. Vierra explained that state law allows Ceres councilmembers to receive health insurance and other cities had done so.
“That’s a lot of money being given away compared to a full-time employee,” charged Yeakley.
Vierra told Yeakley he didn’t understand how much time members put in, saying the council job has taken away from his time with family and his own engineering business.
“Until you have all of the facts, it’s easy to throw darts from the cheap seats,” said Vierra. “So maybe you should do a little more research before you blindly come to a conclusion. I’m not saying what any of us will do. We’ll start the discussion and see where it goes. But to sit there and go on the mike and say you aren’t putting very many hours into it, I take a little bit of offense to that because I put a lot of hours into this job.”
Former city employee Lee Brandt said the council does put in a lot of hours on the job but said the council receiving health benefits left “a bad taste in the employees’ mouths when it came around.”
When it came time to approve the budget, Condit and Ryno voted no and were outvoted by Vierra, Kline and Durossette.