With adoption of the next fiscal year budget on the horizon, the city asks residents what they think
The city wants your help. Council members will adopt the Fiscal Year 2012 city budget next month and, in the meantime, need to figure out how to make up for the looming $2.8 million shortfall. Officials have some ideas (see Good Times’ May 5 interview with City Manager Martin Bernal at goodtimessantacruz.com), but the council is also opening it up for public discussion.
"We're trying to do more to engage the public in helping the city council make decisions about the city budget," Vice Mayor Don Lane says. "We are eager to have people communicate their priorities for the budget."
And a well-informed citizenry makes better decisions, he adds.
It was with these sentiments in mind that Lane, Bernal and Finance Director Jack Dilles broke down the budget at a community budgeting workshop on Tuesday, May 31. They walked whoever would listen through where revenue comes from, how it's spent and why we're in a $2.8 million deficit this year, all in the hopes of getting some helpful feedback. It was the first meeting of its kind for the City of Santa Cruz.
"Coming tonight means making a special commitment," Lane said to the three-dozen people gathered at the Police Department Community Room. "Really understanding how local government works ... and then digging in."
The first question on the attendees’ minds was, understandably, ‘Why the $2.8 million deficit?’
The city's revenue is largely reliant on funding sources out of its control. Bernal put it this way: the General Fund depends on tax revenues, which are affected by the economy, and tax rates can't change without going before the voters.
Additionally, Bernal said that although the budget has hovered at around $70 million over the last several years, "Retirement and healthcare costs have increased, making it hard to balance our budget. It's hard to keep up with these increases when our revenues are only going up 1 or 2 percent."
A decrease in state contributions on a local level has meant more money going out and less coming in, Bernal said. The economic downturn has also affected tax revenue, interest and investment earnings, and retirement rates for employers.
"Could we take the $2 million shortfall out of the reserves?” one audience member asked.
Yes was the short answer, but Bernal added that it wouldn't fix the problem in the long term. Because the increased expenditures are a reoccurring problem, and aren't going away anytime soon, Bernal said the reductions in this budget need to be structural in nature: taking the money out of the reserves would be just be putting a Band-Aid on a wound that would open up again next year.
Dilles reported that property taxes are fairly stable, and he projected a 1 percent growth next year and even slow growth for the volatile sales tax. He added that utility taxes are the most stable and that the 1.5 percent voter-approved increase (2010’s Measure H) helps by adding $1.6 million to city coffers each year.
Although taxes come in every year, they're not always steady, and to further complicate the problem, "The state found all these ways to hold onto our money and delay giving it to us," Dilles said. "So we really need that 10 percent cushion [provided by the reserve fund] to stay above water."
The deficit would have been even bigger if it weren’t for concessions made by the city’s bargaining units. To help reduce the deficit, the city asked all of its bargaining units to reduce their respective budgets by 10 percent. So far the fire and police departments and city executives have agreed, and the city's proposed budget assumes the service employees will follow.
Community member Sibley Simon says he's impressed with the 10 percent reductions by the police.
"It was either that or cut positions," Simon says. "We need to find little ways to be more efficient, [and] raise revenue, which is done through improving the economy, getting money from the state or raising taxes."
One Eastside resident shared her concern about the amount of the budget going toward personnel costs. "That's going to have to somehow be an area looked at but I don't know how," she said. Seventy-one percent of the proposed 2012 general fund budget will go toward personnel costs.
The police department eats up the largest slice, by far, at $21.19 million of the total $54.9 million. While most all other city funds are self-sustaining, the General Fund, which allocates money to Public Safety, Parks and Recreation, Public Works, Planning and Community Development, and Administrative activities, is the largest fund and paid for through tax dollars. Spending 60 percent of it on public safety is standard for most cities across California, Lane said.
Still, another audience member piped in, saying, "If you do have to cut, it seems like there should be cuts in police." (Someone else immediately countered, "No, no! Not the police.")
Next year may prove an even tougher fiscal year for the police and fire departments, which will lose a $44 million grant in June 2012.
When asked if police and fire will get the reductions or if they will come out of other departments, Lane said it's up to the city council to make that decision next year.
The city has cut $25 million and eliminated 100 positions since July 2002. Their current 770 employees have undergone furloughs and now work a 36-hour week.
Unlike in years past, Bernal said departments no longer enjoy fantasizing about improvements or expansions.
"The budget is about sustaining what we've got now," he said.
To this, an attendee suggested increasing the hotel tax from 10 percent to 12 percent. Lane said the tax increase would be up to the voters.
"If the city council was to move to another revenue measure, that's [the] most likely [one], but it's not imminent," he said.
Bernal reminded the audience that although it may look glum, Santa Cruz has done some things right, like never needing to borrow money, always having an adequate cash flow, balancing the budget and having a good bond rating.
"So we do quite well," he said. "It's an indication [that] we do sound fiscal management."
Mia Duquet attended the meeting because of concerns about budget cuts to the Parks and Recreation, libraries and other community programs.
"They’re tough decisions," Duquet said. "I wish there were more people here."
For those who didn’t attend, Lane says government officials continue to be open and ready for suggestions.
"Send emails to city council members, telephone, [or] write letters," he said. "Arrange individual meetings with your favorite council member. You're armed and ready to go."
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