With the three labor unions unwavering, the Morgan Hill City
Council pondered paying scheduled raises with reserves.
With the three labor unions unwavering, the Morgan Hill City Council pondered paying scheduled raises with reserves.
None of the three union groups have agreed to give up cost-of-living raises that take effect Tuesday, according to a summary of labor negotiations presented to the council Wednesday night. The raises, including a second Police Officers Association raise scheduled for April, total $150,000 this fiscal year which began July 1 and $270,000 next fiscal year.
This would have taken a bite out of the $1.2 million shortfall projected for this fiscal year.
The unions have already given up raises totaling about $460,000. And, city management have forgone their cost-of-living increases totaling about $40,000. The unions have also experienced reduced staffing, with the police union giving up two vacant sworn officer positions. A third, multi-service officer position remains vacant.
A Community Service Officers Association-represented dispatch supervisor and public safety dispatcher, both vacant positions, were eliminated too. American Federation of State, County and Municipal Employees Local 101 (AFSCME), was hit hardest, with eleven of its 100 city positions eliminated, including the only true layoff, an assistant planner.
Given this, AFSCME representatives said its members would be unwilling to consider giving up its scheduled raise unless all bargaining groups agreed to it.
The unions pointed to the city’s kitty as an alternative, according to the report.
The council heard that loud and clear, saying that today’s economy just may be the tipping point that healthy reserves were made for.
“If not now, when? If this is not the situation we have it for, what is?” Councilwoman Marby Lee said.
Councilman Greg Sellers said not using the reserves at this point would be “unconscionable.”
Mayor Steve Tate, a self-described “staunch defender” of maintaining reserves at 25 percent of a year’s revenue, a central point in the council’s adopted sustainable budget principles, said that a 15 percent reserve by 2014 is “something we can achieve.”
At the council’s behest, city staff will devise a five-year budget plan that spends down the reserves from the $8.7 million they are at now to $4.6 million, or 15 percent of a year’s revenues, by June 2014.
If nothing is done, by 2014 these blows will reduce the General Fund reserve to $4.2 million, or 14 percent of a year’s expenses. The council’s adopted budget policy calls for a constant reserve of 25 percent of a year’s general fund expenses.
But spending down reserves does not make for a balanced budget. Tate said he held out hope that the unions would relent and give up their raises.
“It’s a shame that we have to ask them again, but we do. I’m very, very hopeful that our unions and employees realize that they really kind of need to step up and help us out again,” Tate said. “We’re really not looking to approve furloughs, but the alternative is layoffs. It’s not a good situation.”
Labor costs make up 55 percent of the general fund’s $28 million expenses. Contracted services, mostly with County Fire, make up another 22 percent.
The body will further discuss budget options, including layoffs and furloughs, during a special council workshop today. The meeting will be at 10:30 a.m. in the Community and Cultural Center’s Madrone Room.
Tate expected the council to begin the budget discussion by revisiting options that were passed up in January. These include turning off street lights and letting park grass die.
In addition to a forced loan to the state of $755,000 in property tax revenues, sales tax revenue is down $200,000. This is mostly due to the July closing of Alpine RV, which was once a top five city revenue generator, City Manager Ed Tewes said. Hotel tax revenue is projected to be down another $120,000.
And that’s not all. In addition to a forced borrow of property tax revenues, the state will take $10.5 million from the Morgan Hill Redevelopment Agency this year, an almost 50 percent take from the RDA’s annual revenue. The state will take another $2.1 million next year as well.
Twenty percent of the RDA’s $20 million revenue is set aside for low income housing. One option the city has to make up for the shortfall is borrowing from this pot of RDA money. Up to $4.3 million is available this year and another $2.1 million next year. The caveat is that the money would have to be paid back within five years. Tewes recommended borrowing the maximum allowed. Tewes did not recommend any RDA staff changes. City staff will also prepare a list of capital improvement projects so far planned for the next five years that could be postponed. Planned projects range from a $720,000 storm pipe installation to the $17 million Santa Teresa Boulevard extension.
City officials already planned to use about $1.5 million of the general fund reserves this year. Unless the cuts are made, they could end up spending $2.3 million of it this year.
POA President Scott Silva said in an e-mail that “the POA is concerned about the current budget situation and we want to be part of the solution.
“I asked the POA members to come up with at least five new ideas not yet mentioned to the city administration to help the budget situation and present them at our next meeting in September,” Silva said, adding he would like to meet with city administration to present those ideas.
Calls to AFSCME business agent Mike Ferrero and AFSCME President Mario Jimenez were not immediately returned.
