The city’s recommended budget for the upcoming fiscal year adds nearly $2 million in services and two full-time positions – including one in the police department – and proposes increasing fees for recreation services such as monthly memberships to local facilities.
And the longer-term outlook looks more positive for the city, despite the fact that the city’s general fund lost about $900,000 in revenue when the state closed the redevelopment agency earlier this year. Rising sales tax revenues which have already jumped 24 percent this year and are expected to keep increasing are largely responsible for the improved local projections, according to city staff.
Depending on negotiations with the three labor unions that represent most city employees, the city thinks it will be able to augment its reserve balance starting in 2014. The contracts between those employees and the city expire in June 2013, and that’s a key area where the city will look to save some money through some combination of lower wages, a tiered retirement system, more of a contribution from employers to their benefits and other personnel costs.
“We are achieving a sustainable budget, and beginning in 2014 we will be able to increase our fund balance (reserves) if we are able to negotiate labor costs,” City Manager Ed Tewes said. City staff will likely begin those negotiations with the Police Officers Association, Community Service Officers Association and the AFSCME union next spring.
The current contracts allow for annual raises for the represented employees, though some have agreed to forego some of the raises or take pay increases lower than what was originally contracted the past couple years, in response to the city’s revenue shortages resulting from the 2008 recession.
The total proposed general fund budget for the fiscal year that starts July 1 is $29 million. That’s up from a projected $27.2 million by the time the current fiscal year ends. The general fund is funded primarily by revenues from sales, property and hotel taxes.
Most of the increase in expenses is attributed to rising, contracted salary costs, rising retirement costs for city staff borne by the general fund, and increasing internal service funds such as workers compensation and general liability insurance, Tewes said.
Other funds such as the utility enterprise funds are projected to cost about $96 million for next year, according to the draft budget proposed by city staff.
The city council will receive the recommended budget at its meeting Wednesday, but is unlikely to discuss the proposal before a workshop scheduled for May 25.
Mayor Steve Tate said Monday he had not had a chance to look into the details of the budget proposal, but he anticipates the staff and council will be seeking to be more efficient next year.
“We’re just being squeezed more and more with the RDA going away, and we’ve got to keep the (police) officers on board who were funded by the RDA,” Tate said. “We’ll stick with our sustainable budget strategy.”
The city’s general fund reserve by June 30 is expected to be about $6.6 million, which will drop to about $5.9 million by the end of next fiscal year. However, the reserve is expected to be up to $7.2 million by 2016-2017, according to city staff.
The council earlier this spring already responded to the loss of RDA revenues previously used to pay for some city staff time, by redistributing those costs to the general fund and other funds.
The 2012-2013 budget proposes adding a multi-services officer to the police department. The MSO will assist in the transportation and booking of arrested suspects, traffic control, vehicle abatement and processing crime reports.
Staff also predict an increase of $1 million in general fund costs to fund police department activities – an amount that was previously picked up by the RDA to staff three positions, increased pension costs and the previously negotiated 3-percent salary raise for the POA and CSOA.
Police department costs make up about 57 percent of the city’s general fund.
In the community services department, staff have proposed a restructuring that will eliminate a vacant senior park maintenance position, add a community services coordinator position and reclassify other existing job titles.
And with planning and development activity expected to rise next year, the city anticipates being able to add a planning technician to its staff. That position in the community development department will be funded by fees paid by developers, Tewes noted.
The proposed budget does not yet assume savings from a new contract for fire and emergency medical services next year. While Calfire will likely be able to provide the services at lower cost than Santa Clara County now provides them, the city projects saving about $800,000 per year starting in 2013-2014.
Another key, ongoing challenge to the city, for years to come, will be the rising costs of the general fund’s contribution to CalPERS retirement benefits for city staff and retirees, Tewes said.
The city currently pays 32.5 percent of salaries for sworn police officers to CalPERS, and 16.2 percent for all other employees, staff said. The rates are likely to go up another 4.7 percent by 2017 for sworn personnel and 3.1 percent for others.
For the 2012-2013 fiscal year, that amount equates to about $3.8 million paid for retirement costs out of the general fund, or about 13 percent of the general fund.
And in an effort to maintain recreation facilities and a “high quality of service,” the recommended budget proposes raising rates paid by users of the Centennial Recreation Center and the Aquatics Center. Monthly membership fees for those facilities will go up by $3 for individuals and $4 for families, if the council approves the changes. Day use fees are proposed to be increased as well.
Tewes added that the impact of the state budget, whose deficit jumped from $9 billion to $16 billion over the weekend, is unknown because the governor hasn’t released enough details about the likely cuts to be made at that level.
– $29M – proposed 2012-2103 general fund budget
– $27.2M – 2011-12 general fund budget
– $6.6M – reserves expected as of June 30
– $5.9M – reserves expected by 2013
– $3.8M – amount paid for retirement costs out of the general fund
