The city of Davis now faces a large and growing budget deficit. Due to the continued decline of the economic conditions in Davis, the current year's budget deficit is projected to grow from the November estimate of $1.54 million to $2.37 million. Next year the budget deficit will range from between $3 million to $3.6 million depending on the city's negotiations with the employee bargaining units.
From the city staff report for Tuesday's City Council meeting:
Here are some further notes from the city staff report:
The Vanguard has made much of the overtime expenditures by the city. The staff report notes that the total overtime budget for the current fiscal year is $1.38 million which represents 2.6% of the human resources budget.
The staff report also looks at the excess fund balance over the 15% reserve target.
The good news is that the excess fund balance for last year was $723,325, however, the current budget situation will deplete most of that even with the budget cuts. By they are now projecting an $86,705 fund balance at the end of this year.
Commentary
We have discussed the issue of unmet needs multiple times here. The bottom line, the city has to take steps to make the city budget sustainable in the short term by cutting costs and in the long term by negotiating fiscally responsible deals with the city's bargaining units. All of the key bargaining units have the contracts up. The city cannot simply rollover the existing contracts in hopes that they can buy time until the next cycle when the economic outlook could be more favorable. There are structural issues that must be addressed.
The city has to hold the line on the top salaries. It needs to allow inflation to bring them back toward a more manageable level. It also needs to deal with the runaway train of retirement pensions. The current CalPERS situation is going to force some of this because CalPERS is going to forced increased contributions from cities that need to be taken up by employees.
The bottom line is that the city of Davis like the other cities in California has increased its employee salaries at an unsustainable rate during this decade. We are now about to pay the price for this rate of increase. We have the opportunity to fix that if we are proactive and act now. We are not in the calamitous situation that other cities find themselves in. But we could get there if we do not fix things now.
---David M. Greenwald reporting
From the city staff report for Tuesday's City Council meeting:
"Despite the potential to manage the FY2008/09 budget through aggressive cost containment measures, the budget outlook for FY2009/10 and the out-years of the five-year forecast pose significant and growing challenges. The baseline General Fund forecast for FY2009/10 now reflects a $3.6 million deficit under our original expenditure forecast assumptions, and a $3.0 million deficit assuming no changes in personnel costs beyond those provided for in current labor contracts."Part of the cost containment strategy calls for most departments to develop a 7 to 10 percent budget reduction scenario with pulbic safety developing 3 to 5 percent reduction scenarios. The city hopes that this would provide up to $3.1 million in budget reductions.
Here are some further notes from the city staff report:
"As of February 1, the City has documented a current vacancy list of 21 regular full time and 1 (75%) regular part time positions. These vacancies represent a 4.7% shortfall in our current work force, in relation to our 464.25 budgeted Full Time Equivalent permanent positions."Revenues are project to end the year at $2.37 million below the adjusted revenue budget.
"Property Tax revenues now reflect approximately 2% growth in assessed real property valuations and reflect reassessments by the Yolo County Assessor’s Office, as well as a slowdown in the rate of turnover of property in general."Sales tax has taken a big hit.
"Sales Tax receipts through the first half of FY 2008/2009 indicate a decrease from FY2008/2009 results. While we had originally predicted 2.5% growth in this revenue, we are now estimating a decrease of 7.8%."The news gets worse when you look at Automotive and Restaurant figures.
"Our core categories of Automotive and Restaurant, which together account for approximately 60% of direct Sales Tax collections, reflect decline of 14.6% compared to the same period last year."Transient Occupancy tax has also declined.
"Transient Occupancy Tax receipts for the first two quarters of the fiscal year indicate a 10% decline from FY2007-08 results due to a 3.5% decline in tax receipts from hotel operators, and the closure of one business. This results in a reduction of $133,000 from our original budget estimate."Department revenue is also down.
"Departmental revenue estimates are being reduced due to declining Public Works inspection activity and declining participation in recreation programs. Community Development revenue is increased due to billable planning activity for private developments. Combined departmental revenue estimates have been decreased by roughly $150,000 for the current year."
The Vanguard has made much of the overtime expenditures by the city. The staff report notes that the total overtime budget for the current fiscal year is $1.38 million which represents 2.6% of the human resources budget.
The staff report also looks at the excess fund balance over the 15% reserve target.
The good news is that the excess fund balance for last year was $723,325, however, the current budget situation will deplete most of that even with the budget cuts. By they are now projecting an $86,705 fund balance at the end of this year.
Commentary
We have discussed the issue of unmet needs multiple times here. The bottom line, the city has to take steps to make the city budget sustainable in the short term by cutting costs and in the long term by negotiating fiscally responsible deals with the city's bargaining units. All of the key bargaining units have the contracts up. The city cannot simply rollover the existing contracts in hopes that they can buy time until the next cycle when the economic outlook could be more favorable. There are structural issues that must be addressed.
The city has to hold the line on the top salaries. It needs to allow inflation to bring them back toward a more manageable level. It also needs to deal with the runaway train of retirement pensions. The current CalPERS situation is going to force some of this because CalPERS is going to forced increased contributions from cities that need to be taken up by employees.
The bottom line is that the city of Davis like the other cities in California has increased its employee salaries at an unsustainable rate during this decade. We are now about to pay the price for this rate of increase. We have the opportunity to fix that if we are proactive and act now. We are not in the calamitous situation that other cities find themselves in. But we could get there if we do not fix things now.
---David M. Greenwald reporting
