Wednesday, June 9, 2021

Update on Budget Subcomittee Meeting

Yesterday the budget subcommittee met to discuss the preliminary FY22 (June 30 fiscal year end) budget and recommended it be forwarded to the full council for discussion with a few modifications:
  • Maintain the City Engineer position as a contract role.  The first budget proposal contemplated converting this contractor position to a full time employee.  Full time employees incur significant costs relating to Cal PERS, medical benefits, etc. that contractors do not (though their rate is typically higher than base rates for employees).  There are structural challenges with the city's finances and to take on a permanent funded position incurs significant fixed costs.  Without an understanding of the big picture on how we plan to address the finance challenges facing the city I thought it would not be prudent to incur that permanent costs at this time.  We should evaluate any new position in the context of the overall financial position of the city.

  • Include funding for the crossing guards in front of Mt. Diablo Elementary in the operating budget rather than with one time funds.  This is an important item for the safety of our youngest students.  During the summer of 2019 I had worked with the the Mt. Diablo PFC President to facilitate a donation to cover the cost of this crossing guard in the FY20 budget.  For FY21, the city funded this position with one time funds, with the understanding that we would like to incorporate this into our operating budget going forward.

  • Include funding to assume responsibility for maintenance of the city owned dog park.  Maintenance of the dog park had been performed in part by a local non-profit that was established when the park was first created.  I requested this item at our 10.6.20 meeting.
In addition, there are three special revenue funds (funds that have a specific revenue source for a specific purpose) that will need to be addressed this year.  Those are Stormwater, Streetlights, and the Geological Hazard and Abatement District (GHAD).  Each of these funds were established with a cap on the dollar amounts of revenue.  Instead of tying funding to Consumer Price Index (CPI) like some of our other funds, such as the Landscape Maintenance District (LMD) or the Grove Park Maintenance, the amounts we are able to collect for these three funds is limited.  Where the LMD can increase its funding in connection with CPI increases, there is no way for the Streetlight fund to maintain its balances when costs to operate exceed the amount of revenues it collects.

Ultimately it means that the above three special revenue funds will be insolvent in short order.  The Streelight and Stormwater fund will be first, with the GHAD close behind.  
  1. If we do nothing, the impact of the Streetlight fund exhausting its resources will be that the lights on certain collector roads (not the main arterial roads) will either need to be turned off, or funded from the general fund.  

  2. Stormwater fund is a little different in that the consequence for not performing those activities is more severe.  Rather than dark streets, there are financial penalties for not performing the environmental requirements that this fund is designed to support.

  3. The GHAD serves primarily a monitoring function.  There isn't enough money to cover significant improvements so the GHAD funds are used to maintain monitoring devices designed to detect earth movement, and other small maintenance items.  As such, the impact of this fund going insolvent will have less of an immediate impact, but carries a risk that a larger problem go undetected.  There is also a larger reserve associated with GHAD activities that could support this fund for at least an additional year, or a couple years depending on maintenance needs.
To address the above three funds, we have few options.  Either we can accept a lower level of service (less streetlights, or less services elsewhere in the city), or we would need to increase taxes in order to cover the increasing costs over time.  For special revenue funds, any tax increase would require a 2/3 majority vote.  We will be discussing this throughout the year.

There is also the larger issue of our overall city finances.  Our expenses in general are increasing faster than our revenues.  Projections show that following the adoption of this budget, the next year following that we will be in a deficit position.  This means that our general fund revenues will not be sufficient to cover the expenses.  And while we have reserves we can use to cover temporary shortfalls, it is poor public policy to utilize reserves to cover ongoing operations.

Over the next several months it will be important for we as a city to determine the levels of service we want to provide, how we will pay for it, and how we can shift to a more sustainable structure.  There will likely be difficult choices ahead and I invite everyone to share their thoughts on what they are willing to pay, what they are willing to give up, and what are most important to them.