Council okays balanced budget, prepares for future deficits

Council okays balanced budget, prepares for future deficits

Michele Ellson

Alameda’s City Council okayed a fresh budget which council members hailed for its lack of impact to community services, though they also acknowledged that much more work needs to be done to steady the city’s shaky finances over the long term.

“Is the work over? It’s absolutely not over. Is there more progress to be made? Absolutely. But there’s been progress made,” said Vice Mayor Rob Bonta, one of four council members who voted in favor of approving the budget.

The council approved a $72.2 million general fund budget which was balanced with the aid of $2.8 million in cuts that include closure of the city’s jail and elimination of some positions and with one-time funds including a $1 million advance on future payments from Alameda Municipal Power and the carryover of $800,000 that wasn’t spent this fiscal year. The city’s revenues have been flat, while pension and health care costs have grown.

The general fund covers basic services that include parks, libraries and public safety; police and fire spending account for 63 percent of Alameda’s general fund budget.

The city’s total budget for next year is $160 million, excluding Alameda Municipal Power and the Housing Authority, which is separate, and it will spend $17.8 million on capital projects, roughly half of that on sewer work. The city will also spend $2.8 million to replace an assortment of public safety and other city vehicles. City leaders expect to retain $17 million in reserves, 24 percent of the general fund.

Assistant City Manager Lisa Goldman noted that unlike previous years, city leaders weren’t considering cuts to park programs, library hours or sworn public safety staffing in order to close a projected budget deficit which this year reached $5.1 million. All of those things have been cut to bridge budget gaps in recent years.

“These are significant accomplishments for the city, considering the state of the economy and the rising cost of doing business,” Goldman said. “As you’ll see in the presentation, there’s more work to be done in the next fiscal year, but this is a very good start.”

But the city is facing growing deficits in the years to come, a staff presentation showed. This year, city leaders are hoping the federal government will replace a grant that’s paying for six firefighters; they are also awaiting a court decision that could require the city to return $735,000 its former redevelopment commission that the commission paid for a city parking lot slated for low-income housing development.

Not everyone was happy with the city’s proposed budget. City Councilman Doug deHaan, who voted against approving the budget, said he thought efforts to close the city’s projected budget deficit relied too heavily on the use of one-time funds and that other solutions should be considered. When pressed for specifics, he said he wanted city leaders to consider outsourcing ambulance service to Alameda County.

“I’m having real reservations moving forward with a budget of this nature,” deHaan said. He said he wasn’t comfortable that long-term solutions to the city’s chronic budget problems were being pursued diligently enough “and I don’t have the assurance we are going to move forward in a year or so.”

City Treasurer Kevin Kennedy and City Auditor Kevin Kearney said council members and the city’s managers need to consider cutting public safety salaries to boost the city’s financial health, since they are such a large part of the budget.

“It’d be very nice if we could reward people with the same compensation they’ve had for years. But it’s not realistic,” Kearney said. “Two or three years out, we’re not going to have enough money to pay public safety what they get paid today.”

Mayor Marie Gilmore stressed that the city can’t unilaterally cut employees’ salaries, while Councilwoman Lena Tam questioned whether it would be fair to ask the city’s current employees to bear the brunt of years’ worth of financial troubles.

“We seem to expect this generation of workers to pay for the sins of the past. The gambles that were taken in the financial markets, with Wall Street,” Tam said. “Certainly when times were good, before the 2008 slide, I didn’t hear a whole lot of discussion about people asking for cuts in services, cuts in salaries, cuts in benefits.”

Tam said prior city leaders had discussed outsourcing ambulance service to the county, as deHaan suggested, but that the incoming private ambulance provider said they couldn’t provide the service Alameda has at the same cost the city pays.

City Manager John Russo said the city is reopening its public safety contracts, though he said other factors – including public safety pay in other cities – could figure into the negotiations. But he said city leaders need to look at raising revenues, too.

“I think it’s widely understood the city intends to discuss same types of issues remedied in contracts with the miscellaneous union groups. There’s no secret that’s what we’re looking to discuss,” Russo said.

The city’s non-safety employees agreed to pay more for their pension and health benefits and to consider boosting future employees’ retirement age.

Russo also railed against the city’s limited sales tax base, which has been among the lowest in the county since the car dealerships that once accounted for much of it disappeared from Park Street. He said the city needs to consider bringing more businesses that can boost the city’s sales tax base like Target, which is working to set up shop in the Alameda Landing development.

“We’re going to need another 10 or 11 sales tax generators like that. We need to talk to the community about the burdens of having retail businesses, but we need to have them,” Russo said. “It’s foolish to have our people spending money and paying for the tax services of the cities around us instead of spending it here at home in Alameda.”

But council members said they weren’t convinced residents would want to see those type of big box stores in Alameda. They want to talk to residents about whether they’d assent to such businesses coming to town – and what services they’d be willing to see cut if the city can’t raise more money.

“We’re not a community that wants to see a Costco and a Home Depot on every inch of Alameda Point. But that’s what we see in San Leandro because that’s where they get their sales tax,” Tam said, noting that San Leandro generates four and a half times the sales tax per resident that Alameda does.

The council’s vote came as city leaders in neighboring Stockton announced that that city would be entering bankruptcy proceedings, reportedly making it the biggest city in the country to do so. Council members here said resolving this city’s budget issues will be challenging, not black and white but many shades of gray.

“When you talk about the budget, the framing I hear is, ‘It’s a simple math problem, just do the math.’ To me that’s exactly not what a budget is,” Bonta said. “A budget is a reflection of a community’s values. If you cut here, chop there, you get exactly what a budget is not – a value-less, cold numbers problem. Which is not what a budget is or the values it should deliver.”


Maria's picture
Submitted by Maria on Fri, Jun 29, 2012

The council has kicked the can down the road. They are obviously unwilling to make cuts to a very bloated city government. . I believe they could cut back staff by 10% and there would be no difference in city services. Does Russo really believe we can have 10 or 11 Target-equivalents on this island? or that we want to? They don't get it.

Submitted by Michele Ellson on Fri, Jun 29, 2012

Hi Maria,

Thanks for your comment. To clarify, I think the point Mr. Russo was making was not that we can or should have 10-11 Targets here - only that this is what it would take for the city to have the sales tax revenue we'd need to cover the ongoing deficits we face (or at least a sizable portion of them).

Maria's picture
Submitted by Maria on Fri, Jun 29, 2012

Hi Michele,

Thank you for the clarification, I put a bad spin on an explanatory statement due to my
state of anxiety about taxes and unlimited growth.
Apologies to Mr. Russo are in order.
Thank you also for this forum, I really appreciate getting the news here.