Mid-year budget report has some bright spots
Despite an economy that is
”
bad and getting worse,
”
Hollister City Manager Clint Quilter said no layoffs of city
workers are planned, following a mid-year budget review presented
to the City Council recently.
Mid-year budget report has some bright spots
Despite an economy that is “bad and getting worse,” Hollister City Manager Clint Quilter said no layoffs of city workers are planned, following a mid-year budget review presented to the City Council recently.
“We mirror the national economy,” he said. “Our revenues are going to be down from last year and our expenditures are relatively the same.”
The budget report, prepared by Administrative Services Director Robert Galvan, emphasized “the need to impose the greatest caution and prudence in maintaining fiscal constraint” in order to ensure budget stability.
While Quilter said the city is “not in as perilous a situation” as some other local governments around the state, a worsening economy could further strain a tenuous budget.
“We had to eliminate workers ahead of everybody else,” Quilter noted, referring to layoffs enacted by the city in recent years to save money. “Layoffs will be avoided [this year]. We trimmed our workforce three or four years ago.”
There are roughly a dozen unfilled positions on the city books, he said, and many of those are likely to remain vacant as the city works through tough budget times. Salary savings from the unfilled positions exceed $546,000, according to the budget report, though that is offset somewhat by contractual salary increases for occupied positions of nearly $300,000.
Vice Mayor Victor Gomez echoed the city manager’s comments that previous staff reductions and current vacancies have helped Hollister’s budget situation not become dire this year.
“I’m definitely feeling good about it,” said the first-year councilman and owner of the local Papa Murphy’s pizza franchise. “Compared to other cities, with the layoffs and budget cuts they’re going through, we’re feeling pretty good.”
Gomez said the council is expected to begin formal discussions about the direction of the city budget at a Feb. 23 meeting. In the meantime, administrators are working to run a lean operation.
Seeking efficiencies
“We are always looking for ways to save money,” Quilter said. “You try and find every efficiency you can. When we look at equipment or other capital purchases, we look at putting those off a year or two. We ask if we can get by with a vacancy for a year; we’re looking at everything we can to be fiscally prudent.”
In an effort to improve the liquidity of its funds, particularly since the stalled state budget has also stalled the flow of revenue to cities, the City of Hollister transferred the entirety of its investment portfolio to the city’s main bank account.
“The return was not substantially higher than you can get in a bank account,” Quilter said. “We need the money liquid. The state has been delaying payments and who knows what they’re going to do if a budget doesn’t pass soon.”
Having that money accessible means that the City Council can authorize borrowing from those funds to cover expenses normally funded by money from the state. When the flow of money resumes with the passage of a state budget, the money that was borrowed from the former investment account dollars would be repaid, Quilter said.
Measure T revenue up
Sales tax revenue in the wake of the November 2007 passage of the Measure T half-cent sales tax hike has exceeded expectations by more than $1 million this year, according to city projections. However, an ongoing structural deficit – in which the city’s ongoing revenues fall short of its ongoing expenses and one-time funds or reserves are used to balance budgets – essentially cancel out those gains, according to Quilter.
“The revenue from Measure T is much higher than expected,” he said. “But it’s not like it’s out-performing a bad economy.”
Instead, the consultant hired to track revenue from the sales tax measure under-projected the revenue that would come in during the first full year of the five-year tax measure.
So, despite the additional $1 million in projected Measure T revenue, “we’re going to have about a million less in the general fund,” Quilter said.
The city of Hollister has operated with a structural deficit since the 1999-2000 fiscal year, at which time the city had more than $14 million in its general fund reserve. Despite a reduction in staffing levels and police and fire service, along with the increased sales tax rate, the projected reserve for the budget year that ends June 30 is just more than $2.1 million.
Gomez said that while the goal of budget surpluses may not be realistic in the short term, the city should focus on restoring its reserves after it balances the budget.
“My goal for this year and next year is to break even on the budget,” he said. “For myself as a council member and a business owner, my goal is to have the deficit at zero. In the years to come, we need to start being able to get back to where we were” with a general fund surplus.
Two-year budget
In an effort to add more predictability to the budget, the city this year is enacting a two-year budget cycle.
“It allows you to plan a little better, since the second year isn’t as intensive of a budget process,” Quilter said. “The downside is that your projections for that second year aren’t that great, particularly in these unsettling times.”
One benefit to the two-year budget cycle, the city manager noted, is that department heads in year two shouldn’t have as intensive of a budget planning workload as they would in year one, freeing them up to perform their regular duties.
“Department heads and finance folks have a lot to do,” Quilter said. “Doing a budget is a massive undertaking for everyone. If you can go through the full process in one year, it frees up people.”
The City Council is expected to provide direction about budget priorities in meetings over the next couple of months, as revenue projections are tweaked and the state’s budget situation is resolved. The council typically reviews the next fiscal year’s budget plan in May and adopts the spending plan in June.
