Although Hollister council members are budgeting for the next fiscal year that starts in July, they have no choice but to look out toward the expiration of the Measure E sales tax in the spring of 2018.
It became clear at last week’s special council meeting—the lone hearing to help staff officials devise a 2015-16 budget draft—that city leaders are fully expecting to ask voters for a second extension on the 1 percent levy.
“We still have an issue with the general fund according to your five-year projections,” Mayor Ignacio Velazquez told city administrators at last week’s budget hearing.
His statement came in response to staff-provided figures showing the proposed employee count increasing from 142 to 142.5 in 2015-16 and about a multimillion-dollar budget gap without Measure E revenue.
“There’s going to be a point with layoffs if we don’t get these numbers fixed in two years.”
City Manager Bill Avera agreed, with a caveat.
“If we don’t get an extension of Measure E, yes, you will probably have to lay off people. How does the decision on this year’s budget affect two years from now?”
In the event voters side against a tax extension—city leaders have broached placing a measure on the 2016 ballot to avoid a costly special election in 2017—it could mean further adjustments in the future. The fewer costs on the books now—which tend to compound year over year—the fewer cuts the city would need to make down the line without the special revenue. City officials, however, are banking on that tax extension to prevent falling off the prospective financial cliff.
Voters in 2012 approved the first five-year extension on the original tax OK’d in late 2007. That tax now raises about $4 million annually, a number ticking up in recent years with a gradual upswing in the economy. It’s a significant chunk of revenue in a city with an annual general fund budget totaling about $18 million with a robust reserve of $5 million.
Avera, though, said he believes council members have followed through on commitments made during the Measure E campaign three years ago.
“The voters voted not to have services reduced,” Avera said. “At this time, three years later, you can show them that not only have those services not been reduced, they have been increased.”
He pointed to restrooms installed in the parks as an example.
“As far as we’re concerned, we kept our promise,” he said.
Velazquez since his first election victory in 2012—he opposed Measure E that year—has been a proponent of the notion that Hollister can wean itself off the need for an extension, through a combination of cuts and economic growth, before the five years are up. Halfway through the current measure’s life, revenue growth has been steady but annual expenses are relatively flat at about $14 million outside of Measure E.
The daunting task of closing that gap has even changed the outlook for Velazquez. He now says the city could get by without a tax extension, but that there wouldn’t be any money left over for basic road maintenance and other necessities.
Despite some tensions during the budget hearing—including disagreements over amounts to allocate toward public safety overtime—Velazquez reflected with a sense of compromise.
“I think we all agree on the same thing,” the mayor said. “We want to make sure we’re continuing to do what we’ve been doing. We’re seeing results from it now. The only question I have to the public is: Where do we want to be? We should be honest with the public if the intention is to keep going (on Measure E). Put it out there.”
He went on: “If we don’t extend it, we can eventually balance the budget. We cannot fix roads or anything else or any of the other infrastructure.”
He said he still believes it’s a bad sign the city is increasing its employee count.
“My position’s the same,” he said. “We need to keep winding down, be more efficient, instead of hiring more people. My position on that is clear.”
The city’s head finance administrator, Brett Miller, takes a relatively optimistic view of the prospect to meet Velazquez’s original goal. He said it’s too early to make assumptions on where the cost curve might go in the next two to three years. Miller’s office has taken some steps to curtail the cost burden. He appears to have council support, for instance, to pay off $1.7 million in side-fund retirement debt for the two public safety departments, saving $700,000 to $1 million annually by refinancing the remaining liability at a much lower interest rate.
Favoring the optimistic outlook, Miller is also known for a relatively conservative approach in his projections. That is showing, for instance, in his categorizing an abundance of fees for building and planning services—a significant boon for government coffers in the 1980s and 90s and heating up in the past two years—as one-time revenue sources instead of plotting in the numbers as expected cash year after year.
“Those dry up real fast,” he said. “You can’t rely on those.”
He acknowledged that under current projections, though, there would be an annual deficit at the end of the tax’s life.
“I’m hoping we have done measures that will definitely make that cliff very small,” Miller said.
2015-16 BUDGET NUMBERS
$5m: General fund reserve
$18.1m: General fund budget for 2015-16
$335k: Extra payroll or ‘payroll leap year’
$150k: Calaveras Park upgrades
$134k: Traffic cop (being left out)
13: Years since Hollister had a traffic cop
$24k: Police body cameras
$2.7m: Pension debt payment to save $700k/year
7.5%: Current interest rate on that debt
$253k: Street sweeper (fate unclear)
142.5: Hollister employees
40: Fire employees
37: Police employees
