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Sentinel staff report–
Citrus Heights council members participated in a live-streamed public study session on Thursday where the city manager and staff presented a budget update with dire scenarios including multi-million-dollar deficits or major cuts to police and other services.
No clear direction was given to staff at the conclusion of the session, and budget planning will continue over the next five months until finalized in June in advance of the next fiscal year, which begins July 1, 2021.
City spokeswoman Nichole Baxter said the 80-minute study session was designed to engage the council with the latest budget data and forecasting, which staff have been working on following the failure of Measure M in November.
The city’s fiscal troubles have been an increasing topic of discussion in recent years, with much coming to light last year through the city’s Measure M sales tax proposal, which would have boosted the city’s $35 million General Fund budget by a projected $12 million per year. City Manager Christopher Boyd said the measure “would have really solved a lot of these issues,” but voters shot down the tax increase by 52%.
To cut expenses during the current fiscal year, the city has left a total of nine unfilled vacancies at City Hall and an additional 28 positions unfilled in the Police Department, including 13 sworn officer positions. The vacancies are projected to create a $2.4 million savings for the current fiscal year, but staff said the result has been reduced police services and response times, as well as delays at City Hall.
Coupled with $1 million in federal CARES Act funding received, the city is now on target to have a $500,000 surplus at the end of the current fiscal year, compared with the original projected deficit of $2.5 million.
What comes next?
Looking ahead at the city’s drafting of a two-year budget for fiscal years 2021-23, three scenarios were presented during the Jan. 28 study session.
Scenario 1. The first scenario would fully fund a list of nine recommended expenses totaling $14.2 million per year, with the majority of that ($12M) being annual street maintenance. Other annual expenses on the list include $248,000 going towards Other Post Employment Benefits (OPEB), $400,000 to vehicle replacement, and $210,000 to building maintenance.
While the city has never allocated $12 million annually towards roads, the result of fully funding all listed expenses would create a $17 million deficit in the next fiscal year and a $12.6 million deficit the following year, according to a 10-year financial model presented during the meeting.
Scenario 2. Scenarios two and three attempt to balance next year’s budget by reducing street maintenance to zero, and cutting or reducing funding for other items. Scenario two would still leave a $4 million deficit in the next fiscal year, but would be fully balanced by fiscal year 2023-24.
Reserves under the scenario would dwindle to just over $1 million for several years, however, well-below the 17% recommended reserves level of about $6 million to cover cash flow needs. The city currently has reserves of about $5 million, down from highs of more than $30 million prior to the new City Hall being purchased in cash.
Scenario 3. The third scenario would bring next year’s budget deficit down to $200,000, with a $3.7 million surplus the following year, by leaving an additional five full-time positions unfilled in the Police Department. Reserves would be kept above $5 million each year, increasing to $23 million by 2029.
All three scenarios show a significant boost in revenue coming in early 2023, with the addition of a projected $6.6 million annually in property taxes. The city historically has lost out on property tax revenue due to a 25-year “revenue neutrality” agreement with the county as a condition of incorporating as a city in 1997.
City staff said the additional property tax revenue will help, but still leaves the city with a need for budget cuts.
Most of the staff presentation focused on scenario three to balance the budget and maintain reserves, with implications being increased delays at City Hall and the suspension of the Police Department’s Problem Oriented Policing unit, which handles nuisance calls, community engagement and homeless-related matters. The department’s General Investigations and Traffic Units would also be reduced, which Chief Ron Lawrence said would result in delayed response times and limit investigations.
The city also presented four “Budget Reduction Principles” moving forward:
- Reducing Staff (with layoffs on July 1, if needed)
- Reducing Services (with service levels reduced in line with staff reductions)
- Commitment to Staff (to recruit and retain top talent)
- Fund Deferred Expenses (as soon as possible)
Comments from council members were brief, apart from several questions by council members Bret Daniels and Tim Schaefer regarding budget needs and whether the purpose of the reserve account was primarily for cash flow or for a “rainy day.”
Schaefer also said the scenarios appeared to be “worst case” presentations which assume no additional stimulus funds will come from the federal government this year. He also accused the city manager of presenting inconsistent figures relating to the budget, referencing a prior budget meeting he had with Boyd in December.
The city manager’s office later described the confusion as an example of how “complicated and ever-evolving the budget process is,” while Schaefer maintains that the budget “should not be complicated.”
Mayor Steve Miller, who could not be reached for comment Saturday evening, said during the meeting he was surprised at Measure M’s failure, but respects the decision of voters.
“It’s going to be a tough couple years and folks aren’t going to be happy,” said Miller. “We’re going to have to make some cuts for a while and then we can start to build back up our Police Department.”
Vice Mayor Porsche Middleton said the projections were not a surprise, saying the council knew since last year that cuts would be necessary.
“We don’t really have a choice in this,” said Middleton in brief comments during the meeting. “We can’t make magic money appear, so we’re going to have to make do with what we have.”
What about pay cuts?
A major talking point heard during the Measure M campaign largely focused on salaries and benefits paid to the city’s top positions. Both Daniels and Schaefer have previously suggested pay cuts, but no mention of cuts to salaries was made during Thursday’s meeting.
Asked whether staff pay cuts were being considered, the city manager’s office told The Sentinel in an email statement Friday: “At this time, staff pay cuts are not being considered.” The statement also noted a goal to retain employees and avoid “added expenses that are associated with high turnover.”
Jayna Karpinski-Costa, who previously served on the City Council for eight years and was vocal in opposing Measure M last year, said pay cuts should be on the table as an alternative to cutting entire positions.
“I think salaries are a real issue they should look at before they consider cutting staff positions or services,” she said in a phone interview Saturday evening. “Salaries would be the first thing I would look at, and those who make more should be cut more than those who make less.”
She also said the budget scenarios looked like “payback” from the city manager. “I feel like he’s trying to punish people for voting no on raising taxes with Measure M.”
A Sentinel analysis of 2019 city salaries from California’s Public Pay website found total pay to city staff amounted to $19 million that year, meaning an across-the-board pay cut of 10% would have saved about $1.9 million that year.
From December: City releases statement after defeat of Measure M sales tax
Following Thursday’s study session, city staff will continue budget planning and forecasting over the next few months, with final adoption of a new two-year budget slated to reach the council in June. The city manager said in a statement last month that community involvement will be part of the budget process.
He also said the city “will look to balance and align with what our community prioritizes,” referencing an extensive community survey the city conducted in 2019 where residents identified priorities to be crime investigation and prevention, street maintenance and pothole repair, homelessness reduction programs, school safety and security, and support for local businesses and jobs.
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