(Updated with complete presentation attached in PDF form.)
San Leandro has a balanced budget now but faces a gap between revenues and expenditures that will widen to a chasm by 2018, City Manager Chris Zapata told council members at a workshop Saturday morning.
The workshop, held at the San Leandro Main Library, is the first in a series of designed to help the city enact a balanced budget by June 30.
About two dozen members of the civic and business communities attended the workshop in addtition to council members and city department heads.
Two factors complicate this year's budget process: three council seats will be up for grabs in November and three labor contracts with city workers will expire before year's end.
Employee salaries and benefits account for 49 percent of the city’s $72 million general fund expenditures.
Of that $72 million, about $13 million is devoted to city payments for employee pension and health benefits.
After Zapata’s finished his 30-minute presentation, Mayor Stephen Cassidy focused on those pension and health costs.
Cassidy established that about $3 million of the $13 mlllion benefit load owes to the fact that, under current contracts, the city pays the seven to nine percent that employees in many other cities contribute toward their own retirement funds.
At present, council members and the city manager pay a 7 percent pension contribution. Fireghters pay 9.62 percent. But police and other city staff do not contribute to their own pension funds.
“It is not realistic that San Leandro continue to pay 100 percent of employees’ share of pension contributions,” Cassidy said.
The budget gap that Zapata forecasts is based upon a conservative projection of sales and property tax revenues that -- he told the council -- will open a $2 million to $4 million shortfall in the next two to five years, widening to about $7 million after Measure Z expires in 2018.
Measure Z is the temporary quarter-cent sales tax increase approved by San Leandro voters in 2010.
Zapata’s projections are more conservative than those of an outside consultant who advises the city on future sales tax revenues.
The consultant’s predictions do not envision a gap between revenues and expenses until Measure Z expires, at which point even that more optimistic outlook projects a roughly $5 million budget gap.
“What all this tells me is that you need a plan, an eight to 10-year plan that looks beyond Measure Z,” Zapata told council members.
The budget planning process and negotiations with city employee unions will play out over the months to come.
Meanwhile, here are some factual takeaways from Zapata’s briefing:
In 2008 the number of city employees peaked at 382 full time equivalents. The city now has the equivalent of 297 full time workers, a reduction of 85 positions. Salary and benefit outlays have fallen from $46 million in fiscal 2008 to about $35.7 million in the current fiscal year.
The city’s streets are getting worse, Zapata said. In fiscal year 2007 the city had 1,100 potholes. Last year it had 2,507 potholes. Expenditures are flat and are not enough to keep up with wear and tear, he said.
Maintenance of 50 city-owned structures is another yawning need. Zapata told the council that the city is now spending just $100,000 on upkeep, whereas at least $600,000 per year would be prudent.
The city has roughly $14 million in reserve, meeting a self-imposed mandate to have a backup of about 20 percent of its general fund. Is that the right ratio, Zapata asked rhetorically? He said that will be a question for the city to answer with feedback from likely lenders who would want to know if San Leandro is on a sound financial footing.
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