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Cassidy: Reform Pensions To Close Budget Gap

Updated report on Saturday budget workshop contains PDF of complete presentation by City Manager Chris Zapata.

 

(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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Marga Lacabe March 01, 2012 at 03:58 AM
Personally, I think the issue is total compensation. And if you look at the total compensation, our employees are overpaid. Directors make over $200K a year, and I can't think of a single one that is worth it (except for the city clerk, but I don't know how much she's paid).
tony santos April 11, 2012 at 06:29 PM
I am a bit late in commentiing on employee pension reform. I read the presentations of both the new City Manager and mayor's comments on pensions being the main cause of the City'f financial problems; I disagree. The problem with the City finances are no different then what is going on in every city in america. The economic recession, depression is the single biggest cause of the City's budget problems. While past councils did not solve the problem, they did reduce them. First and foremost, the council reformed the city's pension program. today, as a result of those reforms, a new employee must work 10 years before becoming fully vested and no longer can an employee retire at 2.5% at fifty; now the figure is 2.0% at 55, This reperesents a terrific savings for the City. In reviewing the City Manager's comments, I note the full time number of employees is 382; this is a tremendous high figure; the City has lost almost all of its top employees; this shows the City workers have paid a tremendous cost of the economic fall out. In my opinion, employees of the City have suffered enough and it is time to stop blaming them for the so called financial problems the City faces. City employees have not had a cost of living increase in five years, took a 4.6% cut in time during a period of over three years and now pay more into their health care cost. Time to stop poor mouthin City workers.
Tom Abate April 11, 2012 at 06:40 PM
Just to clarify, what the city manager said was that the number of city employees peaked at 382 full time equivalents in 2008. The city now has the equivalent of 297 full time workers, a reduction of 85 positions.
Paul Vargas April 12, 2012 at 04:51 AM
Not blame City Workers for the financial problems? Oh yeah, let's blame the mythical 1%. This problem was foreseen over a decade ago, yet all we ever got out of John Jermanis and Maltester's talking puppets on the Council was "we need to raise taxes" "Oh we need this tax increase, and it will solve all the problems" How stupid do you think we are? Every single tax increase went straight into the pockets of City Workers including Councilmen. Why are we paying the City Council pensions in CALPERS and health insurance? Then the City came back wanting more taxes. "Raise the business license fees and everything will be fine". Bob Glaze's assinine quipe; "if we don't defeat Measure G, then little by little the quality of life will deteriorate". Or Glenda Nardine's crocodile tears about some mythical woman who "couldn't eat her dinner" if taxes were lowered. MORONS! We've seen taxes shoot up for 25 years beginning with Dave-the-tax-cheat-Karp and the quality of life has gone down. The thinking people in town knew what was going on, the gullible knew but were too timid to do what was right and vote down the tax increases, others just threw in the towel and moved. What have we got to show for all the tax increases?; another hole in the budget.
David April 12, 2012 at 02:12 PM
City employee number is down 25%, while tax revenues are down 10% from the peak, and 0% from one year before the peak. Same number of cops as 12 years ago. "Terrific savings" for NEW employees, who clearly aren't getting hired, while the remaining employees get stepped up to new payscales. It's a fictional savings. San Leandro is in FAR better position than many cities where the property taxes have actually decreased (the only component of tax revenues that have significantly decreased are business & transfer tax related revenues, not property or sales taxes). No COLA in 5 years? so what, again, the employees are getting stepped up to new, higher pay scales through promotions. Meanwhile, the local median income has dropped by 5%, not adjusting for COLA or inflation--in other words, it's dropped much more than that in real money. Pay more into health care? welcome to the club, find me someone who ISN'T paying double into their health insurance compared to 5 years ago. Your sob story isn't going to work Tony.

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