Politics & Government

Council Says No More Program Cuts Despite $2.7 Million Budget

In response to Mid-Year Budget report, councilmembers said program cuts aren't an option, but closing the mounting budget deficit will happen.

At Monday night’s city council meeting, city staff members and councilmembers alike rallied behind a common resistance to more staff cuts and a united front to end the budget deficit.

For the past two years, the city has cut 70.5 positions, had 30 involuntary lay-offs--some from the exit-incentive program-- and reduced 38,000 hours of labor. This amounted to approximately 15 percent of the workforce, interim City Manager Bob Bell said.  

“The end is near,” Bob Bell said. ‘This chronic budget condition that we’ve lived with for several years is almost over.

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Yet though excruciating cuts had been made over the past two years, the deficit still stands at an imposing $2.7 million for fiscal year 2011-2012. For 2012-2013, the budget will increase to $4.8 million, $6.4 million the following year, and take a small decline to $6.3 million the following year, according to Finance Director Brian Ponty.

However, the city council promised that they wouldn’t start burning through the city’s reserves, but said they also wouldn't cut more programs and service cuts.

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“There have been so many cuts made already that we won’t stand for more,” said Councilmember Rosanne Foust.

To resolve next year’s deficit, staff presented two options:

  • Option 1: make labor concessions, restructure city government and other revenue opportunities. These include a potential , transient occupancy tax increase, or consolidating services, like .
  • Option 2: which was far less popular with councilmembers, was more program cuts.

The Council has been talking with the Service Employees International Union (SEIU) and the Redwood City Management Employee Association (RCMEA) to restructure their compensation packages.

Councilmember John Seybart said that reducing labor costs by consolidating services was the route to go, not cutting more programs.

“This will make us more attractive to other cities,” he said. “Then we can be the drivers of the bus and not wait for other cities to propose consolidation services.”

Councilmembers said they would also unanimously support the business license tax increase on the November 2011 ballot of 16 percent over a period of three years, bringing in an average of $700,000 in revenue for the general fund. An increase in the transient occupancy tax (hotel tax) from 10 to 12 percent would bring in an additional $560,000 per year. These two taxes contribute 1.7 percent and 3.5 percent, respectively, of revenues.

But the $2.7 million deficit could increase by an additional $3.5 million if the California Public Employees’ Retirement System (PERS) requires the city to contribute more for city employees’ pensions and benefits. Finance Director Brian Ponty explained that the increase was based on three factors: people’s increasing lifespans, paying off the effect of the 2008-2009 investment losses, and a larger contribution of $1.1 million for every quarter of a percent that PERS drops their rate.

“This isn’t unique to Redwood City or even to the state of California,” Mayor Jeff Ira said. He mentioned the dire situation in Prichard, Alabama, in which former city employees stopped receiving their monthly pension checks in the mail. Many of them had to return to the labor force after years of retirement.

“It’s happening everywhere, and companies like GM and United [Airlines] were only relieved of their pension obligations by declaring bankruptcy,” he said.

But Vice Mayor Alicia Aguirre promised that this “b-word”—bankruptcy—would never be an option.

“This Council is committed to ensuring that we never venture into that area,” she said. “We will reduce this deficit once and for all.”

City staff and the Council will be holding two Budget Study Sessions on June 20 and 27.


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