Crescent City is likely to spend a significant chunk of its savings over the next year.
But this won’t be enough to keep things running, mowed, paved and flowing as they are, according to the city’s proposed 2012–13 budget.
Even with deficit spending, the budget calls for higher sewer rates, fewer city employees and less funding for the Chamber of Commerce, among other measures discussed at Monday’s City Council meeting.
After taking a long look at the proposed budget, the council approved raising sewer rates by 3.2 percent. This equates to a $1.72 increase in the single-family residential rate.
The hike would generate an additional $100,000 a year in revenues for the sewer fund, one of four funds that collect and spend money for city services. The other funds are for housing, water and general services.
The housing fund is state-mandated, state-funded and balanced, City Manager Eugene Palazzo reported at the Monday meeting.
Not the case for the other three funds. Even with a rate increase, sewer operations are expected to require $55,000 out of a $639,000 reserve. The water fund is expected to syphon $604,000 out of a $1.3 million reserve.
The general fund, which pays for a hodgepodge of real-life, often discretionary services, is also under water.
“It’s parks, it’s streets, it’s drainage, it’s police, it’s fire, it’s recreation — the pool, the Cultural Center,” Palazzo said of the general fund.
As it is, all these things come at a loss to the city coffers. The fund’s deficit is expected to peak at $115,000 next year, to come out of reserves that are “at a crucial point,” according to Palazzo.
The council agreed 3-2 to scrap a proposed 40 percent cut to funding for the Chamber of Commerce, instead heeding a suggestion from the Chamber’s Board of Directors to pursue a 10 percent cut. The more modest reduction puts the city’s general fund reserve balance at about $685,000, some $15,000 below the amount Palazzo stressed would be prudent to keep in the bank at all times.
Having at least $700,000 cash on hand would ensure that city employees and bills are paid on time, even when tax collections are slow coming at certain points throughout the year, Palazzo said.
The $780,000 now in the reserve already lacks any cushion to deal with unforeseen emergencies, he added.
With a 10 percent cut to its funding, the Chamber of Commerce would receive $78,300, instead of $87,000. This fiscal year the Chamber used city funding to staff the Visitor’s Center ($36,000), operate the marketing arm of that enterprise, called the Visitor’s Bureau ($40,000), and pitch in $11,000 for the annual Fourth of July Fireworks display, a $30,000 affair.
In lieu of drastically cutting the Chamber’s budget in one fell swoop, the council instructed staff to carve an additional $5,000 out of a firefighter incentive program and another $5,000 out of legal expenses. Since the city’s legal needs vary considerably from year to year, this might only save money on paper. Tangibly, the city could opt not to pay expenses for its attorney to attend training workshops twice annually.
“We’ll just have to direct people to stop suing us,” Councilwoman Kelly Schellong joked.
Overall, levity was not operating with a surplus during Monday’s public hearing.
“We appreciate and share the pain that the city is going through right now. It’s not just our problem. It’s a state problem, a national problem, a global problem,” said Bill Renfroe, director of the Tri-Agency for Economic Development, which is slated to see a $6,000 dent in city funding. Its annual budget is also supported by the Harbor District and Del Norte County.
The proposed budget eliminates 3.5 jobs with the city and consolidates the Public Works Department in the wake of two managers retiring.
The cutbacks on the table are all short-term solutions, Palazzo said in a report presented at the meeting. “A long-term solution includes employee concessions,” the report states.
What form those concessions may take is still being negotiated.
Currently, employee benefits and salaries constitute 25 percent of the sewer fund, 34 percent of the water fund and 62 percent of the general fund.
Several members of the public asked why the council doesn’t raise more money by increasing the Transit Occupancy Tax or TOT, one of the city’s main revenue streams besides sales and property taxes. The TOT is levied on each motel room or vacation home rented in Crescent City.
Raising the tax is a possibility, but not up to the City Council. It would require a ballot measure and approval by 51 percent of voters.
Councilman Rick Holley tentatively mentioned the P-word on Monday.
“Hopefully I don’t create a lot of enemies ... But the pool is a deficit... and the pool neither raises revenues nor reduces expenditures,” he said.
Pruning the pool’s operations was considered, but piecemeal cost-savers like reducing hours won’t save much relative to the facility’s considerable expenses Palazzo said. Those expenses are likely to drop by $40,000 due to a renegotiated contract for propane, his report states.
Another public hearing is scheduled July 2, when the City Council is likely to adopt a 2012-13 budget.