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Pleasanton city councilmembers and administrators took a stern tone on Tuesday as they addressed rumors alleging the city was hiding information on the past fiscal year’s budget and talked about how even though the city saved some money last year, that doesn’t change Pleasanton’s high-level financial challenges ahead.
Outgoing Councilmember Valerie Arkin particularly called out those who have been pushing a narrative that the city was holding out on 2023-24 budget results while voters decided whether to approve Measure PP — the half-cent sales tax increase measure that failed on Election Day.
“I can’t even go there with what happened in this community,” Arkin said during the meeting. “For everybody that took (part) in that, shame on you … for what you did to this city.”
For months, folks on the No on Measure PP committee questioned why the city hadn’t released its unaudited budget report for the past fiscal year before placing the half-cent sales tax increase measure on the Nov. 5 ballot. One of the main arguments made was that residents should know more about the state of Pleasanton’s finances before voting on a measure to raise taxes in order to balance the budget in the future.
It wasn’t until last week as Measure PP continued to trail significantly in the still-uncertified election results that the city released ahead of the council meeting its 2023-24 budget actuals, which reflect the city’s final financial results for the fiscal year that ended June 30.
Mayor-elect Jack Balch, who was the lone PP critic on the council, acknowledged Tuesday night that the unaudited actuals always come out during this timeframe, which Arkin used as a point of reference when talking about the timing of when the report came out and how it shows that the city is following procedure and not lying about anything.
Arkin also echoed Balch’s previous comments about how even though the city’s finances can be difficult to fully comprehend, she did not like how people in the community were claiming the city hasn’t been transparent about its finances — or lack thereof in this case.
“Yes, this is hard to understand and it’s hard for the public to understand, I absolutely agree with that,” Arkin said. “But (for) the city and the council, it’s one of our duties to inform the public, to educate … and I think we’ve all done a really good job. It’s just unfortunate that it became politicized … that we are hiding money, that we’re lying about stuff.”
City Manager Gerry Beaudin called staff’s 2023-24 year-end operating budget report a “snapshot in time” of the city’s budget because the report doesn’t give the city a chance to fully delve into the entire budget breakdown.
And while the newly released 2023-24 unaudited budget actuals shows a better outcome compared to the previously approved budget, Beaudin said the report’s overall message remains the same as past budget presentations — city revenues are flattening while expenditures continue to go up.
He used an analogy of a dam where they are plugging holes with temporary budget fixes but the entire dam is still leaking from way too many areas.
Every year, the city presents its year-end financial report to the City Council for approval, which adds up the actual numbers for the city’s operating budget compared to the amended budget that the council approved. As Balch noted, the city reviewed last year’s report around the same timeframe of late November and December.
The numbers presented to the council on Tuesday were unaudited because the city is still working on its annual comprehensive financial report, which should be complete in December or January.
Despite the final budget showing better numbers than what the city originally projected in the amended budget, city staff continued to emphasize the comparison of results year over year as opposed to the approved budget.
The amended 2023-24 budget from the beginning of the fiscal year projected $146.4 million in general fund revenues and just under $148 million in expenditures – that compares the 2022-23 year-end actuals of $152.7 million in revenue and $133.5 million in expenditures.
The 2023-24 general fund actuals recorded $151.7 million in revenue (about $5.3 million, or 3.6% higher than the amended budget) and $142.5 million in expenditures (about $5.5 million, or 3.7% less than the amended budget).
But when compared to actuals from the year before, the 2023-24 actuals show revenues almost flat – actually 0.7% down – and expenditures went up by roughly 6.7%.
City finance director Susan Hsieh told the council there were a few reasons the actual budget numbers are slightly better than the projections in the previous amended budget. She said apart from practicing conservative budgeting, which is a common practice for city governments, and property tax revenue being 0.1% higher than budgeted, the main reason why the city saved some money this year was due to several cost-saving measures the city recently enacted.
This included freezing city positions, deferring purchases of equipment and reducing contract services. Hsieh also said the city’s hotel and business tax was higher and the city used rainy day and general fund program reserves to help balance the budget.
But even with money saved in 2023-24, Hsieh said it is still not enough to address future projected deficits that could range anywhere from $13 million every year to $22 million depending on if a recession hits.
She said that sales tax revenue is still 2.3% lower than budgeted, certain enterprise funds are still operating at a deficit and expenses continue to outpace revenues.
She and Beaudin explained that the crux of the issue lies in the details, and the details are that cities have to balance the city’s budget every year, which means they will always aim to have a surplus.
But just because this year’s budget shows a surplus, Hsieh said that doesn’t mean the city is swimming with extra cash and that the extra money will not help address the structural deficit the city had wanted to tackle by using the revenue generated from the failed Measure PP.
“(Surplus) is the term we use but actually it’s not a surplus,” Hsieh said.
She said other cities have also seen in past years positive budget actuals but still had to deal with significant budget challenges and that if Pleasanton continues to dip into its reserves just to balance its budget every year, the city is heading straight to bankruptcy.
“Having positive financial results does not mean we don’t have financial challenges,” Hsieh said.
Vice Mayor Julie Testa said there was an “enormous amount of confusion” around understanding that principle and that eventually led the conversation to talking about the future and how budget cuts may be on the horizon for the new incoming council.
Outgoing Mayor Karla Brown wished the next council luck but she did express concern that Measure PP did not pass and said she is sad to see how the city will have to deal with the fallout of future reductions to city services.
“Going forward this is going to be a tough road,” Brown said. “You’ll start seeing things worn down, you’ll start seeing grass not cut, you’ll start seeing responses from your emergency responders extending and it won’t be the same Pleasanton it was now, but we’ll still be Pleasanton and we’ll still be proud to live here.”
Part of Tuesday’s unanimous acceptance of the report included one-time adjustments totaling $7.9 million to be allocated from the general fund to various funds that “either have negative or inadequate fund balances” as a result of the 2023-24 actuals.
That includes rebuilding the rainy day fund reserve and restoring reserves in the city’s insurance and repair and replacement funds.
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Interesting that Valerie Arkin says “ It’s just unfortunate that it became politicized … that we are hiding money, that we’re lying about stuff.” I never heard that the opponents to Measure PP ever say that anyone from the city was “lying” nor did I ever hear them say that money was being hidden. What I heard was growth projections were underestimated and I also heard them asking why pension funds were not being used as intended. Far cry from saying the city was lying or hiding money.