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After some back and forth, the Pleasanton City Council eventually compromised on how the city will develop its two-year budget during its meeting last week by approving two budget-related items — a budget development plan and a Budget Advisory Committee (BAC).
Both items were approved by the council despite some debate that was eventually resolved after a council majority agreed to an alternate motion that moved the two items forward with the additions of an extra budget workshop and independent review of the city’s 10-year financial forecast.
“Compromise is happening right now on this dais, and I really do appreciate it,” Mayor Jack Balch said during the Jan. 9 meeting.
Councilmember Julie Testa was the sole dissenting voice when it came to the new budget development plan vote, however she did vote yes — along with the rest of the council — to form the BAC and appoint 11 members to the new committee.
Testa had originally motioned to approve staff’s original recommendation, which did not include one additional workshop and independent peer review of the forecast, but her motion failed to get a second.
Staff first presented the two-year “Budget Engagement Plan” and the BAC during the Dec. 17 meeting in which the council had a lengthy discussion that eventually ended with the council delaying the two items until its following meeting for a few reasons.
The plan itself provides a detailed process for how the city will gather input from its residents regarding its upcoming financial challenges before developing its two-year budget for fiscal years 2025-26 and 2026-27.
During last month’s discussion, some members of the council did not agree with certain aspects of the plan including the pop-up events, which staff wanted to hold at places like the farmers market, and using a statistically valid survey tool — some councilmembers did not think the survey would fully capture the most input from residents.
Balch also did not fully agree with the idea of forming the BAC and instead asked staff to return with different alternatives on Jan. 9 — one of which was substituting the BAC with an ad hoc committee that he voluntarily wanted to be a part of along with Councilmember Matt Gaidos.
The idea behind the ad hoc was to have two councilmembers further look into various aspects of how the budget is formed, look at city’s fiscal policies in detail and it look at how the 10-year budget forecast has been vetted so that they have a scope of the city’s challenges and problems in order to look for other viable solutions.
While staff did return with more information on such an ad hoc committee and how that would look like within the context of the engagement plan, their recommendation instead doubled down on maintaining the BAC.
Deputy city manager Alexa Jeffress told the council that while staff included the ad hoc committee as an alternative in the engagement plan, she pointed to various different reasons why such a committee wouldn’t be the best route to take.
One main reason against the ad hoc committee — which several residents supported during public comments — was allocation of staff resources. According to the staff agenda report, there is not enough time to go through the process of creating the ad hoc; creating such a committee would redirect resources away from budget development; and those ad hoc meetings could have taken place during negotiation meetings with certain labor groups.
“Staff resources and timing are limited so we want to make sure that we are focusing the resources and the limited time where we think they can be most feasibly applied and reasonable,” Jeffress said.
That’s why instead, staff suggested going with a slightly altered recommendation for the “Budget Engagement Plan” from the Dec. 17 recommendation.
Staff’s new direction was to remove the pop-up events and the use of a survey — although staff mentioned that they still plan on engaging with folks in some way during the farmers market — and instead add two new workshops where the council as a whole could participate in further budget discussions.
The council had already participated in one of the two workshops an hour and a half prior to the start of the regular meeting on Jan. 9 and had another scheduled workshop in March as part of the original staff recommendation for the engagement plan.
While there were no disagreements on most of the plan, the council was divided over the formation of the BAC.
According to staff, the BAC is made up of 11 members who will help with providing, “insights and recommendations on community priorities and strategies for achieving a balanced budget.”
Each councilmember, including the mayor, each chose one person to be on the committee — Nibert pointed out during the meeting that those representatives didn’t have to be from the councilmembers’ districts — as well as representatives from local unions and representatives from other city stakeholders.
City Manager Gerry Beaudin was the only one who was able to choose two members. After getting some criticism from a few residents who thought he should have only one choice and that Balch should have had two, the mayor also suggested reducing one member choice for Beaudin.
However, that motion failed and all 11 representatives were appointed after the council established the BAC following the approval of the engagement plan.
Testa and Vice Mayor Jeff Nibert both thought the BAC was the obvious choice if the city wanted the best representation during these upcoming budget discussions.
“I think it’s essential … to have public input and engagement,” Nibert said.
He said the BAC would be the best way for community member representatives to advise the council on how these future budget decisions could affect the greater public.
Testa said she even thought that during the last election campaign, she had heard candidates like Balch, as well as members of the community, tout the idea of having something like the BAC and that the city should have formed such a committee much sooner..
“I know it’s what I heard, repeatedly, asked for,” Testa said.
Before establishing the BAC in that separate item, Balch still wanted the city to at least address the city’s financial forecast, which Balch said he had concerns with — with or without the ad hoc committee. He said the city needs to rebuild trust and one of the main ways to do so is to look further into how the city comes up with these financial assumptions that are so integral to how the city makes decisions on developing its budget.
“The reality is that our forecast forecasted a $4,112 surplus for … 2023-24 and we ended up with approximately a $10 million surplus,” Balch said. “So given year one is so egregiously off, I have a difficult time saying that I can vote for a budget relying on outlying years without looking at what assumptions were off.”
However, Beaudin clarified that the city did know about the surplus and that the only reason it is so high is because the city “hit the brakes on spending”.
“There’s a long list of reasons why we had more money at the end and it had nothing to do with a projection,” Beaudin said.
That’s why later in the discussion, after Testa’s motion to support staff’s original recommendation, Councilmember Craig Eicher asked the dais for a compromise which still included an ad hoc committee to dive deeper into the 10-year financial forecast on top of staff’s original recommendation of moving forward with the engagement plan and the BAC formation.
However, Beaudin offered a counter recommendation to have a third party provide a peer-reviewed assessment of the 10-year financial analysis that has been done to date and further analysis on the financial forecast assumptions, which ended up being enough for Balch.
“The goal of us tonight … is how do we want to develop our budget,” Balch said. “My intent with the independent review is to build trust.”
“We have a divided community,” he added. “An independent, third party would be very beneficial to this city.”
Everyone except Testa agreed to having an independent peer review of the city’s financial forecast outside of the budget engagement plan as a compromise to approving the engagement plan.
In addition to a town hall meeting where residents can interact with staff and provide face-to-face input regarding the budget, the plan will also include hosting an additional budget workshop in February, on top of the originally scheduled budget workshop in March.
The engagement plan will also maintain the use of an online engagement tool and the BAC as staff work through developing the budget during these next few months.
According to assistant city manager Pamela Ott, the BAC — which the council unanimously agreed to form — will still meet three times between now and March and that while it might seem like a lot of work and information squished into a small timeframe, the committee will be an “opportunity to bring more of our residents into this discussion.”
“This is really that on-ramp to deeper community engagement and understanding of the city’s financial position,” Ott said.
Isn’t it ironic that Mayor Balch and Council (minus Council member Julie Testa) want to hire more consultants, paid for by the city, to audit the city’s financial forecasts? This comes after a reported $10 million financial surplus by the city manager. One can see that Mayor Balch’s eagerness to “question the underlying financial assumptions” is nothing more than a hollow political objective. When asked by Vice Mayor Nibert at the last council meeting, Mayor Balch failed to state what underlying financial assumptions he personally disagreed with. The City’s staff will have to produce a two-year balanced budget. In so far as “questioning the underlying assumptions” is concerned, this is nothing more than empty rhetorical phrase. Mayor Balch is going to use the “peer-review” consultant’s findings as a cudgel against City staff and his opponents on council to get what he wants.
Critical thinker, eh? That financial surplus went unreported by the City Manager, even denying public records requests before the election, all the while asking the public for a sales tax increase. Same City Manager who wanted a raise and contract amendment for himself while denying police officers contract to get to the median salary per past practice. Same City Manager who pushed for large water rate increase using “assumptions” knowing that the well agreement with Zone 7 would be far less. Yeah, I am okay with an outside consultant since it appears the City Manager likes to hide the ball.
What do the Mayor and Council “want” by the way? Clearly, the voters of Pleasanton wanted them to right the ship.
I’m not okay with spending more taxpayer money on hiring yet even more consultants to tell us how to spend money better. I believe Pleasanton residents have had enough of the wasteful spending.
Pleasanton voters trusted Mayor Balch’s for his financial expertise. Why is it necessary to spend taxpayer money to hire more financial consultants? Isn’t this an audit the mayor can perform himself in the Ad Hoc body?
@CriticalThinker: again, well said. Thank you.
@FactChecker: a tad aggressive toward the City Manager. Wow. What anger. What would he gain from “hiding the ball” so to speak? Also, many of the Voters wanted the Tax Increase to pass. Please don’t speak for me again. Thanks.
The majority of voters–more than 54%–rejected the sales tax increase precisely because they don’t trust the numbers put out by staff, which is why an independent financial consultant who does not report to the City Manager is the only way to build trust. We have heard time and again that an alternative path forward may well exist that wouldn’t include the draconian, and frankly punitive, cuts being put forward by staff. Why wouldn’t we spend the extra money on an independent financial consultant to see if there is, in fact, a way forward that does no harm to the residents who live here? To say that Mayor Balch was trusted for his financial expertise ignores the derision he endured on the dais when he mentioned he was a CPA and believed there was a better path forward.
Mayor Balch actively planted seeds of doubt and derision for city staff in the minds of Pleasanton voters in the previous election cycle. Using Measure PP as a political wedge issue for his benefit, he stoked and enflamed distrust for our city finance department’s projections. He, along with the help of his supporters, promised an alternative to budget cuts by using the pension savings fund as a reserve slush fund. He has promised his voters that he will take a “hard look” at city finances. Now that he’s in the mayor’s office, Balch is desperate to poke holes in the city finance department’s financial projections to validate his position (or rather, the no for now position) on Measure PP to his voters. This is why he’s using taxpayer money to hire consultants to do the work he isn’t able to perform. Think about the absurdity of it for a moment: the council voted to approve hiring a consultant to look at the city’s financial projections so it can better tell us how to spend money while we are in a structural budget deficit. Absolutely ridiculous and a complete waste of money!
Critical Thinker – Please answer this simple question: What if the City Manager and Finance Director are incorrect in how they have structured the city’s budget?Shouldn’t we not be afraid of a new look? Why murder the messenger? How about looking at the facts as if for the first time and see what we see? Why be angry rather than curious?
@Concerned reader- Please don’t mistake my incredulity for the Mayor’s argument as anger. Rather, I’m deeply disappointed in him for having promised one thing to his voters, in this case the formation of a BAC, and then make such an extreme pivot to an Ad Hoc body. Mayor Balch let it slip at the council meeting, I believe it was at the meeting where Council member Gaidos admitted to colluding with Mayor Balch re the Ad Hoc body before the meeting on December 17th, that his intent was for the Ad Hoc committee to select the appointments for the Budgetary Advisory Committee. In effect, completely hijacking the budget process for his control.
And on the matter of hiring more consultants – enough. We are tired of the wasteful government spending. We know the city is in a structural deficit because of the unfunded pension liability to retiring and retired employees. No need to audit the projections. Council needs to do the hard work in the next few months of putting together a budget that minimizes the hurt to the community. Mayor Balch is mixing an atmosphere in the community that is simply toxic and ugly.
Let me remind readers that the Mayor raised close to $100k in the last election. He also spent a whopping $54k on the Tucker Group communications consultancy to beat Karla Brown. Then he has the nerve to spend Pleasanton’s taxpayer money on hiring more consultants to give him ammunition for his next battle with the City’s professional staff. We know that Jack has higher political aspirations. We are tired of being played for fools and simpletons. Pleasanton voters just want a council the is focused on making government work.
Critical Thinker – I see it differently.
As a CPA, Mayor Balch understands WHY an independent auditor is needed to examine the City budget process. Note the word ‘independent’. Neither Balch nor the Finance Department can perform the task, by definition, even if they wanted to and had the time.
Municipal Finance is a specialized area within the Accounting Field with its own methods and standards. It’s actually not unusual for cities to hire an independent auditor for the budget process to assure the validity of assumptions, cost projections, controls, and all the many factors determining the budget. But it’s especially important when a so-called ‘structural deficit’ has been identified and later a $10M surplus happens.
I found it helpful to review the last ACFR posted by the Finance Dept for FY 2023 and see what makes up the City’s revenues and expenses. There is also a comparison to the year earlier which is useful in understanding how a $10M variance to budget could occur.
Take a look, if you have not and be sure to read the explanation of variances.
https://www.cityofpleasantonca.gov/assets/our-government/finance-department/financial-reports/acfr-6-30-2023.pdf
Call it what you will, but WHY would our City lie about our finances? I may have a LOT of money in my bank account today, but if I have current bills to pay tomorrow, money goes away. Simple.
Granted, $10M is a lot and sounds like a huge amount to the general public, but I think it’s important to realize that running a city requires a lot of money. Take this simple AI response to “how much does it cost annually to run a city of 80,000 residents”: The annual cost of running a city with 80,000 residents can vary significantly depending on location, infrastructure needs, services provided, and other factors, but a typical estimate could range anywhere from $50 million to $200 million per year. Hhhmmm…I find this quite interesting. And yes, I admit. We are spoiled in this town. Our city pays (or has paid until we run out of money) for our beautiful parks, downtown closures for parades and so much more. So sad when these all go away.
I also must agree with @CriticalThinker yet again. Mr. Balch ran his election more like a budget crusade…MUST FIX THE BUDGET!!! NO on PP!!! Actually, he never said whether or not he supported PP. Interesting. Now he needs to produce for his supporters. Obviously fishy to me.
There is absolutely ZERO reason to NOT trust City Management and City Employees. They are the experts.
Sadly, Mr. Balch (talk about a witch hunt) seems to be on one now with the City’s employees. Appalling and embarrassing. So much for our community of character. Great example for our children, too.
It would highly inappropriate for the Mayor to conduct this audit. Just as it would be highlyly inappropriate for anyone in the finance department of the city to conduct it. Cries of conflict of interest would resound all across the tri-valley. The true irony might be that the predicted $90 million shortfall this year ended up being a $10 million surplus. We were told the city would be insolvent in a few short years. Those kinds of inconsistencies need an outside observer.
An independent auditor should be hired to review a city’s financial history in several situations.
1. It’s best practice for cities to engage certified public accountants to conduct annual audits of their financial records. This ensures transparency and reliability in financial reporting.
2. An independent audit can provide an objective assessment if there have been significant changes in financial management, such as a new finance director or major shifts in budgeting practices, an independent audit can provide an objective assessment.
3. If there are concerns or allegations of financial mismanagement, fraud, or embezzlement, an independent audit can help identify and address any issues.
4. Some grants or funding sources may require an independent audit as a condition of receiving funds. This ensures that the city’s financial practices meet certain standards.
5. To ensure compliance with state or federal regulations, an independent audit can verify that the city’s financial practices adhere to legal requirements.
6. Conducting regular independent audits can help build and maintain public trust by demonstrating a commitment to financial accountability and transparency.