Members of the Pleasanton City Council indicated Tuesday night that they will approve a downsized $87.3 million operating budget for fiscal 2009-10 when it comes before them for a vote next Tuesday.
With sales tax revenue down 10 percent, a zero percent projected increase in next year's property tax revenue and development basically at a standstill with almost no developer fees--once the cash cow of Pleasanton municipal revenue in the late 1990s and early 2000s--the council and city staff already had pared last year's $100-million operating budget to $89 million. The budget for the new fiscal year, which starts July 1, is down 2.9 percent with budget constraints in place.
The council spent 2-1/2 hours Tuesday reviewing financial details in two documents, one with the proposed two-year operating budget containing more than 300 pages of data and commentary, and the other with capital improvement projects under way or proposed through 2013. For both measures, City Manager Nelson Fialho said the brakes are on given the recessionary economy.
"There are six key strategies that we are following given the current economy," Fialho said. "The first one is vacancies. We haven't been hiring since last September, so we've been able to achieve significant savings as a result of that. Second, we've held all of our non-personnel costs flat, so there's been no incremental increase associated with these costs, such as the supplies we use, equipment and even how much paper we order for the copy machines."
Even more significant is the announcement that none of the city's 60 staff managers, including Fialho, will receive a pay increase during the next 12 months. For those in unions, similar actions will be negotiated when their next contracts come up for renewal.
"We're in a dire situation throughout the state and everybody has got to contribute a little to avoid take-backs and layoffs," Fialho said. "Rather than cutting, what we are asking folks to do is freeze salaries."
Also, the new two-year budget earmarks nothing toward capital improvements. With the Firehouse Arts Center now fully funded and under construction, the Alviso Adobe completed this year and $8 million already provided in the current budget for completing the baseball fields on the Bernal Community Park, Pleasanton can move forward at ease without new projects, Fialho said.
Another strategy in budgeting for the next two years is that the city has reduced its annual contribution to a reserve fund which is designed to provide a cushion for recession emergencies and even a likely state take-away of more than $4 million in property and other taxes this year to help pay down the state's deficit. Although that money will be repaid, when is unclear.
Finance Director Dave Culver said he's optimistic that economic improvements will allow a 2.1 percent increase in the operating budget to $88.1 million in fiscal 2010-11, but that half-year reviews are planned to keep check on that financial plan.
City officials said that the economic recession has had a significant impact on General Fund revenues. Over the last seven years, the city had been experiencing sustained revenue growth due manly to an expanding commercial and residential property tax base, expanding retail and business license tax bases and renewed growth in the hotel tax.
"But this fiscal year, revenues declined 4.4 percent and are expected to decline another 2.9 percent in fiscal 2009-10 before they are projected to begin a slow recovery in fiscal 2010-11," he said.
"however, or General Fund reserves remain intact and the conservative financial contingency planning done in the past year will help us weather any additional unknown wildcard such as further state shifts of local property tax," he added.
"The nation, state and East Bay are in the midst of en economic recession the likes of which have not been seen since at least the 1920s," Fialho explained. "The median price of single family homes in Pleasanton has declined 9.6 percent in 2009 and home sales volume is only 70 percent of what it was in 2007."
He added: "In January 2009 there were three foreclosures reported in Pleasanton, down from eight in January of last year. Sales tax declined 10.3 percent in the current fiscal year and is expected to decline another 13 percent in fiscal 2009-10 before any recovery is expected. Both property tax and sales tax revenues have dropped to fiscal 1996-97 levels."
Fialho said that while the two-year General Fund budget submitted to the council is balanced, it will be a challenge to keep it in balanced given the fragile state f the economy. The city's prudent approach has resulted in over $70 million in reserves for anticipated costs and future unknowns.
The council's consideration of the new two-year budget will be part of its Tuesday meeting, which starts at 7 p.m. in the council chambers at 200 Old Bernal Ave.