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May 25, 2004 > An Interview with Larry Cheeves, City Manager of Union City

An Interview with Larry Cheeves, City Manager of Union City

Local cities, faced with maintaining services amidst unstable revenues and encroachment from the State are straining to balance hard-pressed budgets. Union City has been no exception to this conundrum. TCV recently spoke with Union City's City Manager Larry Cheeves on Friday, March 21st about Union City's response to these fiscal challenges.

TCV: What is Union City's financial position at this time?

Cheeves: I've just presented to council or put it in their packet, a proposal for filling our budget gap which will be discussed on Tuesday night and then the following Tuesday night. So that's where we are right now. The budget won't finally be adopted until June.

TCV: Is there a deficit? If so, how much is it?

Cheeves: Originally the gap was about $7 million. Through the parcel tax that was passed and the 911 fee and some other adjustments - vacant positions we left vacant and that type of thing - we got it down to about $3.5 million. The proposal that I have given to council will bring that down, partly using one-time moneys of about $1.8 million, to a balanced budget.

TCV: Where are the one-time funds coming from?

Cheeves: The council authorized us to sell some unused properties. We're estimating a value of about $900,000. We also got a salary concession from some of our bargaining units, the managers and me, the City Council and our professional unit, gave back 5% of their salaries. That gave us about $325,000. We also had a carryover savings this year of about $330,000. These are monies that we cannot expect to carry us next year, so we still have a structural budget deficit.

TCV: Is the 911 fee facing legal action?

Cheeves: We have not been served. We did get a threatening letter from a law firm representing a couple of the cell phone providers. They gave us a deadline of last Friday to repeal the ordinance, which we did not do, and there has been no action since then.

TCV: Are employee concessions a one time thing? Is there any "catch-up" provision when things are better financially?

Cheeves: We asked for a "giveback," which really takes the form of a PERS (Public Employees' Retirement System) pickup. In other words, the city pays the employees' share of the public employees retirement system costs. That amounts to, for miscellaneous employees, 7% and 13% for safety employees. What some of the bargaining units agreed to do was, for a period of one year, pick up 5% percent of what the city was paying for their retirement costs. But that's a one-time thing that expires June 30 of next year. Then salaries would be restored. There's no "catch-up" provision. We will not be liable for the money that they lost.

TCV: Are you still expecting growth around 4%? That was what the plan was at one time.

Cheeves: Yes. We usually figure about 3.5%. I think 4% is probably reasonable, but we wanted to be conservative.

TCV: Are things somewhat flat right now, or are you seeing some growth?

Cheeves: Some things are flat, and some things are growing. Property tax continues to grow. If we continue to have people filling homes at record high prices, property tax will continue to go up. Sales tax is flat, retail sales are flat, and business sales are very, very low. Sales tax is one of the biggest taxes we're concerned about.

TCV: When doing your projections for the next year or two, are you looking at that trend continuing?

Cheeves: We have to do that, at least in the sales tax area, because it just is not going up. The estimates we did for this year were rosier than they turned out to be, so we really can't afford to project going up at too quick a pace. My gut feeling is that the economy is turning around and that it will go up, but we want to be prudent.

TCV: What is the reserve that Union City is putting aside?

Cheeves: We have a very low reserve. It's a 3% reserve - 3% of the general fund revenues in reserve. Now, that's unencumbered general fund reserves. We also have reserves in other funds- in our pension fund obviously, we have reserves in our insurance fund, we have reserve in our transit fund, and a number of other non-general funds - but they are not nearly as liquid or usable and they're tied to specific programs so that we can't really consider them an unencumbered reserve.

TCV: What is projected for capital investment during this year? Is your five-year capital investment plan still in place?

Cheeves: Basically it is. Capital monies are different. We didn't have any general fund monies in our capital program so the general fund does not affect it. Our capital is paid out of street projects, gas taxes and measure B monies. We have redevelopment money for a lot of our projects, and that will continue. We have a Community Facilities District that is building some projects for us. We also have Decoto Industrial Park Study Area fees that were put in place that provide some revenue. So, we're on track as far as capital projects go.

There are two caveats to that. One is that redevelopment is getting hit heavier by the state than it has in the past. We're going to have about a $1.2 million a year for the next two years taken out of redevelopment. It had been about $525,000. The council also agreed to utilize some redevelopment moneys for other activities that had previously been paid for out of the general fund, which is a legitimate use of those monies. That means we have a little bit less in the redevelopment area. So, we're playing that by ear.

If we have the types of increases we've been getting in property tax revenues, and of course that affects redevelopment agencies as well, we are not going to have any problem. Those monies will be there. The other caveat has to do with building projects we have to maintain. We have some money but not full funding for a gymnasium. We have some money but not full funding for a library. We've applied for grants in both cases. If the grants were to come through, we would have enough money to build the projects but then we would have to make the hard decision: do we go ahead and build the projects, even though it is going to be very difficult to have the money to maintain them and to operate them?

TCV: The City of Fremont has said that they will probably use Redevelopment Agency (RDA) funds to help fulfill their obligation to the state. Is that what's going to happen in Union City as well?

Cheeves: I am aware of the fact that we can use redevelopment money to pay off the general fund obligation. In our particular case, we accounted in the original budget planning for $1 million in takeaways from the general fund this year. That was reduced to $760,000 I believe. We have incorporated that into our general fund budget so we're not anticipating taking redevelopment moneys to pay for that. Part of the reason is that we have taken redevelopment moneys to offset what had been general fund expenditures. So, in a sense, we have already done the same sort of thing - we've already taken some redevelopment money to help out the general fund. I think we're planning to just take that hit in the general fund this year.

TCV: For what uses has the city been taking RDA funds to supplement the General Fund?

Cheeves: Redevelopment Agency is considered a separate entity; it's like a corporation. It has to have support, so it has to have people help with finance, paying bills, and doing projects and all those types of things. General Fund employees provide those services. The Redevelopment Agency pays some of the cost of our salaries in order to do that. I'm Executive Director of the Redevelopment Agency as well as being City Manager, so a portion of my salary is charged to redevelopment. We've been doing that type of thing for years and we adjust it based on what the actual amount of time is we're putting in to redevelopment projects.

The one thing that is different this year is that the council has agreed to use some redevelopment money towards activities that occur primarily in the redevelopment project area. One of those is community police officers, one in the Decoto District and one in the Alvarado District, both of which are in the Redevelopment Areas. There was a very real possibility that those positions were going to go away. Council said, "Well, let's use Redevelopment Agency money, since the Redevelopment Agency benefits from those positions; let's use redevelopment moneys to fund them."

The other area was with Crisis Intervention Counselors - a very, very successful program that we think, although it is hard to quantify, has saved us a great deal by avoiding future crime. Those people primarily work, there are two of them, they primarily work within the Redevelopment Agency as well, and the council said we could utilize redevelopment money to pay their salaries. So, those are the two areas where redevelopment has been helping to pay for other services previously paid for by the general fund.

TCV: Is that going to be ongoing, or just during this economically difficult period of time?

Cheeves: Things can change. We're going to a one-year budget now; we used to have two-year budgets. Things are so volatile now that it's hard to do that anymore. Council has indicated that it will be ongoing, but certainly, if general fund monies pick up and redevelopment monies go south, things could change.

TVC: What about the infrastructure, roads, sealing, the streets, is there any cutback there?

Cheeves: No, not really. Those are gas tax monies and Measure B monies. We also get some grant money to help us with that, some STIF funds (State Transportation Improvement Funds), that are pretty steady so we are continuing our ongoing maintenance and repair of city streets.

We have had the same sized street maintenance crew for the last twenty years. We had twelve people in that area and we still have twelve people in that area. That includes two street sweeper operators. We have never been overstaffed in that area. There are two vacancies in the streets division right now. That is having an impact on how much we can do just in the ongoing maintenance of streets. However, that's different from our pavement management program - slurry seals and overlays - that we do by contract.

TCV: Are you going to fill those positions or are those being held open during this year?

Cheeves: I'm going to fill those positions. I've had a hiring freeze for the last eleven months and we're going to maintain a modified hiring freeze. All the positions are budgeted if the council approves the budget that I am presenting. However, the prudent thing is to only fill the positions that are needed, and to fill them a little slower than normal. However, I think we have a critical need in the streets area that requires us to fill those positions, so I will be filling those.

TCV: We're talking on an off-Friday, when was that instituted and is it a cost savings measure?

Cheeves: That was instituted, I think, about 13 or 14 years ago. It was, in some ways, considered a cost saving measure, and there are certain costs that are saved. I am sitting in a room where I have only one light on as opposed to all the lights of the entire city hall, so there is some cost saving. It was as much a concession to bargaining groups as anything else. People who lived a long way away were able to save a commute. I was Public Works Director at the time; I thought we would have more problems with it than we did.

I thought we would get all kinds of calls on those Fridays that were off. Also, I thought that it was going to be an imposition on the residents not to have city hall open on a Friday. What has proven to be the case is that people accept it, they understand it, they benefit from the fact that we're open an hour later the other days of the week, and it really has not proven to be a problem.

There is that cost savings factor, I don't know if we've ever quantified it, but there certainly is a cost savings in utilities that we would otherwise use, we're not running vehicles- there certainly is a cost savings.

The employees like it very, very much. I think another way that we benefit is that people would be taking off during the week in order to accomplish things they can't get done on weekends. People who would be taking off more days to add to a weekend aren't doing that as much because they've already got that. I think there is a savings overall.

TCV: What will be visible to the public during these lean times? Will it be business as usual?

Cheeves: I think they are going to see a lowering of standards particularly in things like park maintenance. We have the same size work force that we had fifteen years ago, in fact, maybe even smaller. Yet, we are constantly adding more acreage every year that has to be maintained. What happens in that case is that we get spread thinner and thinner.

People will see grass growing taller, more weeds, brown areas, dead plants; those types of things are going to be fairly obvious. If I had had to actually cut positions in those areas, we'd have to be closing parks. Hopefully, we're not going to have to do that. We are hoping to put in a Property Business Improvement District (PBID) at Union Landing where property owners would come up with the cost of police. If that goes through, we'll be able to retain the three police officers we have there now. It's a voluntary district. We're helping them do it; we've had a couple of meetings with them. It seems that more than a majority of the property owners are willing to participate but we have to go through a process for the PBID to happen and we won't know until probably some time in July.

TCV: You were talking about selling some city properties. Are these unimproved parcels designated for parks or other civic benefit?

Cheeves: These parcels are small pieces of property; they were remnants from various projects that we've done. They are not big enough for a park or located in such a way that they would be useful for a park. A couple of them are residential properties, and in one case, we are selling a piece of property on Mission Boulevard that we have been using as a teen workshop. The city is selling it to the Redevelopment Agency. It will continue to be a teen workshop for a period of time but it is within the area that the Redevelopment Agency plans to develop along Mission Boulevard, so ultimately it will be redeveloped when that section occurs. It's not a lot of money; we're talking about $900,000 with all those parcels together.

TCV: Any other comments?

Cheeves: I'd like to say that Union City has a tremendous workforce and an outstanding city council. That's the reason we're able to operate with as few people as we have. We are the least-staffed per capita city in the county and yet I think that we have been able to do phenomenal things, and we will continue to do so because of the dedication of a whole lot of very well qualified people.

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