September 24, 2008 > Union City responds swiftly to loss of 9-1-1 fee
Union City responds swiftly to loss of 9-1-1 fee
By Simon Wong
The City of Union City has acted decisively to close the public safety funding gap in the wake of the First District Court of Appeal's April 2008 ruling that the City's 911 fee is a special tax that was imposed unconstitutionally without the requisite two-thirds' voter approval and the State Supreme Court's August 2008 denial of the City's petition for appeal.
The City also has a 911-fee refund liability that could amount to $2.7 million. Additionally, the Council has been informed that the plaintiffs (two cell phone companies), who brought the case alleging that the 911 fee was unconstitutional, might file a motion for the City to meet their legal costs. The City Attorney does not believe, however, that the courts will uphold such a claim.
About $1.25 million, saved for a Computer Aided Dispatch (CAD) system to replace the existing 911 system, will be used towards 911 refunds instead. Once these funds are exhausted, refunds will be drawn from General Fund Capital Reserves. Without spending revisions, the latter would have to fund public-safety services that were financed previously by 911-revenue. The monies are earmarked for emergencies such as natural disasters, large litigation settlements and other unanticipated expenditure.
On September 9, 2008, a plan to re-balance the FY 2008-09 Budget was presented to the Council. Reduced General Fund expenditure, 911-fee revenue offsets and revised revenue projections were proposed to close the $2.7 million funding gap created by the loss of the 911 fee which represented approximately 6.75% of the City's total annual budget.
A 5% reduction in General Fund spending will generate over $2 million of savings, as follows:
There will be a moratorium on recruitment. Vacancies arising from promotion, natural wastage and retirement will remain open for the rest of the current fiscal year (savings: $619,917). These positions are not permanent eliminations. Staffing will be reviewed when the FY 2009-10 budget is developed and appropriate recommendations made, if there is a lack of [Measure UU] funding at the end of June 2009.
Operations and Maintenance expenditure will be reduced. Notably, savings will arise from discontinued funding for the City's Lobbyist in Washington DC, suspension of consultancy services for the City Clerk's records management and filing system and for a Public Works traffic engineering consultant. Planned spending for other contractual and consulting services, staff training, non-stipendiary City Commission budgets and supplies has been revised downwards. (Savings: $374,743, annually)
Position funding transfers assign expenses borne by the General Fund to other budgeted areas such as the Redevelopment Fund, Leisure Services Fund and Transit Fund. Proposed transfers consist of several small amounts that will be funded through reductions in undesignated fund balances so there will be no impact on the destination budgets. (Savings: $232,009)
One Public Works position will become redundant. Former duties will be covered by remaining staff. The incumbent has accepted another position within the Fire Department. (Savings: $142,000)
Part-time staffing within the Fire Department will be reduced. (Savings: $112,601 annually).
There are proposals to either temporarily suspend reimbursement of the Union City Historical Museum's annual operating costs (savings: $6,000, annually) or to reduce Union City Library funding by 10% which will mean a weekly loss of two hours' service (savings: $27,500, annually). The Museum is deemed to have the flexibility to charge membership fees and organize fundraising events to cover its own expenses.
The City has recommended suspension of this fiscal year's transfer to the General Fund Capital Reserve and that this sum is used towards closure of the funding gap (savings: $250,000). General Fund Capital Reserves will amount to only $450,000 if the budget revisions are adopted.
There has been legislative change that eliminates the cost of booking prisoners to cities throughout California though the State Budget might eliminate these savings if it includes a rescission. (Savings: $216,000).
The City Attorney's budget is subject to a 10% reduction but unexpected litigation expenses can arise which would make it difficult to achieve the savings. (Savings: $50,000).
The City has received 911-fee revenue for part of the current fiscal year and is likely to continue doing so until the end of the calendar year. This is attributable to time lags between the City's instruction to telecoms providers to cease collection of the 911 fee, with effect from September 1, 2008, and implementation of changes to their billing systems. Consequently, an estimated revenue offset of at least $370,000 is expected though the actual sum it is likely to be greater which would lessen the impact to the General Fund budget.
Projected property tax revenue to the General Fund, for FY 2008-09, has been revised upwards by $508,039. The City forecasted a 5% increase in property tax receipts for FY 2007-08 because of the depressed housing market. Actual revenue grew by 5.9%, thus, resulting in higher-than-expected base revenue at the start of the current fiscal year.
The spending cuts affect most City Departments. The Police Department's budget will fall by 4.1% ($757,478). Planned expenditure for the Fire Department will be reduced by 1.82% ($177,101). In real terms, the Economic and Community Development Department's budget will endure the largest cut of 16.08% ($249,448). In most cases there will not be a significant loss of service though permit applicants could see longer processing times in the Planning Division.
These proposals address the immediacy of the loss of the 911 fee but three uncertainties exist.
First, failure of Measure UU to pass in the November 2008 elections would mean another loss of $2.7 million of public-safety revenue. Should this funding source disappear, further spending cuts will be unavoidable.
Second, the California State Legislature is still debating the State Budget. There is concern that a "special budget deal" might redirect funds from cities, counties and Redevelopment Agencies to the State despite representation by local municipalities that the practice is unacceptable.
Third, more budget adjustments may be necessary in January/February 2009. The accuracy of revenue projections does not become apparent until the third quarter of the fiscal year when the first tranche of property tax collections is remitted by the County to the City.
These revisions are sustainable until the end of June 2009 but not in the longer-term. Moreover, they are not final and the City's budget will require fine-tuning throughout the fiscal year.
A 5% reduction in overall spending may not seem much but many of the City's budgets are built on a "threshold concept." Consequently, reducing them by hundreds of thousands, or millions of dollars, and making the cuts permanent, will eventually lead to a severe loss of service.
In response, the Council stated that it would be prudent to continue to set aside capital funds for unforeseen, ad hoc expenditure such as the replacement of the emergency generator at City Hall in the summer, and projects such as the CAD system which would have been funded by the 911 Capital Reserve Fund had the 911 fee not been lost. City Staff was asked to explore alternative savings so that this fiscal year's $250,000 contribution to the General Fund Capital Reserve is made.
City Staff will also assess funding for the Union City Chamber of Commerce. The Council would like to identify what Redevelopment Agency monies fund staff positions. Savings from reduced opening hours at other public facilities will also be compared with those of the City's library.
Union City employees were invited to submit cost-saving ideas when they were informed of the spending cuts. The City Manager has received a suggestion for some consolidation within the Fire Department; this will be explored in due course.
Representatives of the Union City Historical Museum stated that $6,000 per annum is very affordable compared with funding for other non-profit organisations that receive as much as $90,000 to $100,000, annually. The Museum has no other funding sources and has applied unsuccessfully for grants, so far. Nevertheless, the Museum's Board continues to submit grant applications and, if successful, would no longer ask the City to reimburse its operating costs. Museum staff consists entirely of unpaid, community volunteers who are concerned that the only museum dedicated to the City's history might have to close.
The Council will next meet on September 23, 2008 to finalize the plan and approve a resolution to revise the FY 2008-09 Budget.