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June 3, 2009 > Tough decisions ahead as Union City faces $6.8 million budget deficit

Tough decisions ahead as Union City faces $6.8 million budget deficit

By Meenu Gupta

Union City's proposed operating budget for the next two fiscal years, 2009-10 and 2010-11 was presented to Council on May 26.

The economic downturn has severely impacted the City's main revenue sources, viz. property and sales taxes and building permit fees. Last September, the City lost the ability to collect the 911 emergency communications fee, reducing annual revenues by a further $2.7M. The situation is exacerbated by ever-increasing costs and by the very real prospect of the state of California appropriating $1.47M (8%) of the City's FY 09-10 property tax revenues to balance the state budget following the failure of Props. 1A-1D in the May 19 Special Election. The state has up to three years to repay the City with interest. CalPers projects a 30% increase in retirement rates in 2011-12 arising from poor investment portfolio performance which means the City faces an extra $2M in annual retirement costs.

$38.6M revenue is expected in FY 09-10. The General Fund must spend $45.4M in the same period just to maintain existing services. The result is a budget deficit of $6.8M which will not be covered by the $4.7M of General Fund reserves expected to be carried forward to FY 09-10. Drastic spending cuts across all departments are necessary to balance the budget.

The passage of Measure UU last November reauthorized an existing public safety parcel tax (Measure K). The basic rate did not change so does not provide additional funding for public safety services. The slight increase raises $500,000 to fund youth violence and intervention programs. The fiscal position would be much worse without the measure.

The City will increase charges to businesses and individuals by 0.8%, in line with the San Francisco Bay Area CPI that prevailed as of April 2009. The City and employee bargaining units have yet to agree on salary and benefits from July 1 so the proposed budget does not include salary adjustments other than performance-related sums. The City transfers 7.5% of its annual budget to General Fund reserves to cover emergencies whilst many other Bay Area cities set aside 15%; Union City is perhaps more vulnerable than others in an emergency.

To prevent further loss of police department staff, nine police department employees, who would otherwise have been laid off, received golden handshakes. It is a plan that allows for two additional years of retirement service credit.

Golden handshakes have not been offered where the vacated position would need to be re-filled. The City has applied for a Department of Justice (DOJ) grant to partially fund 16 police officer positions that otherwise would be eliminated.
If no cuts were made to the police or fire departments, all other departments would have to cut spending by about 60%. The police association and other employee groups have begun negotiating new contracts with the City. A utility user tax is a possible source of additional revenue.

"As unpalatable as all of this is, the reality is the public sector's had a nice ride with their benefits for far longer than the private sector. It's time to start looking at some of the things the private sector's been doing," said Vice-Mayor Carol Dutra-Vernaci.

"We're already one of the leanest staffed cities with one of the highest crime rates. It's tragic that it's turned into a kind of a political meeting and trying to hold over our heads that we're going to have to call on our employees who have families, houses and health care to reduce our salaries, and that's the only way to get out of here," said Police Officers' Association President Michael Mahaney.
Hoping that there was some other way of addressing the fiscal situation, he stated that he now has less confidence in the city.

"Losing officers during these hard economic times will only exacerbate the situation; fewer officers mean more crime. Our police department is already overstretched with several collateral responsibilities that require a lot of our time. Reducing numbers will have a significant impact on employees, department and city. The remaining officers will have to battle with increased levels of fatigue and we shan't fill these positions easily or quickly because no one will want to work here. Some citizens would find the crime rate unacceptable and may not want to live here," he said.

Residents suggested cutting more from the Leisure Services Department or using reserve money to keep police and fire services intact. Resident Sheryl Glausch said that the council should consider making cuts that would be "less lethal to the fabric of this community" than lose public-safety services. "Police and fire are essential to the functioning of this community otherwise the criminal element will take over," she stated.

The council might decide to use general Fund reserves to help close the budget deficit.

"All five of us campaigned to pass Measure UU. Personally, I find it revolting to know that somebody should think we're not in favor of public safety," said Mayor Mark Green. "Lack of funding leading to several valuable employees being laid off is a painful decision that the city council faces."

No council action was taken at the May 26 council meeting.

Next budget meetings:
Budget Workshop - Council and Public Q&A at City Hall, Union City on Monday, June 8.
Budget Workshop - Council and Public Q&A at Union City Sports Center, Union City Blvd on June 11.
Formal adoption of budget - City Hall, Union City on Tuesday, June 23.

All meetings begin at 7 p.m.

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