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June 17, 2009 > Hayward's budget reflects economic downturn

Hayward's budget reflects economic downturn

By Simon Wong

Hayward City Council formally adopted the City's and Redevelopment Agency's FY 2009-10 operating budget, FY 2010-19 Capital Improvement Program budget and Master Fee Schedule for FY 2009-10 on June 16.

Operating Budget FY 2009-10
Staff recommended changes to the second year of the two-year budget adopted in June 2008 because of the economic crisis.

Expected property and sales tax revenues have been revised downward by $10.7M to $61.2M which accounts for 52% of General Fund income. Account for all other revenue sources, including $10M from Measure A (utility user tax or UUT), and the $12.6M budget gap originally projected for FY2009-10 narrows to $2.2M.

Personnel will account for 79% of General Fund expenditure next fiscal year. A two-week furlough last December saved the General Fund $600,000 and a total of $1M across all funds. A 104-hour furlough will reduce the payroll by 5% in FY 2009-10 and sworn employees' one-time pay concessions will save $5M.

A moratorium on recruitment, the sale of capital equipment and land for one-time monies, a review of fleet management, elimination of spending on non-essential goods and services, overtime reductions, contingencies for reduced service levels in all departments and mandatory furloughs for certain bargaining groups have been implemented.

Police, fire and unrepresented employees, including executive staff, agreed to reduced salary adjustments to save $14M over the next four years and help balance the budget until the economy recovers. $2.5M and $4M will be saved in the first and second years of the budget.

Elimination of about 50 positions through layoffs and early retirement and salary concessions reduced spending by $6.7M in FY 2008-09 and $8.5M in FY 2009-10. Public safety is one of the City's priorities; salary concessions helped retention of sworn officers.

Budget reductions look likely in FY 2010-11. General Fund borrowing of $5M per annum in FY 2008-09 and 2009-10 from the Housing Fund to maintain services in the short-term are not a long-term budgetary solution and must be repaid. A loan agreement with the RDA to set aside housing monies to repay the $10M is in place. The RDA also owes the General Fund $13M which will be repaid over 15 years yielding $800,000 per year to the General Fund.

Measure A revenues will be realized 90-120 days after the new UUT is implemented. About $10M of the $13M annual revenue is expected in FY 2009-10. Consequently, no further material budget reductions are proposed for the same period.

Measure A funding will help maintain essential public services and avoid deeper cuts to basic services and is expected to generate $3M of surplus funds for transfer to reserves. The UUT will reduce the originally projected $18M budget deficit for FY 2010-11, as per the General Fund 10-year plan, to $5M. Despite this new revenue source, FY 2010-11 and beyond will see reduced budgets. Economic recovery is not expected to gain momentum for another 18-24 months.

Following the failure of Props. 1A and 1B in the May 19 Special Election, there is the real prospect that Sacramento will "borrow" $3.6M (8%) of the City's property tax revenues in FY2009-10 to help balance the state budget. The state has up to 3 years to repay this amount with interest; in the meantime, the City will have a funding shortfall. The take-away will deplete General Fund reserves if it goes ahead. The Council formally opposed the action on May 26.

The City has actively pursued all available stimulus funding from the American Recovery & Reinvestment Act 2009 for transportation, community development block grants, police services, fire/paramedic services, library services, public works, energy efficiency and conservation.

Capital Improvement Program (CIP)
The CIP's $58M budget forecast for FY 2010 is based on a ten-year plan instead of five years as was the case previously. This reduces the volatility and inaccuracies associated with forecasting over shorter periods.

$16M is earmarked for utility projects, $27M for road and street projects, $3M for neighborhood projects including pedestrian and landscaping projects. The remainder will go to airport, internal services and miscellaneous projects. Besides infrastructure, the CIP aims to improve the City's appearance.

The California Legislative Analyst's Office has suggested suspension of 80% of the Prop. 42 gas tax transfer from the state to cities and counties in FY 2009-10. The state would have up to three years to repay these monies with interest. An alternative proposal is to borrow $1.03 billion of gas tax funds from local governments in the same period.

Master Fee Schedule
The City has determined the cost of providing fee-based services to the public and adopted a phased increase of fees to cover the full cost of these services. They include building, planning, fire inspection, hazardous materials and some police services.

Changes to plan check, building inspection and some development-related permit fees are proposed. Bi-annual fire inspections may replace annual inspections at large daycare centers.

The Master Fee Schedule will take effect from July 1, 2009. Development-related fees will be effective from Aug 15, 2009.

For more information, visit the City of Hayward's website at www.ci.hayward.ca.us

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