City manager Kevin Duggan told the council that he had just received an e-mail from the League of California Cities with some bad news: State officials were considering taking 10 percent of property taxes away from cities throughout the state if legislators' six propositions, designed to help balance the state budget, are rejected by voters on May 19.
Duggan said that would mean a $2 million bite from the city's $88.4 million general fund, plus unknown amounts from the downtown and Shoreline tax districts.
"If they can find a way to spread the pain, you can guarantee they will do it," Duggan said.
Fortunately, the city is closing the fiscal year with a balanced budget, unlike neighboring cities, Duggan said. But "unusual economic times" mean a deficit of $6 million next year and no revenue growth for several years, even as personnel costs increase by $4 million every year.
Give and take
After months of discussions with department heads, Duggan says he has proposed his "least conservative" budget ever by using $2 million in city reserves to temporarily fill some of the deficit. About $3.5 million in proposed cuts to the general fund include the elimination of 17 positions in various departments that are unfilled (except for one librarian position which will be funded with "transition funds" until a librarian leaves voluntarily). Another $240,000 would be raised through fee increases for preschool programs, Center for the Performing Arts tickets and ball field use, among other things.
"We would prefer not to recommend any of these actions," Duggan said on Monday. "Unfortunately we can't make a serious dent in the problem without consequences. You can't pretend things are better than they are."
On Tuesday, in a chamber packed with city employees, the council discussed the proposals with the help of an Excel spreadsheet projected on a large screen.
Council member Laura Macias started things off by removing about $260,000 worth of "tier one" proposals by the city manager, including the elimination of a parks maintenance position and increased recreation fees, and replacing them with a roughly equal set of cuts taken from a list of "tier two" proposals, including staff cuts to the finance department, city wide employee training, cuts to library collection costs and complete elimination of the city's "commuter check" transit pass program.
Macias said her priorities were with residents "being able to enjoy living in the city." The rest of he council seemed to support her recommendations.
Mayor Margaret Abe-Koga disagreed with Macias on one point, saying she actually supported new fees for three city preschool programs, at another $2 an hour per child, because they were not the type to be used by low-income parents.
Council member Mike Kasperzak was critical of the city's increasingly expensive union contracts, which are the major cause of a recurring $4 million deficit projected over the next few years.
Residents "are losing their jobs, their wages are being cut," Kasperzak said. "We're asking them to pay more for less. What it comes down to is we have to do all these cuts so we can do wage increases" for city employees. He added that he may not be able to support the budget in June if the labor groups do not share the pain.
Abe-Koga said she thought Kasperzak's remarks were "premature," and pointed out that some of the labor contracts were agreed upon only six months ago.
"To take back what we negotiated, I have an issue with that," she said.
Not over yet
On Wednesday morning, Mayor Abe-Koga announced that the city clerk and the city attorney have followed Duggan's lead in forgoing pay increases this year to set an example for other city employees considering whether to forgo pay increases.
Duggan said Mountain View will have a tough time compared to other cities in raising revenues under Proposition 13, which restricts tax increases. In a built-out city like Mountain View, there is very little room for new tax-generating real estate development.
Earlier in the decade the city had to make $7 million in cuts after the dot-com bust, only $2 million of which was restored. Duggan has said the city government is actually shrinking over time, while the city is taking more measures than most to increase revenues. At some point, he said, the city will have to ask voters to approve a tax increase, such as a bond measure, to maintain services. A voter-approved tax increase for the city hasn't been attempted since a library bond failed 15 years ago.
The council is expected to consider more cuts in the latter half of the year. By then a deal may be made for a hotel in the Shoreline area that could bring $2 million in general fund revenue every year. Without new revenue, possible future cuts could include reducing firefighter overtime pay and cutting about a dozen police department positions, including eight of the city's officers. The public safety cuts could mean slower emergency response times.
Without more cuts, Duggan said, the increasing expenses could compound and quickly diminish the city's reserves.
"It's a short road to Vallejo," said council member Jac Siegel, referring to the bankrupt city.
For the complete list of proposed tier one cuts and fee increases this year, see the city's Web site at laserfiche.mountainview.gov/weblink7/Browse.aspx, and click on Attachment A for the May 5 City Council meeting packet.