A Message from City Manager Susan M. Loftus
At the June 15, 2009 City Council meeting, I presented the proposed changes for the 2008-2010 Amended Business Plan which address the $8 million General Fund gap between ongoing revenue and expenses. This package represented the culmination of the work of individuals throughout the organization to find creative solution to balancing the budget with the smallest possible service impact. At the meeting the City Council concurred with the recommended strategy and asked us to move forward with the recommended cuts totaling $4 million and on the two proposed ballot measures for November to address the remaining $4 million gap. I am writing this article to update community members regarding the City’s financial condition and to outline the proposed approach presented to the Council.
What is the Gap?
Not surprisingly, but extremely disappointing nonetheless, the financial challenge facing the City has grown. As was clear in the City’s last Financial Quarterly Update, we continue to be in the midst of a deep, prolonged recession. The economic turmoil facing us at a federal and state level is being experienced here in San Mateo. The $3-4 million structural gap projected over a year ago, before the huge effects of the recession, has now doubled to $7-8 million. All accounts suggest recovery will take much longer than originally expected and there will be long term impacts which will last beyond the recession. Here in San Mateo this recession has impacted us in virtually all revenue sources from hotel and sales tax to property transfer tax and property tax. For example, property transfer tax revenue alone has reduced to $4 million per year for the last two years from its high of $10 million plus.
What is the Proposed Budget Reduction Strategy?
The recommended strategy includes a combination of budget reductions and tax increases. Our goal is to move forward in Round 1 with $4 million of budget reductions by the end of the fiscal year and to go to the voters in November for a sales and hotel tax increase for the remaining $4 million. If the election is not successful, we would need to move forward with further budget reductions.
Round 1 Budget Reductions: (See: Administrative Report)
Generally the proposed reductions will create extended turnaround times, cutbacks in frequency of activities, provide less flexibility for responding to unanticipated requests, elimination of certain activities, diminish management oversight, and curtail the City’s ability to proactively respond to issues. These reductions will significantly reduce capacity in every area of the organization. There will be less flexibility for unplanned items that occur, and some delays and slowdowns in service and responding to issues. Service impacts range from reduction in library hours to restructuring recreation center operations. Human Resources is working with departments to develop a more detailed schedule on the timing of this process.
In order to balance our 09-10 budget without further reductions before the election results are known, the City will need to use a combination of one time funds and labor concessions from employees.
Like many others in the City, this is not the first budget reduction process I have been involved in during my career. All have been demanding, both on a personal and professional level. None of them have been easy. No matter what process is followed, there is no simple way to implement the difficult work that needs to be done. Be assured that the departmental managers and I take this responsibility seriously and are doing our utmost to mitigate the impacts these actions will have on the organization and community, both directly and indirectly.
I know personally that this is not the script I would have written for the first months of my position as City Manager. Having a history with the City and knowing personally the individuals in our organization, has made the effort even more difficult. Although I have lost sleep wrestling with the options and impacts of how to resolve our financial problem, I recognize the importance of this task we face. The City has a track record of making the difficult choices and addressing its financial reality. This is something I strongly support and am committed to do.
As the City works to make the $4 million in cuts to our operating budget, we will be looking to voters to support the two ballot measures in November to prevent further cuts. If the ballot measures fail, City Council with be forced to further reduce services in order to balance the budget.
We have a game plan in place. I am confident we have the wherewithal and experience to do what’s necessary to execute it.