Here’s a story from the Appeal Democrat in Yuba City/Marysville. The title states the problem – read further – city expenses have increased to pre-recession levels while revenues have continued to fall, retirement costs have increased by almost 10 percent a year while 32 positions have remained vacant.
Sound familiar? Well, not if you’ve been listening to Chico Assistant City Mangler Chris Constantin lately – he just made a Pollyanna speech about how everything will be getting better and we need to pump more money into police salaries for cops who only pay 12 percent of their pensions, 90 percent available at age 50. Constantin assumes higher property tax and sales tax revenues – I’d like to see the crystal ball he’s been using, cause my crystal ball says we’re headed straight for the second dip in the ‘W’. Housing prices are going up too fast, builders are building in a glutted market. In my neighborhood, the same contractor is flipping three houses – putting lipstick on pigs, and jacking the price up to $400,000 plus.
Below, Constantin admits we can’t really afford these raises for the cops, but insinuates they won’t stay if we don’t pay them more. Meanwhile, interim chief Dunbaugh told Stephanie Taber we had more than 100 recruits for those three positions they just filled the other day. The lies just keep on flowing – Chris Constantin is full of double talk.
“While this agreement includes base pay adjustments, the CPOA has agreed to pay more of their pensions costs (the highest of any employee group) and to convert to a new employee 14-step schedule that reduces the annual step increases from 5% down to 2.5% (a new salary schedule also agreed to by our non-public safety management group). This is a unique solution to the unique issue faced by this high priority area. Unfortunately, it is not something we can afford to give to others without compromising our financial future; however, I believe the return on the investment will positively impact all of us and will bring relief to a workforce that is struggling to maintain even a minimum safe staffing level.”
I predict Constantin will fly the coop before the city announces plans to pursue a sales tax increase. But, read below, you see we’re on the same road as Yuba City.
Yuba City budget deficits remain as costs rise
There is a light at the end of the tunnel for Yuba City’s budget woes, but it’s obscured by a mountain of pension debt and rising health care costs.
Those rising costs mean budget deficits will remain until 2018, when the city pays off its pension obligation bonds. Consequently, it’s unlikely the city will be able to add or expand services, Finance Director Robin Bertagna told the City Council during a mid-year budget update at last Tuesday’s meeting.
Bertagna projected the city would have a $2 million budget deficit by the end of the fiscal year, although the actual number will likely be lower due to one-time savings realized by 32 vacant positions in the city, said City Manager Steve Kroeger.
And required contributions to the Public Employee Retirement System (PERS) will increase by 33 percent by 2021, which will add just less than $2.2 million to the city’s budget.
The city has handled the budget deficit in several ways. Employee furloughs have resulted in significant savings — without the 10 percent furlough, the projected deficit this year would be $4.2 million, Bertagna said.
The city has also used a reserve fund, the Economic Stabilization Fund, to balance the budget.
Currently, the fund has a balance of $4.5 million, which Kroeger said should sustain the city’s deficit through 2018.
In 2018, the city will have paid off its pension obligation bond. The city sold the bond to make a one-time PERS payment of about $7 million.
The bond was sold in the interest of saving money, as the bond’s interest rate is two percentage points lower than the unfunded liability rate that PERS charges the city, Kroeger said.
Even with the one-time payment, the city’s total unfunded PERS liability, representing the difference between the assets the city has to pay pension costs and the amount of pension obligations it has, is $53 million.
Kroeger said the city has planned well for the extended economic slump.
“It’s a downturn that most expected to recover sooner than it has,” Kroeger said. “The city’s conservative fiscal planning has served us well.”
CONTACT reporter Andrew Creasey at 749-4780 and on Twitter @AD_Creasey.