There were no declarations about the end of the structural deficit on Tuesday night, as City Manager Dirk Brazil gave a brief report on the budget. Council was pleased with the good news, but the majority on council were clearly concerned with issues such as roads, infrastructure, and unfunded liabilities like OPEB and PERS.
The city manager noted they are “cautiously optimistic” and, given “the unique nature of the number,” they felt it was good to have this as a regular agenda item. The city unexpectedly ended the last fiscal year with $850,000 in unanticipated revenue – largely property tax, but also some sales tax. “That’s great news and we wanted to report that to you,” he said. “For the new fiscal year… things are looking equally good.”
This is even prior to Measure O taking effect in October. He said, “The reason to bring this forward is not only the unanticipated revenue, but also to reassure you and to reassure the public that we’re not going to go out and spend this immediately.”
Right now, that money will go into the fund balance and to build the reserve back up to 15% – even now it currently sits at only 13.9%.
“The more money we have, the more policy choices we have, the more opportunity we have to do things that we’ve wanted to for a while in the budget,” Mr. Brazil stated. He noted improvements in the budget at the state level and added, “So I think that the recovery is starting to gather steam.”
“We will keep a cap on the enthusiasm, we’ll be realistic, but just know that I think things are picking up,” he said.
Mayor Dan Wolk quipped, “I’m not going to put a cap on the enthusiasm.”
However, his colleagues tamped down enthusiasm and expectations.
Councilmember Rochelle Swanson noted that we have a lot of unfunded liabilities and maintenance, and “those are things that are still at the top of the priority list.” She added, “This isn’t yay, yay, now we get back to programs.” She said, “I just want to make sure the public knows that we’re still very cautiously optimistic.”
Councilmember Lucas Frerichs, “This is a welcome amount of news, but I think that there’s no disagreement among the five of us and the city manager and staff, at sort of keeping our eye on the prize. It’s a good welcome bit of news, certainly, (but) one quarter or two quarters does not necessarily a trend make.”
Mayor Dan Wolk, however, said, “My impression of this is that this is not just a one-time aberration… My impression is this has some stickiness to it. That is before Measure O kicks in.”
The city manager agreed.
Mayor Pro Tem Robb Davis noted that this was driven by property tax. He said that we have had increased home sales. “It’s clear that this is a trend that’s continuing. Of course that’s a cyclical trend, there was a pent-up demand during the recession.”
Robb Davis said that, while the trend may not be leveling out, at least the work of city staff has caught up. Where he wants to explore is where the turnover trend is with housing. “That’s the driver,” he said. “My simple interpretation – Cannery hasn’t opened yet, we haven’t built a lot of commercial buildings where we’re getting unsecured property tax or anything like that, so this is home sales.” He wanted to know the trajectory and where this would take us at the end of the year.
He also spoke about PERS (Public Employees’ Retirement System) and OPEB (Other Post-Employment Benefits). “The good news is we’re in a place where we’re addressing those long-term liabilities. The time horizons are long – 30 years- but we’re addressing them,” he said. “But we’re putting away money in way in which our actuary thinks is a reasonable approach.”
“But,” he said, “the point is that between 2020 and 2021… between OPEB and PERS we’re going to need to be coming up with an additional $4 to $5 million. Additional on top of today. But that’s a hefty piece of money. We are in a situation where we need this money.”
“We have the road backlogs, we have Bob Clarke who is ready to put out a bid on the study of other infrastructure – especially building replacement costs,” he added. “When we begin to finally internalize those things into our normal budgeting process then we can start breathing a little bit.”
Councilmember Brett Lee said, “I think we need to more explicitly talk about roads.” He noted that we are looking at 20 years, $6 to $8 million a year to stay current, “and that’s not in the current budget projections.” He added, “Even when you include the Measure O funds, that’s nowhere near the $6 to $8 million going forward for 20 years. We need to talk about that and really have that part built in so that it’s not an afterthought.”
He added, “We may not be able to fully fund it, but at least have it explicitly listed so that it’s not an afterthought.”
In June, the voters approved Measure O, which increased the sales tax by one-half cent. The Vanguard recently learned that roads are being funded at roughly $3.9 million in ongoing money, but council will need to decide relatively soon if they wish to put a parcel tax measure on the ballot for the spring.
—David M. Greenwald reporting