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  Whiskey to Beer
June 24, 2004

Like an alcoholic pronouncing himself sober after switching from a bottle of whiskey to a case of beer, the Richmond City Council congratulated itself and City staff for producing and adopting a “balanced” budget for FY 2004-2005. The vote was 7-2, with Butt and Bates dissenting.


Not one person from the general public showed up to either support or criticize the budget. I don’t know if silence means consent, or if the public is simply too weary or too jaded to care any more. Only one person showed up to comment, Lynda McPhee of SEIU Local 790, and in her lowest key presentation in recent memory, she seemed simply resigned.


The budget was, in fact, balanced only to the extent that projected revenues matched expenditures for a finite period of time, assuming no unforeseen emergencies or events. What the budget did not include could well exceed in magnitude what it did include. Challenges that were not addressed and one-time fixes include:


  • A cumulative deficit of $18 to $28 million was carried forward.
  • The budget depended on at least $6 million of one-time sources of revenue – a loan repayment from the Redevelopment Agency.
  • There are no reserves.
  • Diminished services in Parks and Recreation and the Library remain unfunded.
  • Questions about the adequacy of Public Safety services (Fire and Police) following substantial downsizing remain unanswered.
  • The PERS liability is to be refinanced, resulting in lower annual costs but passing the obligation along to future taxpayers.
  • The future of City Hall remains unresolved and unfunded.
  • Provisions for maintenance and replacement of infrastructure requiring $100 million remain unfunded.
  • Maintenance of all City facilities continues to be deferred.
  • There has been no resolution of the request for public employee unions to assume their share of PERS contributions and to reduce the cost of health insurance plans.
  • There has been almost no implementation of cost-recovery, cost reduction and revenue enhancement opportunities suggested for many City departments, including Risk Management, Auditorium, Fire and Police.
  • There is no plan or funding for fixing or replacing the star-crossed SAP system.
  • There may be substantial unfunded liabilities in Workers Compensation.
  • Although front yard fences were the biggest Richmond story of 2003, almost nothing has been done to implement the resolution, and no funds have been provided to do so.


In a related action, the Council tried and failed again on June 22 to take action on a Council size reduction Charter amendment ballot measure that would ensure enabling State legislation for the TRAN (Tax Revenue Anticipation Note) need to pay bills in October. What was passed would offer the voters an opportunity to downsize the Council in 2008, but after that, confusion reigned. Some, including the mayor, believed that a 2008 downsizing would further offend the Republican senators whose votes were needed to pass the TRAN bill. Others believed that 2008 would meet the Senators’ demands. Two Council members were convinced the TRAN wouldn’t be needed after all, or the legislation could and would occur later this year.


Added to the budget woes are huge leadership vacuums facing the City. Acting City Manager Leveron Bryant has 36 days left before retiring on August 30. The search for a permanent City manager, in the hands of a southern California headhunter, has yet to turn up a single candidate. The search for a permanent city attorney has been stalled for months. Dan Nackerman, the highly regarded director of the Richmond Housing Authority has decamped for a better job in southern California. Former directors of Parks and Recreation, Library and Human Resources have gone following elimination of their positions.


It used to be difficult for me to obtain information and get answers from City staff and process service requests from constituents. Now, with a few exceptions, it is nearly impossible. The City, like my computer, has gone into “sleep mode.”


In all fairness to my colleagues who supported the “balanced” budget and staff who prepared it, they point out that it represents progress and that there is much hard work ahead. They acknowledge many shortcomings but believe that the magnitude is simply too great to address all at one time. They also believe that prospects for substantial additional one-time revenues from land sales and other sources will alleviate millions of dollars of deficits in the next couple years as will voter support of the ˝ percent sales tax in November.


While I share their optimism that we will eventually emerge, I cannot accept the prospect of doing so on faith alone. We need a plan that deals with everything, and we need it now.


When this financial crisis was first revealed in January of this year, the greatest fear was of how the financial community would react and whether or not some bondholder would sue the City. Now, no one seems to be concerned how those same people perceive a City that has just adopted a budget with a cash deficit of as much as $28 million dollars and unresolved additional millions of public responsibilities. The City still has no bond rating.


I have stated several times that I made a huge mistake when I voted to support the 2003-2004 budget with a built-in $7 million deficit (See City Adopts "Hail Mary" Budget - Asks Unions For 5% "Give-Back", TOM BUTT E-FORUM July 09, 2003). There is no way I would support the 2004-2005 budget with a deficit of at least four times that much - $28 million.




Posted on Thu, Jun. 24, 2004

Richmond adopts balanced budget


Months after announcing a staggering $35 million budget shortfall, Richmond officials adopted a balanced city budget Wednesday built on several assumptions and without any reserves.

While City Council members lauded staff members for near heroic work on the $96.8 million budget, nearly everyone realized city coffers are far from healthy.

"You have a budget document before you today that in my opinion exceeded all of our expectations in terms of its ability to bring forth a general fund budget that essentially balances but fully recognizes that there is still an accumulated deficit that needs to be contended with," said acting City Manager Leveron Bryant.

Among the problems city officials face is an $18 million cash deficit patched with a combination of one-time money, expected sales of some 38 properties, a waiver of the standard reserve requirement and other moves.

The plan also reduced a $21 million deficit in city special funds to $10 million, Bryant said.

But the plan pushes a $6.6 million starting deficit forward into the 2005-06 budget, officials said.

"This coming year we still expect to experience problems related to cash flow, shrinking revenues, increased benefit costs," Bryant said. "We need to continue to work to control our labor costs. We need to rebuild to prudent reserve levels and, of course, we need the council to continue to work together as a unit to support the overall goals of our financial recovery strategy."

"We have a very, very long ways to go," said Councilman Gary Bell. "No one is trying to communicate that by balancing the budget this year, we have resolved the problem."

Richmond also may run out of cash in its bank accounts by October to pay regular bills, such as employee payroll, finance director Patrick Samsell said.

A solution to the short-term cash flow problem relies on a bill pending in Sacramento that may allow Richmond to sell $14 million in notes to be paid back with property tax revenues.

The state Senate agreed to reconsider the bill if the Richmond council put a proposal on the November ballot to reduce the size of the council by two seats.

While Senate Republicans wanted it to become effective immediately upon voter approval, the council Tuesday night put before voters a measure effective in 2008.

If the bill is not resurrected this week, Bryant recommended the council work diligently to have new legislation introduced in the fall when the Legislature returns.

Councilman Tom Butt enumerated many shortcomings in the budget, ranging from its lack of reserves and capital spending to any discussion of benefit cost-sharing by city employees.

"I have to say that, in my opinion, this budget is all show and no substance. If the object was to ... convince the financial community that the (budget deficit) problem has somehow cured itself, I think it's an abject failure," Butt said.

Bryant bristled at Butt's comments, saying, "I have to reject the characterization that this budget was put together with smoke and mirrors. This is the most conservative budget I have seen in all my years with the city."

Mayor Irma Anderson chastised Butt for his harsh assessment, saying such sentiment hurt the city's search for a permanent city manager. "When you talk about smoke and mirrors, you don't encourage people to come."