Grim Five-Year Fiscal Forecast Prompts Early Planning for 2016-17 Budget


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Richmond could be nearly $40 million in debt by 2021, an independent financial consultant told City Council at a presentation of the city’s five-year financial forecast on Tuesday. 

The news of financial troubles ahead could be improved, according to the consultant, if the city makes hard decisions now to align expenditures and revenues — an approach the city appears prepared to take. 

“Like a lot of cities nationally, Richmond has been scrambling to maintain services with budget cuts,” said Russ Branson, a senior management consultant with Public Financial Management who presented the five-year financial forecast. “The fight is not over yet.”

Branson’s firm, in partnership with the National Resource Network, an organization dedication to helping cities overcome various challenges, spent the past few months surveying Richmond’s finances in the current economic climate to identify areas of concern and where there is room for improvement. 

Among the key issues identified were volatility of the city’s general fund revenues over time, anticipated significant increases in CalPERS, significant overtime pay for city employees, and revenues that failed to keep up with expenditures. 

Without any salary increases, the city would have a $22.7 million deficit by 2021, a number which would jump to $39.4 million if the city sets aside the recommended 10 percent for reserves.

If the city grants an average 1 percent salary increase, the base deficit would be $35.2 million by 2021, and could be $52.4 million if the city sets aside the 10 percent for reserves.

Setting the city on a corrective path will be a challenge, Branson explained. For fiscal year 2016-17, Richmond needs to increase revenues by 7.6 percent to balance the budget. Additionally, the city will need a reduction in expenses or increase in revenues of $8.7 million annually. 

The consultant recommended the city consider cut funding for public art, reduce overtime by 25 percent, and eliminate a number staffing expenses, including reducing a workforce that has already been slashed by 27 percent since 2007. The various cuts would save the city $14.7 million in the next fiscal year’s budget.

Adding pressure to the conversation was Branson’s acknowledgment that the United States is closer to the next recession than the end of the last one. The US has seen 78 months of growth, while the average cycle is a little longer than 58 months.  

“The city has some hard choices to make in the next year, and it’s important to make them soon,” Branson said. “The next six months could lead to increased stability or distress.”

The five-year forecast came after a presentation from Richmond City Manager Bill Lindsay, in which Lindsay outlined a number of one-time revenues which would supposedly put the city on a strong financial track in the future. The two varying pictures of the city’s finances was reminiscent of a recent conversation at a meeting of the Richmond Heights Neighborhood Council in which Lindsay and Councilmember Pimplé sparred in their assessments of the city’s financial situation. 

At the end of Branson’s presentation, Mayor Butt emphasized that this would be just the first conversation on the city’s finances before next year’s budget is approved in June 2016. 

“We’re going to have a major discussion of fiscal issues at least once a month,” Mayor Butt said. “This is not the end, this is just the beginning.”

The monthly conversations ahead of the fiscal year 2016-17 budget is a shift from years past, where initial budget discussions happened mere weeks before the budget was to be approved.

“These conversations will get more detailed and get more contentious as the months go on, and hopefully we’ll hang in there and get through this together,” the Mayor said.

No decisions were made regarding the city’s budget during the conversation on Tuesday, though it is expected that many difficult decisions will be hammered out in the upcoming monthly discussions.

 

Photo: Slate

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  • commented 2015-12-18 10:26:38 -0800
    I attended both City Council meetings regarding the “hidden” Five-Year Plan produced by Jim Goins (and his staff), and this recent CC Meeting where Mr. Branson presented these bleak numbers. City Manager Bill Lindsay claims he didn’t release the 13/14 Five-Year Plan to the public because it, for some reason, didn’t meet his expectation (despite the fact that the entire format was nearly page-for-page identical to the previous year’s report that the Council DID adopted). Despite the identical format, the numbers of the ensuing year’s budget projection was that each ensuing year ran deeper and deeper in the red.

    In comparing the numbers between the adopted Plan of 2012 and the couched plan (that was obtained by Richard Poe through the Freedom of Information Act—which required continual prodding because City Staff denied its existence); the trajectory of the two Five-Year Plans was off approximately $50M by year five.

    The last Five-Year Plan (produced by City Finance head Jim Goins and staff, yet hidden by Lindsay) mirrors the numbers of what was presented by the National Resource Network on Tuesday night….an approximate negative ($50M) swing. This raises suspicion as to Lindsay’s ulterior motive(s).

    So, there is much more of a story here than just the “couched” five -year budget projection: Hiding these numbers for the past 3 years AND having to prod city legal to abide by the Freedom of Information Act is just the smoking gun. Why are we hiding negative budget projections? Could the timing be in sync with trying to qualify for a $30M non-asset bond, simply to pay for past pensions created SOLELY from budgetary mismanagement? (i.e. We’ve mismanaged funds, but we need SOME ONE to pay for it, so let’s put it on the homes of the citizens if the form of a line-item tax on your property tax bill! How’s THAT for a Carte Blanche credit card: Go look at your tax bill).

    The desperate One-Time-Funding money grabs by this city, along with the usurped Measure U funds (which now is bordering on voter fraud) are painting a much larger, more bleak picture. If we don’t get to the bottom of it, we will be faced with another Bell, California.
  • commented 2015-12-17 18:38:01 -0800
    Thank you National Resource Network for presenting a clearer picture of Richmond’s financial situation, dire as it is. This is something Richmond City official have not done (in decades), instead they deceive and mislead the public as they waste and mismanage taxpayer dollars. Unfortunately based on the City officials current actions, I see no change from our current City Council, Manager, or other City officials, unless by force. With a State audit looming, hopefully the State will see what many of us have seen for years, mismanagement, neglect, incompetency, and perhaps fraud. So I say bring on the force and help us get rid of anyone of authority responsible for our current situation,
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