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

Sean Pyles
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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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