City's hands tied by budget City's hands tied by budget (April 21, 2004)

Officials' focus is making financial ends meet

by Bill D'Agostino

Palo Alto is "just trying to get by" as an economic recovery continues to elude the city, City Manager Frank Benest said last week.

A first draft of Benest's proposed 2004-2005 budget is scheduled to be released this week. The City Council's Finance Committee will begin budget hearings on May 4.

Those hearings are not likely to be as controversial as last year, unless the council chooses to take up the mayor's recent challenge to spend more on repairs to city infrastructure.

Regardless, city officials are still struggling to get stagnant revenues to meet expanding expenses.

"We're not adding any programs, we're not adding any staff -- we're just trying to get by," Benest said.

Last year's shrinking finances produced tense budget hearings as the City Council struggled to permanently cut $10 million in spending. Community protests stopped the council from slicing the city's libraries, art center and children's theatre budgets.

One branch library was closed and many special events were cut last year as the city balanced its budget in the face of declining revenues, a result of the bust in the local economy.

Much of the city's deficits in the past two years were made up through attrition, as nearly 40 retiring or departing employees were not replaced, and the city restructured around the vacancies. That strategy continues for next year's budget.

Last week, city officials were expecting to include a mandatory second year of furloughs (three unpaid days off) for most employees, even though the city's largest union had not accepted the proposal.

"Let's put it this way -- we're not really happy about the idea of reductions in our salary, which is what a furlough is, but nothing is set in concrete," said Maya Spector, the chair of the city's Service Employees International Union chapter. The SEIU organizes the lowest-ranking city employees, from librarians to utility workers, and is currently negotiating a new contract with the city.

The proposed furloughs will save the city approximately $1 million. In return, Benest will not recommend layoffs to the City Council.

There will be some minor proposed cuts to city services "around the edges," Benest said. "But nothing dramatic."

It was unclear whether those reductions would really have the minimal impact -- both practically and politically -- that Benest suggested, especially since he alluded to an additional $1.4 million in cuts that have yet to be outlined.

Some proposed changes have already been implemented: the deputy community services director was not replaced when Richard James, who held the position last year, was promoted to the director position.

Next year's revenues are projected to stay close to this year's expectations, and city financial officials are not expecting an economic recovery to hit Palo Alto anytime soon.

Sales tax dollars -- the largest source of Palo Alto's income -- is expected to rise slightly, from $17.4 million to $17.8 million.

Meanwhile, employee benefit costs are expected to skyrocket. For instance, the city's contribution to its employees' retiree medical plan is expected to jump 88 percent -- from $8.4 million to a projected $15.8 million.

If the City Council wishes to make more improvements to the city's old and ailing infrastructure next year, additional cuts to services would also be needed, Benest added.

"I've got a big bag of tricks, but there's really not a lot left in the bag," Benest said.

Mayor Bern Beecham made the city's infrastructure a priority for his term as mayor during his state of the city address on March 8. The $73 million earmarked for replacement projects over the next decade "is insufficient to maintain the parks, streets and facilities that comprise our city's half billion dollars in material assets," Beecham warned.

The city is also concerned about more than $1 million the state is expected to take away from Palo Alto. City officials are actively promoting a November ballot measure that the California League of Cities is promoting. The measure would prevent the state from taking away local dollars when they need funds.

"That will take care of this problem," Benest said. "We're just fed up."

Bill D'Agostino can be e-mailed at bdagostino@paweekly.com

E-mail a friend a link to this story.