First time since recession where no departmental reductions called for

There are a few pieces of good news in the 2015-17 “status quo” General Fund budget Benicia City Council will see Tuesday night.

In a joint report written Wednesday, City Manager Brad Kilger, Assistant City Manager Anne Cardwell and Finance Director Karin Schnaider said the city’s revenues are increasing at 1 percent, “a very moderate rate.”

The proposed budget “will allow the city to continue providing existing services,” the trio wrote. It is the first budget since the recession in which departments were not “recommending reductions to maintain the city’s General Fund reserve policy of 20 percent over the course of the two-year budget cycle.”

Property taxes are increasing at about 3.3 percent year over year, and that may improve as the housing market recovers, they wrote. Franchise fees also have improved, by $300,000, primarily through Pacific Gas and Electric’s increase in gas fees.

And the city will get a one-time revenue boost of $1.2 million, half from a one-time Board of Equalization payment that comes from a prior period audit and the balance from the end of California’s “Triple Flip.”

The “Triple Flip” is a system employed to repay Economic Recovery Bonds through a complex series of revenue exchanges affecting local governments, school and college taxing districts and exchanges of various one-quarter sales taxes designed to keep those districts from losing revenue.

Current law requires conclusion of the “Triple Flip.” The 2015-16 Governor’s Budget transfers from the state to local governments amounts equal to how much the sales tax will generate during the first two quarters of that fiscal year. For Benicia, that’s about $600,000, the report said.

That’s some of the good news. But other information has kept city officials cautious in planning the next two-year budget, expected to be adopted and in place by July 1.

Impact from the Measure C 1-cent local sales tax increase isn’t known yet, the three wrote. The current budget draft includes the original estimate of $3.7 million; the Council previously earmarked $2 million for capital needs and $1.7 million for ongoing operational needs as an approach to reduce the city’s structural deficit.

However, other sales tax news is disappointing.

“The city’s overall sales tax revenues are continuing to shrink, primarily because of the Benicia Industrial Park,” Kilger, Cardwell and Schnaider wrote. “The proposed budget continues this downward trend. However, it is unknown how much of this downward sales tax trend will impact the local sales tax portion coming from Measure C.”

As they continue to track trends and revenue, city employees will make regular reports to the Finance Committee and the Council as soon as information is received, the three promised.

Another concern is spending, they wrote.

In contrast to the overall 1-percent increase in revenues, expenditures continue to rise at 1.7 percent each year.

The fiscal year that ends June 30 is expected to show revenues of $32,063,536. A year later, revenues are expected to reach $35,802,530, and by June 30, 2017, they should be $35,773,492, the report estimated.

Expenditures at this fiscal year’s end should be $33,926,505, with outgoing transfers exceeding incoming by $344,025.

The fiscal year ending June 30, 2016, is estimated to have expenditures of $36,062,959, with transfers out beating transfers in by $369,920. The June 30, 2017, year’s end will see $34,555,315 in total General Fund expenditures, with transfers out — including debt and capital — exceeding transfers in by $369,920.

In the upcoming two-year budget, city departments presented the costs of providing core services, and proposed changes only when required by contracts or when services would be affected, the three wrote.

“For example, the Information Technology department renegotiated expired service contracts for fiber, and will require $50,000 to continue providing Internet services to all locations,” they explained.

Updating the public library catalog services with Solano County will cost $40,000 during the two-year budgetary period, they wrote. “These contracts maintain the city’s existing core services,” their report said.

Only two more positions would be added to city staff, they wrote. Tthe Council already has authorized those additions: a senior planner and assistant public works director, two formerly frozen positions. Some other positions may be reclassified, but those changes shouldn’t affect the budget, they wrote.

Among other changes are increasing the California Public Employes Retirement Service (CalPERS) for safety employees by about 6 percent and nonsafety employees by 2 percent.

“These cost increases are offset in Fiscal Year 2016-17 as the Pension Bond Obligation payments are structured to decrease,” the three wrote.

Kilger’s departmental budget includes a $200,000 information technology increase for contracts and equipment, and the Economic Development Division budget calls for another $150,000 to tackle Phase II of the Business Development Action Plan. The latter increase may be covered by billboard revenues, the three wrote.

The proposed budget has decreases in non-departmental areas based on capturing cost allocations from Water and Wastewater funds. However, the Council will be examining those funds closely at a future meeting.

The report said the $1.2 million one-time General Fund income should fund Enterprise Resource Planning System (ERP), a citywide computer software system that will modernize the way Benicia handles its financial recording and reporting; for consultants to respond to a state order to clean up toxic waste from the Benicia Arsenal; and to engineer a remedy to past storm claims in the vicinity of Saint Augustine Drive.

Some other core projects also will be included in the draft of the two-year budget, because the Council has told staff to proceed with them, because action is mandated or because it’s something a department can do with existing money and staffing. Among those are updating Benicia Public Library’s cataloging system.

One project that remains to be funded is contracting with the firm PMC for a Climate Action Plan coordinator and support staffing.

The community Sustainability Commission proposed March 16 to keep Alex Porteshawver as the CAP coordinator, a job she has had since 2012. However, she has left Sonoma State University, which originally landed the contract, for a position with PMC.

The CSC has recommended keeping her on board for two years and has offered to fund her first year with $155,040 in Valero-Good Neighbor Steering Committee settlement money and provide $100,078 from the same source toward her second year.

The report recommends the Council consider that budget item for additional discussion.

Lower-priority projects weren’t included in the proposed budget, the three wrote.

Though reserves slip to 18.82 percent in Fiscal Year 2015-16, by 2016-17 they should be at 21.21 percent. Reserves are supposed to remain at 20 percent of a year’s anticipated revenues.

But to keep those reserves at status quo, the city will need to correct its structural deficit by cutting spending or increasing income, because expenditures are outstripping revenues, the three warned.

To do that, city employees are developing a Sustainable Community Services Strategy that will get public airing and Council review some time after the budget is adopted.

Kilger, Cardwell and Schnaider wrote that they would ask for Council concurrence of the proposed budget, in particular their recommendations for spending the one-time General Fund money.

The Council will meet at 7 p.m. Tuesday in the Council Chamber of City Hall, 250 East L St.