Measure C to provide boost, panels will hear at special joint meeting

Benicia City Council and the city’s Finance Committee will see a 10-year forecast of challenges to the city’s fiscal future Tuesday during a special meeting of the two panels, Finance Director Karin Schnaider said.

Measure C, the voter-approved penny increase to sales tax collected in Benicia, will provide an economic boost, she wrote Wednesday in a report to City Manager Brad Kilger.

“However, the city still faces escalatino in operating costs outside of their control which are outpacing total revenue growth,” Schnaider wrote.

General Fund revenues are expected to increase annually at less than 1.5 percent, she wrote, but at the current rate, expenditures would increase at more than 1.7 percent each year.

“The reduction in city debt payments reduces some of this financial strain,” she wrote. But the forecast identifies some unmet needs that “have the potential to overwhelm the financial stability of the fund.”

The General Fund pays for city operations.

The forecast predicts that from Fiscal Year 2015-16 to 2018-19, the city’s revenues will narrowly exceed expenses, with little wiggle room should revenues fall flat or unexpected expenses increase city spending.

But the forecast anticipates shortfalls through Fiscal Year 2023-24, threatening to reduce the money Benicia has kept in reserve for emergencies.

Benicia gets about 49 percent of its revenue from property taxes and vehicle license fees. The rest comes from sales, utility user and business license taxes, franchise fees and other sources, meaning Benicia controls less than 85 percent of its income from those volatile sources, Schnaider wrote.

Much of that income is concentrated in the Benicia Industrial Park, she wrote.

Personnel expenses — salaries and benefits — make up three quarters of General Fund costs. Benicia has 210 full-time and about 155 seasonal and part-time employees, she added.

While the city can control salaries, pension benefit costs are controlled by the state through the California Public Employees Retirement Service.

Cities’ purchasing power for repairs and improvements also declines as time passes, Schnaider wrote, and the longer the city delays in making those repairs or in replacing worn-out equipment, the more costly those purchases become.

On the other hand, the city will be paying off several debts soon, she added.

The document the panels will see isn’t an answer to Benicia’s fiscal concerns, Schnaider wrote.

“The purpose of a long-term forecast is to help create a sustainable financial vision for the city,” she wrote.

“Budget forecasts do not remain static; it is a dynamic tool that allows for consideration of the most reasonable outcomes.”

Because of that, she wrote, the forecast will be updated annually.

Such a tool was a longtime desire of the Finance Committee. In past years, members expressed hope that the forecast would help Benicia gain the stability to avoid the financial surprises and economic ups and downs that upset formerly balanced budgets during the severe recession.

Consultant Management Partners presented the first 10-year General Fund forecast May 27, 2014, Schnaider wrote.

“As intended, staff has used this model to update the forecasts annually,” she wrote.

A sustainable budget and ending the city’s structural deficit have been goals of both Kilger and the Council, as well as other employees and advisers, Schnaider wrote.

The forecast includes assumptions that will form the groundwork for the city’s 2015-17 budget, which is expected to be adopted in June, she wrote.

“As staff begins the development of the next biennial budget, it is important to look ahead at the fiscal sustainability of the city’s General Fund. By doing so, the city will be better prepared to react in a fiscally responsibe manner to maintain a desirable level of service.”

The current version assumes Benicia would maintain the services it currently offers, she wrote, and will give both the public and the two panels a depiction of what might happen in Benicia’s fiscal future should nothing change.

However, the city is undergoing a complete organizational scan, and has been analyzing ways it can operate more efficiently in the post-recession economy.

Schnaider’s presentation Tuesday won’t include any proposed 2015-17 budget items, she wrote. Instead, it’s a document the city can use in strategic planning.

“There are limitations on what the forecast will be able to accomplish,” she wrote. “It cannot remain static, and not all future impacts will ever be known at any given point in time.

“The numbers presented in today’s reports have been vetted and considered with great attention.

“However, the economic conditions and assumptions will not all hold indefinitely.”

The special meeting between the City Council and the Finance Committee will start at 6 p.m. Tuesday in the Council Chamber of City Hall, 250 East L St.

A regular Council meeting, at which the city will see its annual audit, the Comprehensive Annual Finance Report, will start at 7 p.m. Tuesday in the same room.