Cost savings

Part I
As members of the City Council we take our fiduciary responsibilities very seriously. We have been working diligently over the past three years to decrease operating expenses and promote sound financial practices. Recent inquiries and events have led us to the realization that we have not been effective in communicating our efforts to the public. The purpose of this letter is to provide clarification and a brief summary of our actions to date.
It is important to begin by stating that a combination of factors has led to our fiscal challenges. National and state economic conditions have impacted local spending resulting in decreased sales tax and transient occupancy tax (TOT) revenues. Property values have decreased leading to a corresponding decrease in property tax receipts. Perhaps the most notable blow to our revenues is the state “raids” that have redirected revenues away from city coffers, most recently the dissolution of redevelopment agencies. All of these dynamics, coupled with inflation, have affected the budget.
Not all operating funds have shortfalls. The Enterprise funds, including Community Services, Water, Sewer and Electric are balanced. While not meeting recommended capital replacement and reserve requirements, it is anticipated the pending utility rate increases will ensure the health of these funds over the next four years. The current strength of these funds is a direct result of the Council’s implementation of rigorous financial planning.
The general fund is most problematic, primarily due to its revenue sources and the issues cited above. A deficit is projected for the current and upcoming fiscal years. However, we are moving forward with a comprehensive strategy that we believe will strengthen the City’s financial position. This strategy includes a combination of revenue enhancements and budget reductions designed to ensure funding for the City’s core services. Examples of the application of our strategy follow.
Past actions of the City Council
1. Staff reductions. Through a combination of attrition, layoffs and the elimination of vacant positions the City’s workforce has been reduced by 18%. The City has gone from 137 full time and 20 part time positions to 113 full time positions and 16 part time positions today. Additional layoffs are anticipated for the FY 12/13 budget.
2. Employee concessions. There have been no cost of living raises for civilian employees since 2007 MEA and Mid-management members and 2008 for IBEW members. In FY 09/10 the City Council successfully negotiated new contracts with three bargaining units and management staff to reduce benefits. All non-safety employees are paying the 8% employee share of the PERS contribution. In addition, these same employees are contributing 10% toward their medical premiums and have six unpaid furlough days per year. Savings from the contract effective dates through the end of this fiscal year are estimated at $651,459.
Police members have not had a cost of living adjustment since 2008. In 2010 police association employees began paying 8% of the 9% employee share of the PERS contribution, providing an estimated savings to date in excess of $110,000. Fire employees are contributing 2% of the 9% employee share of the PERS contribution.
Audited numbers FY 08/09 compared to FY 10/11 depict a total savings in employee salaries and benefits of $2,158,575.
3. Operational modifications. Staff has been creative in cutting operational expenses and maximizing miscellaneous receipts. Budgets for services and supplies have been reduced through a variety of mechanisms: centralized purchasing, reuse and recycling of materials, reduction of inventory and renegotiated contracts with suppliers and consultants. Surplus vehicles and equipment have been auctioned, generating sales proceeds and reducing overall fleet maintenance costs.
4. Revenue. The City Council authorized an audit of TOT receipts. Audit results indicate substantial compliance, but did reveal some calculation errors. While one case remains outstanding, the resolved cases have recovered over $143,000.
Gary Plass is Healdsburg’s 2012 Mayor and Tom Chambers was the Mayor in 2011 when many of these changes were implemented. Part 2 will be printed next week and will include the actions the city is taking to address additional future cost savings. Both parts can be found on the Tribune’s web site at www.hbgtrib.com.