A severe cash crunch has sent the City of Berkeley scrambling to find ways to stay afloat in a tough economy, including a two-year rescue plan whose blueprint City Manager Phil Kamlarz presented to the City Council Tuesday.
The city also unveiled a strategy to balance its refuse collection budget which some councilmembers described as being merely a “band aid” on a looming disaster. When Berkeley raised its collection rates by 20 percent last year, many residents switched to cheaper smaller trash cans, but Kamlarz said the city might raise rates again to combat the current deficit.
At a press briefing Monday morning, Kamlarz reiterated what he had already told council at their March 9 council meeting, that the city was facing a $14.6 million deficit for the fiscal year beginning July 1 because of the recession, loss of state funding, a decline in property and sales tax revenues and change in the use of city services.
The city’s total budget is $350 million, of which half is made up of the General Fund and the other half from revenue and other funds. The most drastic shortfalls include $6 million in the General Fund, $4 million in the refuse fund and $2.7 million in public health funds, Kamlarz said.
Mental health funds will also be cut quite a bit, he said. That report will be presented to the council April 20.
“And all that’s before the state deals with the $20 billion deficit,” he said.
Kamlarz called the current financial slump the most serious he had seen in his 35 years working with the city.
“Most of the time we come back quickly, but not this time,” he said.
In 2008 the city received $16 million in transfer tax revenue from property sales, which decreased to $8 million last year and will stay at that number this year.
“Our home prices have remained essentially flat,” he said. “Sales taxes have also remained flat. Everything else doesn’t have any growth at all.”
One possible bright spot, Kamlarz said, was the hope that the new Health Bill which was signed into legislation by President Barack Obama Tuesday, would help the city’s Health Department over the next four years. “All the people who were not covered will now be covered,” he said. “We’ll have to wait to get more details.”
The city’s clean storm water fund is also suffering from a $0.9 million deficit. For this, the city’s Budget Manager Tracy Vesely said they might have to turn to voters to fund day to day operations.
Another depressing area is the $6.1 million shortfall in affordable housing needs because of limited Housing Trust Fund resources coupled with increased demands, Kamlarz said.
The council voted Tuesday to extend the $1.4 million Housing Trust Fund allocation for the proposed Ashby Arts affordable housing project at 1200 Ashby Ave., which makes the future of other low income housing projects in the city rather uncertain.
The Ashby Arts project is currently stalled because of the economy, but project developers CityCentric along with non-profit partner Bridge Housing promised to kick off construction by the end of the year.
The city’s permit service center—whose revenue funds the Planning Department—is also operating at an annual deficit of $1.1 million.
“Building activity is down, we are not seeing a pick-up,” Kamlarz said, adding that the Planning Department had stopped filling any vacancies for a while now.
Balancing measures for 2011 include $10.8 million in cuts, $2.3 million in new revenue and slashing 67 positions, half of which are vacant.
Public safety will see minimal cuts, Kamlarz said, with three vacant police officer positions in the Berkeley Police Department getting eliminated.
However, the Public Health and refuse departments are likely to see more cuts, he said.
“We are trying to see if [employees of these departments] can be placed in other vacant positions,” Kamlarz said. “These are challenging times. We’ll probably have 130 less staff people over the next two years to help us figure out our priorities. We can’t put new items on our list unless we eliminate existing projects.”
Recurring cuts are expected to balance the $4.8 million budget deficit in 2012.
Another fast approaching problem for the city, Kamlarz said, is the rise in the California Public Employees’ Retirement System fees for Berkeley in 2012 and 2013.
The rate was low in 2003 and 2004, Kamlarz said. “Then all of a sudden the market tanked and people retired early,” he said. “We had a lot of retirements. Costs have gone through the roof.”
Refuse fund balancing plan
Although Public Works Department Director Claudette Ford detailed several ways to avert an impending catastrophe in Berkeley’s refuse fund, the majority of the councilmembers were far from happy.
“It’s sad we are at a City Council meeting on TV with this document,” said Councilmember Kriss Worthington. “It’s something not ready for prime time. There are many controversial problems.”
Suggestions of rate increases, cost reductions and almost $6 million in loans from other city funds for a two-year quick fix were only greeted with lukewarm responses such as “band aid,” “a goal without a plan,” “a wish.”
For fiscal year 2011, the city is proposing to increase enforcement to make sure every property pays for garbage service, to pursue new commercial accounts and to implement a regulatory fee for recycling.
Street and graffiti cleaning could be slashed by $187,000 and the city’s transfer station might be closed on non-productive holidays.
The budget balancing plan, which will have to be approved by the council first, would also reduce the number of workers on each garbage collection truck from two to one, bringing in an estimated $929,000 in savings.
A total of 15 new automated trucks for residential garbage collection would cost $3.75 million over two years.
Every city in Alameda County except Berkeley has one person on these trucks, Kamlarz said.
Solid Waste driver and Local 1021 union member Ricky Jackson told the council that one-person trucks might make collection routes less efficient.
“We got the proposal last week, we would have liked to have more input about this structure because we are the ones that pick this stuff up,” Jackson said. “We are in full agreement in trying to make the city as efficient as possible, but with the terrain we have to travel it’s not possible to use side loader trucks.”
Ford explained that the city would be buying automated trucks which would not have a side loader feature.
Spending millions for new trucks “could be wonderful and great, but given the problems we have had for years with equipment—in some cases we have auctioned them off—should we buy vehicles in return for sacrificing citizens’ jobs?” asked Worthington, whose statement was greeted with cheers and applause from the audience.
Fiscal year 2012 might see new franchise fee agreements worth $250,000 and a review of the entire rate restructure.
Between fiscal year 2010-2012, “we have proposed $5 million in balancing measures,” Ford said.
“It’s not the best way to do it, but it’s a way,” Councilmember Gordon Wozniak said of the balancing plan.
Some councilmembers commented that the city should have studied its Zero Waste plan more carefully because although it had led to less trash, it had also generated less revenue.
“If our goal truly is zero waste it means I am not going to have a garbage can anymore,” said Councilmember Laurie Capitelli. “It means I don’t want to pay $28 anymore—so who’s going to pay for the people who go around picking up the rest of the garbage?”
Councilmember Susan Wengraf said she’d like to see a six-year plan.
“I don’t think dealing with the plan on a year-to-year basis will get us where we want,” she said.
Kamlarz told the council that it had been forewarned last year that the economic downturn was having a “hard impact on the refuse fees.”
“It’s a band aid, but no matter how you look at it, you have to close a $4 million gap,” he said.
The council is scheduled to adopt the budget on June 22.