Updated: City Unveils New Budget

This article was updated Monday 11:30pm

Amid decreased property taxes, stalled new developments and a still high unemployment rate, coupled with growing obligations for employee healthcare benefits and pensions, the city's new draft budget is a testament to the tough economic times facing not only Petaluma, but the entire country.

The budget was delayed by more than two months due to ongoing negotiations with the city's ten labor unions. It will be presented to the City Council at a special meeting Tuesday, Sept. 6 at City Hall, where councilmembers will have a chance to offer feedback on the document.

The city’s general budget this year is $32 million, a reduction of about $1.3 million from last year and $17 million from four years ago. The budget does not call for any more layoffs—at least not immediately—but according to projections will result in a deficit starting 2013.

That deficit of $614,000 is expected to increase to $1.1 million the following year, unless the city lays off more people or generates new revenue.

“It’s lean and has been sliced all the way down,” said Mayor Dave Glass about the new budget. “I’m happy with it from the standpoint that it achieved balance this year (2011-12), starts to restore some reserves the following year that will be applied to the challenges in the out years and at the same time it allows us to continue delivery of vital city services."

Mayor Glass said the deficit projections starting in 2013 are based on conservative estimates and don’t include revenues that would be generated by the Target-anchored Regency or Deer Creek Village developments. Deer Creek Village has yet to be approved and the Regency project is temporarily stalled following Planning Commission’s to change the size of some of the buildings.

Not surprisingly, the biggest expenditure in the budget is for employee pay and benefits, which make up 81 percent of the total expenditures, with three fourths going to pay for police and fire. 

Adding to city expenses will be the end of the 18-month salary decreases or “furloughs” that were implemented in January 2010 along with increases in health and retirement benefits. For example, the city will have to contribute more to employee pension accounts—4 percent more per year for all safety employees and 2.5 percent more each year for all non-safety employees—to make up for a decline in the rate of return in the stock market.

The city will also have to pay an annual nine percent increase for health benefit increases. Together, these amount to $745,000 on an annual basis and total $2.3 million through 2014-15.

Cuts will be likely unless more revenues are generated. About 23 percent of city revenue comes from sales tax and another 26 percent from services and sales charges such as for permits and fees. 

“In the current economic environment, revenues cannot keep pace with personnel costs, a situation that is not sustainable without cost reductions having long-term effect,” wrote Brown in his budget message to the council.

The draft budget will be presented to the City Council on September 6 at 7pm. The council will then vote on the budget on September 12.

What do you think of the proposed budget?