Layoffs, Cuts to Service Likely as City Faces Growing Deficit

Petaluma’s City Manager painted a grim picture of the city’s finances at Monday’s council meeting, prompting a unanimous decision to move ahead with $4 million in cuts, which will likely mean some combination of layoffs, reduced hours and higher employee contributions to healthcare and pensions.

“We are faced with the decision between the unthinkable and the real awful,” said Mayor Dave Glass. “We’re staring down the barrel of a gun.”

Petaluma is facing an estimated $2.3 million deficit next year, largely due to dwindling sales and property tax revenues. If the deficit is not addressed, it will balloon to $15 million in the next three years, according to City Manager John Brown, impacting the city’s credit rating and further depleting the city’s reserve fund.

As many of 18 people had expressed interest in taking the city’s early retirement offer, known “golden handshake” in which staff get a two year credit toward their retirement, but so far no one has stepped forward to sign up, said Councilman Gabe Kearney.

“The more people that take the golden handshake, the less people we’ll have to lay off,” Kearney said, stressing that the cuts should not be delayed any longer. “Although they may be drastic, we need to make them this year and not drag it out over the course of two years.”

Other council members stressed that the city’s reserve fund—essentially a piggy bank for emergencies such as floods, earthquakes and other unforeseen situations—had to be replenished. It’s currently at 1 percent, although 15 percent is typically recommended.

“One percent of reserve is kind of like running your car with the gas tank always on empty,” said Councilmember Mike Healy. “You can go to the gas station and buy a gallon of gas and nurse it along and then go to another gas station to buy another gallon of gas.”

Healy said all options had to be considered, including higher employee contributions to healthcare, pay cuts and reduction in work hours in order to avoid serious layoffs. He said that faced with a similar financial situation, city employees in neighboring Cotati agreed to a “significant pay cut in order to reduce the deficit.”

The decision to shave off expenses means that the city will now enter into negotiations with the five city unions, including police, fire, midmanagers and city employees.

Currently, two thirds of the city’s expenses are spent on salaries.

But in a recent letter, AFSCME, the city employees union, said that employees have already agreed to salary cuts in the form of furloughs for the past 18 months and cannot take further salary cuts, while increasing workloads.

Reached by phone Tuesday, president of AFSCME Deborah Padovan would not comment on impending negotiations and said that city employees already pay 5 percent toward their healthcare premiums.

Meanwhile, Councilwoman Theresa Barrett suggested that the city look at joining police and fire departments or contract with the county on various services such as Animal Control.

“We have to look at providing services in a regional way…and stop trying to provide services on a city by city basis. It’s just not a workable business plan. We don’t have the revenue for it.”

Barrett also pointed out that since police and fire salaries comprise about 80 percent of the city’s payroll expenses, that’s where the cuts have to come from.