City financial crisis looming
Wendy Alexander/The Madera Tribune
Jenika Barajas, 11, is joined by her sisters, Alezandra Barajas, 8, and Elisha Montoya, 6, as she uses one of the computers at the John W. Wells Youth Center. The center provides a variety of activities and services for the youth of Madera and could be affected by city budget cuts.
Hoping to get ahead of a looming financial crisis, the Madera City Council soon will be making some difficult choices — between funding city services and maintaining infrastructure. Reductions in city staff and city services are probably unavoidable in the near future.
Longtime city administrator David Tooley said the city had just been informed that its premiums paid for employee retirement benefits through the state Public Employees Retirement System (PERS) would increase significantly, and though the crisis had been building for some time, the city was not source of the problem.
“One of the largest financial challenges the city is currently faced with can be found in its largest recurring monthly expense, employee compensation,” Tooley said. “The City Council was recently provided projections demonstrating that retirement costs will increase by 68 percent between now and the year 2022. The city’s revenue, much like a regular household income, is unlikely to grow fast enough to cover this increased expense. An annual growth rate of almost 14 percent would be necessary to keep pace and that isn’t going to happen. Every city, county, and special district in Cal-PERS — the California Public Employee Retirement System — is faced with this challenge.”
Increased retirement contributions have recently been a major factor in forcing some cities into bankruptcy, like Vallejo, Stockton, Mammoth Lakes, and San Bernardino, Tooley said, though Madera is nowhere near that fiscal cliff.
The huge California Public Employee Retirement System has long been criticized for alleged mismanagement, poor investment decisions and other problems.
“While Madera’s immediate financial position today is sound due to prudent planning — we’ve maintained a ‘rainy day fund’ of over $13 million, the next five years will present very, very significant challenges.” Tooley said. “Each dollar we need to spend on increasing retirement costs is a dollar less we have available to spend on the services the community wants. Simply put we’ll be able to afford fewer people and fewer facilities over time, and every service currently provided by the City will be impacted in one way or another.”
Tooley said city staff members and the City Council were currently reviewing all options, including layoffs, reorganizations and buyouts. He said early retirement bonuses of up to $25,000 will soon be offered. All newly hired personnel already have a different and reduced pension structure and will contribute more of their own dollars toward their pensions, he said.
Critics claim senior city staff is overpaid, with most long-term department heads making six figure salaries and benefits, according to salary information published on TransparentCalifornia.com and that these amounts are out of touch, with the median household income of most Maderans being around $47,000, some $17,350 less than that of the state at large. Individual incomes are under $18,000 annual on average.
On the flip side, Madera has often been lamented as being a “training ground” for new hires and has long lost experienced and competent personnel to other cities and counties paying higher salaries.
New laws and court decisions pending at the state level could also change the way that existing public employee retirement benefits are provided in California, according to Tooley, but that is uncertain and may not happen anytime soon.
“Some relief may come in the form of pension reform. It’s important to understand that our employees didn’t create the challenges we’re facing; they were hired into jobs with a retirement system they didn’t select or design. Nevertheless, if pension reform occurs, retirement benefits could very well decrease and public employees will may pay more out-of-pocket for the fringe benefits they receive. If it occurs, relief from the state may be several years away. Until that relief is received, the City of Madera, and many if not all of those (cities) enrolled in the Public Employees Retirement System will be seeking to reduce their operating budgets,” Tooley said.
Residents will likely see longer lines at service counters and or cuts to recreational and other programs, he said, but the more significant effects could be on the impact on maintenance of city infrastructure.
Hard choices lie ahead, but the adjustments to the city’s budget are doable and have to be made, according to Tooley, and sooner rather than later.
“Less noticeable but just as important are reductions in the amount of resources available to properly maintain city infrastructure and facilities,” Tooley said. “Streets, parks, highways, sewer and water systems … like taking care of your house, your car, or anything else that breaks down, the longer you wait, the more expensive getting those assets back on track becomes. History has shown that cities, counties, states, and even the federal government have not performed well in finding ways to allocate the funding necessary to properly maintain this kind of costly public infrastructure. Lack of funding for infrastructure has been an issue for over 40 years ... and gets worse every day.” he said.
Police and fire protection are not at risk of cuts, Tooley said, and the city is moving forward in those departments, thanks to the very timely passing of ballot Measure K, the public safety sales tax increase passed by voters in 2016.
“Last year,” said Tooley, “Maderans provided an 80 percent positive vote for Measure K, a sales tax measure in support of public safety. Measure K is both a game changer and an important financial safety net for public safety at a time other services may be cut. In the first incomplete quarter of collection last fiscal year, the City collected approximately $700,000 and anticipates collecting $3.5 million this fiscal year. Funds have been used entirely to hire 15 additional civilian and uniformed police professionals and in funding a new fire station (currently in design) to be constructed in the northern end of the city. A new 109-foot ladder truck has already been ordered using a separate funding source. Once the new fire station is operational, our fire services will see dramatically reduced response times, four minutes or less, for a vast majority of the City.”
New business developments currently underway could also help with increased sales tax revenues.
“Because there will never be enough money for all the things we want or need, our elected decision makers are going to face tough choices,” Tooley said. “Does Madera replace aging infrastructure, or do we fund immediate service needs like public safety or parks programs? Madera is going to have to carefully prioritize how it spends. Near or at the top of any municipal priority list is public safety.”
The next meeting of the Madera City Council is Oct. 18 at 6 p.m., at 205 W. 4th St. The public is invited to attend.