Taxpayers — and those paying fees for a variety of Manteca Parks & Recreation programs for youth and adults — will pay the price for California’s moving toward a $15 an hour minimum wage.
The rising minimum wage in responsible for a bulk of a projected $350,000 shortfall in the proposed municipal budget for parks and recreation for the fiscal year starting July 1.
“Minimum wage increases are hammering Manteca Parks & Recreation programs,” department director Kevin Fant told the Manteca City Council during a special meeting Tuesday.
Parks & Rec employs a small army of part-time workers earning either minimum wage or just above to staff before and after school Kids’ Zone programs, summer camps, teach swim lessons, officiate and operate youth and adult sports leagues, conduct fitness and arts classes, plus many more offerings.
Minimum wage is now at $12 an hour for the city given they have more than 26 employees. It jumps to $13 an hour on Jan. 1, 2020, then to $14 an hour on Jan. 1. 2021, and then reaches $15 an hour on Jan. 1, 2022. Minimum wage was $10.50 an hour in 2017.
If the council wants to avoid increasing program fees beyond what they were upped to in January they will either have to dip into projected reserves or push for another rate increase literally months after the Parks and Recreation Commission imposed the latest charges.
Fant termed the most recently imposed fee hikes as being an “extreme increase.”
Fant said it is a tricky dilemma. If fees are adjusted too high the city runs two risks. One would be participation could drop off significantly meaning revenues would plunge and the shortfall swell. It could also create a large number of unsupervised youth that no longer access structured programs after school or in the summer when their parents or guardians are at work.
Fant noted councils in the past have sought program fees that encouraged participation to avoid juveniles from getting into mischief.
Fant, in response to a suggestion by Councilman Gary Singh, noted the staff routinely audits programs and will drop those that lack robust participation.
While program fees for most city recreation programs are competitive with nearby cities, Manteca is in a league of its own when it comes to keeping expenses down as well as its efforts to recover most of the costs of staging recreation programs.
Nationally, cities recover an average of 28 percent of the cost of running recreation programs from the fees they charge. Fant said a survey of nearby cities indicated they recover 40 to 50 percent of program costs from charges to participants. Lodi, as an example, is at 42%. Manteca last year recovered 69 percent of the cost of running recreation programs from the fees they collected. It was much higher four years ago when it was at 86 percent. But that was before rising labor costs led by increases in the minimum wage started piling on operating expenses.
The projected $350,000 shortfall is in addition to $200,000 being budgeted as a general fund subsidy of recreation programs. The city for years has been supporting recreation programs at a $200,000 to $250,000 level annually to help keep rates low. That subsidy is much lower than the percentage of the cost of recreation programs that nearby cities provide.
In the past three years, as labor costs climbed, the city was able to tap into a Parks & Recreation fund balance at the end of each fiscal year to cover additional shortfalls that were being created by the rising minimum wage to the tune of $175,000 to $200,000 annually.
The fund balances were the result of staff keeping expenses down and finding ways to run leaner. At the end of the current fiscal year ending June 30, however, the fund balance is expected to drop to $40,000.
Finance Director Jeri Tejeda noted tapping into the fund balance to cover the recreation program shortfall meant eventually that money would be depleted. That could literally happen just months into the next fiscal year starting July 1.
If the council opted not to direct staff to increase fees for the second time in sixth months and opted instead to tap the projected undesignated reserves at the end of the current fiscal year on June 30 instead, it would leave $100,077 in that reserve fund. Overall, general fund reserves are projected to be at $22.7 million on June 30.
Those reserves for the most part are set aside for specific purposes. There is a $13.3 million fiscal stability reserve that is the equivalent of 25 percent of the general fund to buffer against economic downturns and emergencies. Other reserves are $2.2 million for pension stabilization, $1.3 million for capital facilities, $1.3 million for technology reserves, $2.5 million for economic development, $1.5 million for public facilities oversizing, and $77,985 in asset seizures.
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