Turlock offers a cautionary tale that both Manteca city employee bargaining groups and municipal leaders —elected and otherwise — should take to heart.
It also should be must reading for those Manteca residents who demand the city turn on the spigot for spending more money to increase spending without either an equal amount of increased revenue from existing sources or a new tax in place.
Turlock is now going through a painful budget process that is more reminiscent of the dark days of the Great Recession back in 2008 than one that is in alignment with the current strong economic conditions.
In order to avoid skidding into the financial abyss, City Manager Bob Lawton has prescribed a pill to nurse Turlock back toward health that many are finding too bitter to swallow. The most high profile impact of that pill is a strategy to end firefighter overtime that would require “browning out” or closing one of the city’s four fire stations at least a third of the time. It also involves eliminating 17 positions by not filling 15 spots that are currently vacant and laying off two other workers.
If that sounds uncomfortably familiar that somewhat mirrors what Manteca did to weather the recession although it excludes the painful decision by bargaining groups either to take the equivalent of 20 percent pay cuts in existing pay and negotiated raises as well as pay more toward benefits or layoffs equal to the dollar amount in savings. That is how Manteca lost 12 sworn police officers when the police bargaining unit rejected pay cuts.
How Turlock has gotten into its current mess — seeing a general fund reserve that was at $14.9 million in 2014 dwindle down to $7.2 million today on its way to $2 million in the next year or so has one key contributing factor that parallels what Manteca went through — spending down reserves on a sustained multiple year basis because elected leaders adopted spending plans budget after budget that spent more money in a 12-month period than the city was taking in. In Manteca’s case, the structured deficit as such a kamikaze budget strategy is called was masked by $11.9 million in “bonus bucks” the city was able to draw down over the course of four years before eating away at reserves. “Bonus bucks” were unrestricted fees (in terms of how they could be spent) approaching $7,000 per new home developers agreed to pay the city in exchange for sewer allocation certainty when the city’s wastewater treatment plant capacity was rapidly disappearing before an expansion project could be brought online.
Several years ago the Turlock council — apparently in a desire to fulfill citizen demands for improved public safety — opted to dip into the reserves to spend $3.8 million including $3.1 million in reoccurring costs to continue eating away at the general fund cushion to the tune of $3.1 million a year to pay for four more police officers, three more firefighters, and two more police dispatchers.
In Turlock’s case it was masked by a decision by their council to embrace the high end of three revenue projections that virtually all city finance directors develop so a decision can be made on how to budget for expenses in the coming fiscal year. Projecting revenue is more of an art than an exact science. Based on current and historic patterns, the finance director comes up with conservative, moderate, and liberal revenue projections for the upcoming fiscal year.
This is where Turlock departed ways with how Manteca has approached those three sets of numbers for decades. Turlock went with the higher number. Manteca always goes with the lower number. And to make sure they have additional cushion and don’t count on something that has yet to materialize they refrain from building in revenue sources from major retailers or hotels that are in the process of being built until the first quarter of actual revenue flows into city coffers. That usually means with retail almost a full year until the new store has been up and running.
Typically that ends up providing extra money as the fiscal year progresses that when it is in hand and tracking indeed shows revenue to be running ahead, the council then looks at wish lists and needs to see if they can fund additional initiatives ahead of the next budget. Even then, they do not go hog wild.
What happened in Turlock was the council had the budget built on the most liberal revenue projection the finance director made that included a 5 percent bump in sales tax receipts typically the second largest proverbial 900-pound gorilla for revenue to run day-to-day city operations behind property taxes. Sales tax did go up but by roughly 2.5 percent.
Some of Manteca’s nine employee bargaining units are viewing the coming of the 500-room Great Wolf indoor waterpark resort as Santa Claus in Wolf’s clothing. They see the “conservative” projected city share of the first full year of room tax — estimated at $1.4 million based on the more muscular 12 percent room tax voters adopted last year — as money that is in the bank to spend.
In all likelihood around 80 to 85 percent of that room tax bump will eventually go to salaries and benefits of existing employees and new staff the city will hire to address pressing workload issues that current employees are well aware of.
But spending it before the money has actually flowed into city coffers for a full year is fraught with danger. Thanks to delays caused by PG&E — the company that seems to be the biggest threat to the economic well-being of a large chunk of California — the projected opening of Great Wolf had been pushed back to Memorial Day weekend 2020. That means revenues won’t show up in city coffers until the 2021-2022 fiscal year.
One might argue eating into reserves to cover pay hikes based on Great Wolf revenues would pose little danger given growth would cover the tab, but if the economy turned south or a disaster came up such as the city suffering significant expenses and damages when PG&E plunges Manteca into Third World status for up to five days when they pull the plug on transmission lines that serve valley cities as well as communities where severe wildfire conditions exist, Manteca would be where Turlock finds itself today.
The council — and employee groups — also needs to refrain from comparing Manteca’s general fund reserve policy with Turlock’s. Manteca sets aside 30 percent or three months’ worth of money based on the overall general fund spending budget. That comes to $12 million this year with that amount fully funded. Turlock’s policy is two months which comes to more than $7 million. Both cities have general fund budgets right around $40 million.
Manteca as a city of 83,750 that at the current pace will have more than 100,000 residents within six years compared to Turlock’s 68,549 residents has a lot of pressing needs that growth is creating as well as exiting “wear and tear” issues on infrastructure. That is why the city’s current overall general fund reserves that encompasses economic development, pension stabilization, public facilities oversizing, capital facilities, and technology reserves in addition to the unrestricted general fund reserve is at $20 million today.
If everyone refrains from being too eager Manteca’s employees and citizens can be spared a repeat of the 2008-2014 era when service levels were reduced and employees took 20 percent compensation hits in order to keep their jobs.
There is no doubt Manteca’s municipal workers deserve additional compensation but it can’t come at the cost of doing a piranha act on city services and reserves intended to allow the city and loyal hard working employees to weather emergencies that require major unexpected expenditures or hiccups in the economy
It’s tough to resist when taxpayers clamor for more services but at the same time aren’t jumping up and down telling you to raise taxes so you can provide them.
Restraint is not only good for elected officials and municipal employees. It is also good for city residents.
Take some advice from Frank Sinatra. Nice and easy does it every time.
This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at dwyatt@mantecabulletin.com or 209.249.3519.
