Manteca has millions of dollars laying around in restricted accounts that can’t be used to bridge the city’s remaining $2.5 million general deficit.
Why not just borrow the money from those accounts and pay it back to avoid requiring employees to make compensation concessions or – if they don’t layoffs of up to 54 municipal workers including police and firefighters. After all, certain interfund borrowing –as long as it is repaid at the current going interest rate – is perfectly legal. So why not do it in Manteca?
Here’s why. It would cost $1.7 million to avoid layoffs if municipal employees don’t forgo negotiated 4 percent raises in both 2010 and 2011 plus make some out-of-pocket concession such as giving up uniform allowances for two years and making a larger out-of-pocket contribution to their retirement,
The city borrows $1.7 million from one of its restricted accounts – let’s say the water fund. To pay it back in a year, it would cost close to $1.8 million. Here’s the problem with that. A year from now, the city has to come up with $3.5 million - $1.8 million to repay the water fund and another $1.7 million to keep those city employees in place for another 12 months.
Property taxes, by all accounts, will remain stagnant or drop for at least another year. There would have to be one heck of a shopping frenzy – a 33 percent increase in taxable sales locally – before September 2010 to generate that kind of cash. Actually it would have to be higher since the state holds on to 25 percent of the local sales tax for nine months before sending it to the cities.
So what if the payback is over let’s say five years at $400,000 a year? There’s the same problem about having to come up with $1.7 million a year from now plus $400,000 to repay the water fund – plus more. That borrowing more than likely will start putting a crimp on cash flowing into the water fund. The city either would have to delay making crucial upgrades or - you got it – raise water rates.
Actually, they may not be able to borrow from the general fund since ratepayers can’t legally pay for anything but the service they get. So that’s a no-no. Maybe the city could hit fees collected for improvements required for and paid for by growth.
OK, the same scenario but now the improvements don’t get built. Those were payments made by people buying homes for specific things. Based on a court decision involving the Mello-Roos district in Tracy where homeowners paid for schools but weren’t allowed to send their children there but instead were bused across town, the court was pretty clear you have to deliver on what you tell people you’re going to use the money for that you collect from them.
Even if it was kosher, the problem is even more basic: All the city would be doing is delaying the day of reckoning and make it even more expensive.
There are times where you have to bite the bullet. Had the state done so a few years back we wouldn’t be where we are today. We wouldn’t have liked it but the economic pain would have been a lot less severe.
Doing anything now that prolongs the needed correction will only increase the pain and delay Manteca’s recovery.
Is there any wiggle room in the city’s proposal to employee groups regarding reductions in their compensation? It’s doubtful given how the city went into overdrive to bring city employee compensation up to comparable cities when the times were good.
Is it the employees fault the city is in its current financial situation? No.
The problem is there is no money, or, more precisely, there is not enough money.
The only option – and it really isn’t much of an option – is to have employee groups forgo wages for one year, give up clothing allowances for one year, and increase their out-of-pocket contributions to their retirement for one year.
That gets the city another 12 months down the road against the reality property taxes will probably drop or stay stagnant when the assessor makes the call on Jan. 1, 2010 on property values and the fact sales tax – if it starts upward movement – will come back slowly.
At that point retirements in the first six months in 2010 might start yielding some relief to the city’s revenue needs.
The odds, though, are overwhelming that Manteca in September 2010 will be right back to where they are today.
No one likes what is happening. No one, though, was screaming foul when the city entered into four-year contracts with employee groups in the final bid to bring them parity with similar municipalities.
To contact Dennis Wyatt, e-mail dwyatt@mantecabulletin.com
