City Struggles to Close Budget Gap

Still facing a $1.5 million general fund budget deficit for 2011-12, the Hercules City Council will meet again next week to try to close the gap.

"We've been working really hard," city Finance Director Liz Warmerdam said. "We're not there all the way."

A special budget workshop is scheduled for 6 p.m. June 21, as the city hopes to pass a balanced budget during the regular council meeting the following week. When the council convenes 7 p.m. June 28, that will be its last meeting before the end of the fiscal year.

The current $1.5 million deficit — $12.4 million in revenues, $13.9 million in expenditures — represents progress. After facing a $5.5 million deficit, the city Finance Department presented the results of its efforts Tuesday night, June 14, highlighting a $4 million reduction of the budget gap.

That reduction was a result of voluntary and forced layoffs, labor concessions and program restructuring, according to Warmerdam.

"I know we all wanted to get it to zero, but it's not for lack of trying, I can assure you," Warmerdam told the council. “My goal is to get it under a million.”

Warmerdam added that further budget negotiations may include more cuts to the police department.

In the 2010-11 budget, Hercules planned for an estimated $24.4 million in general fund revenues. The city expects to end the fiscal year on June 30 with about half of that amount, just under $13 million. General fund revenues for fiscal year 2011-12 are projected at $12.4 million.

The city expected to spend $25.9 million in the 2010-11 fiscal year, but general fund expenditures are now projected to total $18.1 million after cuts in the latter part of the fiscal season. General fund spending is slated to drop to $13.9 million in the 2011-12 budget.

The Hercules Redevelopment Agency is projecting a deficit of $7.8 million for 2010-11 and $1.9 million in 2011-12.

The incomplete Sycamore North project has been a drain on projected revenues from redevelopment taxes. These taxes have been quickly decreasing since 2008 when totals topped $10.2 million. Projections for 2011-12 tax revenues for redevelopment stand at $6.6 million. This drop, due to the city’s stalemated redevelopment projects,has been a significant source of the city's financial woes, according to Warmerdam.

"Nobody is expecting it to increase," she said, adding that projections are flat through 2015 unless the city plans to build anything new.

"That's where we need to focus our energy," said Warmerdam. "I think we've been doing this slash and burn, and my opinion is that we can't do that [any more]. There's just nothing left to slash and burn. We need to start moving on the revenues side."

Projected sewer funds for 2010-11 proved to be a pleasant surprise for the council, with a total of $12.8 million in excess funds slated for 2010-11 due to bond proceeds and fee increases. The estimated excess in 2011-12, however, is expected to drop to $1.5 million.

Revenues for the Hercules Municipal Utility (HMU) also showed an increase from projections due to decreased expenditures. The 2010-11 fiscal year is expected to end with a $13.5 million HMU excess. This was predominantly due to "transfers" into the city's account,such as bond proceeds, which are estimated to total $13.7 million in 2010-11. No such funds are expected in the 2011-12 fiscal year.

The 2011-12 projected budget also includes an estimated increase in the cost of "risk management" for the city due to the layoffs made this year.
"We're self-insured, so any unemployment claims we pay ourselves," explained Warmerdam. "So when you save money you also have to spend money."