Hercules Must Use Reserves to Balance Budget

To balance its General Fund and Redevelopment Agency budgets for the 2011-12 fiscal year, the city is using nearly $3 million in reserves from its developer impact fees.

The City Council this week adopted a $15.2 million General Fund budget with an $850,000 deficit and a $10.3 million Redevelopment Agency budget with a $1.8 million non-housing gap. About $1.3 million of the city's Fiscal Neutrality Fund--made up of developer impact fees—will be used to cover the entire difference in the general fund budget and part of the RDA gap, using up most of the reserve.

The city has a number of one-time developer impact fee funds, but many of the funds must be used for very specific purposes, Warmerdam said. The Fiscal Neutrality Fund is one of the least restrictive.

"It's a rainy day fund," Warmerdam said about Fiscal Neutrality. "If this isn't a rainy day, I don't know what is."

The city plans to cover rest of the RDA deficit with the sale of its Yellow Freight property.

The 2011-2012 budget for the General Fund, which pays for departments like police and parks and recreation, is about $3 million less than last year. The city’s finance department has worked since April to align revenues with expenditures and close a $6.3 million budget gap.

Finance Director Liz Warmerdam said that the gap was has since been identified as $5 million, and through , and fee increases, it was reduced to $850,000. 

The council also adopted a $10.3 million Redevelopment Agency budget, most of which will go to debt service.

Councilman Dan Romero voiced concern about adopting the Redevelopment Agency budget without knowing its future. "We're working with an agency that's going to disappear and we don't have the assests to continue (it)," Romero said.

Warmerdam agreed that the futures of redevelopment agencies is uncertain statewide, but Hercules’ agency would likely not carry on due to new legislation that will require the city to pay a $5 million fee to keep it’s redevelopment agency. The city’s doesn’t have that money, Warmerdam said.

After balancing the budget, the city’s next task will be to deal with trying to dissolve its redevelopment agency.

With some minor tweaks, the four council members voted unanimously to adopt the budgets. Councilman Gerard Boulanger was absent.