In light of huge tax losses, Concord taking steps to shore up budget

As Concord braces for the devastating financial impact of the shelter in place order, the City Council voted on April 14 to lower compensation and benefits for more than 60 employees.

The city manager, city attorney and executive management team had already voluntarily agreed to about a 9 percent reduction in compensation. The austerity measures don’t affect workers represented by bargaining groups, but city officials said they have initiated conversations with the unions about responses to the budget crisis.

The council members also voted to take a 10 percent reduction in their salaries. Assistant city manager Katheen Trepa said the $135.20 per month per council member “is largely symbolic, given the total anticipated shortfall.”

All told, the plan will save about $200,000 in fiscal year 2019-’20 and almost $1.4 million next year.

Earlier in the virtual meeting, staff briefed the council on updated revenue estimates. Scenario A, based on research by sales tax consultants, predicts an $8 million decrease in general fund and Measure Q tax revenue in the fiscal year ending June 30 and more than $14 million in the next fiscal year.

A second, more pessimistic scenario mirrors the effect of the Great Recession – resulting in more than $14 million in losses this fiscal year and more than $23 million in the next. City manager Valerie Barone and many council members expect those numbers to be more accurate.

“The good news is Concord has a history of fiscal prudence and in acting in the best interest of our residents and this has served us well in the past and will serve us well again this time,” Barone said.

Reductions in services likely

The city manager has already taken measures to save about $4.7 million from this year’s fiscal budget – including a hiring freeze except dispatchers and sworn officers, halting non-essential spending and moving some capital improvement money back into the reserves.

City staff expects to bring updated figures to the council in May or June.

“We will know more when they’re going to end the shelter in place and how they’re going to end the shelter in place and which businesses survive,” Barone said. “There’s an awful lot of uncertainty right now, which is one of the reason we’re retaining as large of a reserve as we can make happen. We’ve never been in a situation like this before.”

Mayor Tim McGallian expressed concerns about how the city will maintain vital services. “Are we going to be able to fill any holes, literally and figuratively, in our roads and in our budget?” he asked Barone.

“I think you will find that many of the cuts that you will have to consider will be unpopular – they will impact services,” she responded. “And what staff will do is try to find those cuts that are not hitting the most essential of services and that may be reducing service levels but not eliminating services entirely. But you will see significant proposals for service reductions when we come back to you in May or June.”

Checking in with neighboring cities

Councilman Edi Birsan wondered how Concord was doing in comparison with surrounding cities, and Barone said the impacts vary based on reliance on retail revenue and each city’s current financial situation.

“Walnut Creek, for example, was projecting surpluses. Now they’re projecting deficits – but they get the advantage of coming off what were going to be surpluses,” she said, adding: “By having a history of doing very detailed and advance budgeting and using an advance forecasting model, the city of Concord seems to capture the issues in play earlier than any of our surrounding cities.”

Birsan also asked staff to look into “consolidated administration” of services with other cities, such as a metropolitan police force, or a joint parks department or housing inspector. He also questioned the advantages of changing to a charter city.

“There will be fundamental societal changes,” he said. “We need to look outside the box from our past approaches.”

Barone said staff would provide the council with more information on both topics.

“In terms of sharing services, it can be done. It’s been successful in different parts of California for certain services,” Barone said. “The biggest challenges are usually political, but there can be many other challenges as well – including bargaining groups, local control, not necessarily saving money but diffusing the decision-making.”

Councilwoman Laura Hoffmeister noted that a county Grand Jury report showed that a consolidation of services could be more expensive in some cases.

Meanwhile, Barone said the staff will continue to reach out to state and federal elected officials for assistance, and she encouraged council members to do the same.

“Unfortunately, the city is receiving no support or relief from the federal or state to backfill the loss of revenue,” she said. “Consequently, we see significant fiscal challenges affecting us immediately. And it’s clear the city is going to have to rely on itself to address these challenges.”

To view the archived video of the April 14 City Council meeting, Click Here.