The Ceres City Council last week approved a $28.7 million budget for the coming fiscal year starting July 1 by using $1.5 million in ARPA funds and tapping into reserves by $635,504 to fill a $2.13 million gap.
The spending plan also counts on freezing 10 vacant positions.
“Everything is going up in cost,” reported City Manager Doug Dunford as he outlined how the city is projecting to spend $28.7 million against anticipated revenue of $26.57 million. He said during meetings with city department heads there was a lot of “giving” to make the “balanced budget come forward.”
“We didn’t really favor any one department. We took from everybody. Everybody gave a little bit. Some gave more depending of the size of their budget.”
Dunford said the growth rate of expenditures has been outpacing revenue growth with the city spending 4.3% more than last year with revenues decreasing. The city projects to see only minor increases in sales taxes, business license taxes and property tax revenue while inflation drives up the cost of providing services. For example, employee pension costs are rising, with the employer contribution for public safety pensions expected to jump up nearly 11%.
Adding to the budget shortfall is what the city of Modesto is charging Ceres for the fire services contract. It’s rising 7.2%.
The city’s liability insurance premiums also are rising – by a whopping 33%.
Borrowing into reserves will leave a balance of about $6.1 million, which is 21.3% of expenditures, which satisfies the council’s established policy of maintaining at least a minimum of 18%.
Property tax revenues are only increasing slightly due to a tight market caused by high home prices and high interest rates that have put the damper on sales.
Sales tax revenue may slightly increase while revenue from existing development agreements for cannabis dispensaries is expected to fall below projections.
Dunford said that ongoing and upcoming commercial developments in Ceres are anticipated to positively impact future sales tax revenue.
“Local development is crucial to the city’s financial future and the city has seen significant growth in the Gateway Center project.”
He mentioned that Ceres may see ground break on a travel center and noted that the former Walmart building at Hatch and Mitchell is in escrow with a possible development coming.
“We’re seeing some turnaround and some bright spots here next year,” Dunford told the council during its brief budget special meeting.
The city manager noted that rising employee pension costs remain a “substantial challenge for Ceres. Although the city participates in StanCERA for retirement purposes, the issues with the CALPERS system are likely to impact cities and counties statewide. In Ceres, there is a notable disparity in retirement costs between Public Employees’ Pension Reform Act (PEPRA) employees hired after Jan. 1, 2013, and classic employees hired prior to that date.
The city is expecting to increase costs to those living in the Landscaping and Lighting District. Since the city has not raised those assessments on property tax bills since the 1980s, the city is coming up short on fees covering expenses. Ceres projects to spend $1.04 million while only bringing in $472,000. This year the difference will be made up from the General Fund. The city will be required to hold a Prop. 218 protest hearing before it can raise those assessments.
Still problematic is that the Ceres Community Center continues to be a drain on the city financially. Since it was built, the center has caused the city to incur a deficit totaling $2.24 million.
Ceres resident John Warren said the city has not balanced the budget considering that expenditures have not dropped in correlation to revenue. He also suggested the city should reveal which positions have been frozen. Dunford later specified that the frozen positions include five unfilled police officer positions, two dispatchers, senior dispatcher, deputy public works director and finance department secretary.
“We’re looking at unfreezing those when our funding starts coming back in again and we start seeing the return in sales tax, property tax. When that starts turning around we’ll be coming back to the council and explaining … why we’re requesting to unfreeze.”
Councilman Daniel Martinez asked if the city was pursuing a study of user fees being charged and if the city is reviewing vendor contracts to determine if the city is paying competitive rates. Dunford said the city is undertaking a study of its regulatory and user fees. The study will look at what the city is charging for facility rentals, building and planning fees.
“Right now we’re charging 2008 prices and since then inflation has climbed over 33 percent,” said Dunford. “That may be one reason why people want to build here – because we’re extremely cheap.”
He expected those studies should be in front of the council in August.
Councilwoman Rosalinda Vierra wanted an explanation of where the city was coming up with ARPA funding since she understood that it was all allocated to projects. According to Dunford, before he was hired the council voted to use $1.1 million in ARPA funds to balance the budget but that it wasn’t necessary because revenues came in higher than normal. The remaining $400,000 came from a project to clean city hall HVAC ducts which ultimately was nixed.
Vierra asked about the necessity of employee overtime costs in departments other than police, specifically why Human Resources had overtime.
“This year is going to be very tough for department heads because we’re going to be holding them to their budget – they actually have to follow it,” replied Dunford.
He noted that the Police Department will be capped at a new limitation $56,000 in overtime costs each month.
“And we can still maintain public safety with those new limitations?” asked Vierra. “Are we finding ways around to maintain that we still have proper …?”
Dunford said public safety levels will be maintained and that the department understand that it must live within its overtime budget.
