Budget Talks Center on City’s Cash Flow Dilemma

COUNCIL DIRECTION WOULD FUND LADDER TRUCK FOR THE YEAR

By STEVEN TAVARES
The Citizen

SAN LEANDROHere’s the deal: move forward with a proposed budget that further depletes the city’s general fund or hope for winning the lottery in November. The San Leandro City Council Monday night recommended to the city’s finance department to proceed with the former, but not without ominous signs the city may encounter serious cash flow problems in the next year either way.

The revamped budget proposal hopes to reinstate 10 full-time equivalent jobs for six months, along with an addition six months of funding for ladder truck services. The original proposal sought only to finance the ladder company for the first six months of the next fiscal year and pinned its hopes for funding the remainder of the year on a likely tax revenue measure on ballot this November. The option favored by the council will lower the city’s general fund balance to $1.1 million, if passed sometime in June and may not stave off layoffs without additional revenues.

A second proposal, which Councilwoman Ursula Reed called the “rose-colored glasses” option formulated the budget under the assumption a tax revenue enhancement, possibly in the form of a quarter percent sales tax, would add $2 million to the general fund. Mayor Tony Santos and Councilman Jim Prola favored the proposal, which other members concluded was too much of a risk. If the yet-to-be-proposed tax measure does not pass, the city’s general fund balance would drop to a paltry $677,000, which Finance Director Perry Carter said presented the city with potential cash flow problems.

“I’m very nervous about that,” said Carter when asked by Reed if the city could function with such low cash reserves.

According to Carter, the city’s $5 million emergency reserves are a hedge against unforeseen disaster such as fire and earthquakes, but also serves as working capital for the uneven flow of revenue and expenditures throughout the year. “As we get closer to this number, we have to be careful of what steps we take,” said Carter.

The city still has a ways to go until the final budget is approved. Santos will present the details of the crisis confronting the city tonight at the San Leandro Library at 7 p.m., but much of the proposal is still in a very much preliminary mode. “There’s a lot of ifs,” said City Manager Stephen Hollister. Areas such as the number of employees accepting the city’s early retirement offer, attrition, an uncertain local economy and possible mid-year layoffs still leave the council with  tough decisions in the next two months, according to Hollister.

The finance department’s original proposal nearly closed a estimated $7 million shortfall, which included cutting over 9 FTEs in the police department and 5 sworn officers. The nearly balanced budget only accounted for funding a half-year of the ladder company employing 9 firefighters. The hit to public safety caused some consternation among councilmembers who cited surveys showing San Leandrans overwhelmingly favored maintaining current levels of police and fire, along with a few hoping to earn brownie points during an election year. According to the budget report, the passage of a tax revenue measure would fund the ladder truck for an entire year, but add just one sworn police officer to the mix.

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