When virtually any city or county within California has tried to make budget projections, the “elephant in the closet” is always unfunded liabilities. These financial obligations to pension and medical funds of retirees are a major force to be reckoned with. Also to be factored in are long term infrastructure expenditures needed to fix roads, paint buildings, replace roofs, and maintain recreational facilities, sewers, and other equipment on city property.
Trying to be pro-active, the Concord City Council asked its City Manager Valerie Barone to make a realistic assessment of Concord unfunded liabilities in all of these areas in order to create a balanced budget plan for the next decade. The trick is to accomplish such a goal while juggling limited financial resources. This process was discussed at the last City Council meeting in January with a Power Point presentation made by various City staff members.
As the General Fund graph indicates, revenues in Concord fell from a high of around 78 million in 2006 to as low as 64 million during the tough recession years between 2009 to 2012. To make things work 24 million dollars in reserve funds had to be tapped along with reducing the work force by approximately 25%. Even with these draconian cuts which affected everything from the Police Force to Camp Concord; it has been only the revenues derived from the Measure Q one half cent sales tax passed in 2010 that has provided the economic stability to keep the city afloat.
With the expiration of Measure Q looming in 2016, with Concord’s unfunded liabilities not going away, the City Council must determine how it will meet its financial obligations and still maintain necessary functions of government. Concord unfunded liabilities represent a huge obstacle for achieving these goals.
A Who’s Who of Concord’s Unfunded Liabilities
A. CALPERS pension contributions for city workers are presently stable because of the recent excellent performances of their investment portfolio However increases in contributions are anticipated in the next few years because of the volatile nature of the stock market
B. Retiree Medical (currently only 31% funded) Presently ,this obligation is running minus 1.7 million per year.
C. City of Concord Retirement System (closed) $ 1.2 million under funded each year
D. Building maintenance and facilities, signs etc… About minus 1.7 million
E. Pavement and roadway (to maintain existing conditions) 5.8 million underfunded each year
When all of these costs are tabulated, the city faces over a 10 million shortfall each year. Without any growth or inflation included, this figure is about the same amount of the tax revenues lost since 2006. If this continues, interest charges will rise plus additional expenses will be incurred when deferred maintenance is finally done.
The gap in revenue currently is being partially bridged by the Measure Q half cent sales tax. The question is how Concord will balance its books when it expires in 2016. Possibilities have been offered including
- Property tax receipts might increase with rising home prices
- Hope the State of California will give cities more revenue as State tax receipts have gone up.
- Cutting more city services ranging for closing Cowell Pool (which desperately needs capital improvements) to removing vegetation on mediums, closing parks, eliminate events at Todos Santos and cut Seniors programs to name a few.
- Eliminate more positions in city government and police above and beyond cuts already made in the last five years
- Re-negotiate labor contracts with Police and city workers to reduce costs.
- Continue to delay performing needed maintenance and underfund retiree benefits.
- Gain voter approval for continuing Measure Q in some form and possibly do a combination of the above.
One of the biggest road blocks facing Concord and other cities in Contra Costa is the revenue stream coming in from the State of California. In addition to the 7 million dollars in funding that was lost when Jerry Brown eliminated Redevelopment in 2010, has been the reduction of grants and allocation of gas tax receipts used to fix roads since the recession began.
Recently Governor Brown gleefully announced that California’s tax receipts had increased so dramatically he could balance the budget, increase spending for education and deal with some unfunded liabilities of the State. In his pronouncements no mention was made of returning tax dollars to the cities and counties that have been scrapping by for years.
Valerie Barone commented the State is “kicking the can down the road” with regards to supporting Concord and other cities. Instead, anticipated future revenues from the State are projected to be administered on a regional basis for social engineering projects by the likes of ABAG and the MTC through the One Plan Bay Area. Unfortunately these expenditures including the Bullet Train, do not fill pot holes nor do they keep rain (should we have it) from leaking through old roofs.
To make things worse the State is in the habit of dropping problems on cities such as placing parolees in their borders without providing enough assistance for social services or police supervision. When grants are given to Concord (such as current funds for building bike lanes) there are inevitably guidelines that give the city little latitude in how this money is to be spent. In short, city government is being strangled by reduced revenues combined with unfunded liabilities they must contend with.
But wait there’s more. Later on this year the labor contract with city workers and the police department expires. Since 2008 Non-Police personal have taken major cuts in pay, furloughs and benefit reductions. Police personal were also the recipients of smaller cuts in their benefits. With this being the case, both groups will undoubtedly want improved contracts this time around.
The problem is where will the funds to keep up with day-to-day operations and pay unfunded liabilities be found to pay for it? Without severely cutting city services, it would appear the only way to bridge this gap is by using the Cities rainy day emergency reserve funds. Even then such a solution would offer little more than a financial band aid that would evaporate after a couple years.
So what are the alternatives? The City of Concord can say “Uncle” and walk out on its obligations. This is not likely to happen as the municipality has a long record of paying its bills. More likely voter approved a Measure Q extension will be required in some form when it expires in 2016. At the same time the City Council will have to balance competing needs with limited resources while controlling costs and enhancing efficiency throughout local government.
While Valerie Barone’s remarks on the city’s problems “Don’t panic, this is a challenge not a crisis” may sound like the calming words of the fraternity President in Animal House, we have little choice but to buckle up and go along for the ride.
~ The author is a member of the Concord Measure Q Over Sight Committee. Any opinions expressed in this article are his own and do not reflect the views of anyone connected with the City of Concord or the Measure Q Committee.