City’s finances a mixed bag
Latest quarterly report has good and bad news
The Chico City Council was told this week that the city’s current economic picture is a mixture of good and bad news.
“I wanted to use the word schizophrenic, but I wasn’t quite sure that’s the right word,” said Jennifer Hennessy, the city’s finance director, in summing up her report to the council. “So ‘contradictory’ is the word I chose. We have just as many indictors showing things are looking up and looking good and just as many showing, well, not quite yet.”
Hennessy’s report was a review of the third quarter of the 2010-11 fiscal year, the months of January through March. But that update relies a lot on predictions based on how well indicators did in the second quarter—October through December—and is relevant to budget predictions launched at the beginning of the fiscal year. It’s an imperfect science, made even more so by matters beyond local control—specifically, the financial well-being of the nation and the chronically broken state budget, which currently has a $27 billion shortfall between espenses and revenue.
The good news: Sales-tax revenue, which accounts for about 40 percent of the city’s general-fund budget, did better than anticipated, as did the transient occupancy tax (TOT), the revenue collected from guests who stay in the city’s hotels and motels.
Recent negotiations with the city employee unions to cut salaries and benefits have helped the bottom line, though rates of attrition—not replacing employees who retire or move on—are lagging, particularly in the Police Department.
On the down side, property-tax revenue has declined 3 percent from the previous year due to devaluation and foreclosures. The user-utility tax revenue has also declined 1.1 percent from last year because people are cutting back to save on their PG&E bills.
Business-license and real-estate transfer taxes are below anticipated levels, and because last year the state’s wildfires were down, city firefighters were not deployed for help and thus the reimbursements for that labor were down. On the other hand, this meant less overtime the city had to cover to make up for those firefighters whose hours were sretched locally as they covered for their absent co-workers.
Other dips include less revenue from DUI response fees, which come from drivers convicted of drunken driving who must reimburse the city for all of the public safety workers who respond to the suspected crime. The city isn’t sending bills to the offenders pending resolution of a class-action suit, Hennessy explained.
The city is also receiving less in parking-fine revenues.
Hennessy asked the council to approve $113,000 in operating expenses to help cover the $150,000 cost of the city’s special election for Measure A, the effort to move City Council elections from November to June.
And so it went. The council agreed unanimously to approve requests for increases in budget areas where revenues did not meet projections, including the general fund.
“We started the year with a projected end-of-year balance of $565,000, Hennessy said of that general fund. “Now it’s down to $22,000, which is still balanced but just barely.”
She said her department will continue to update the council as information is received.
“The trickiest part to knowing how we’ll balance or when we’ll balance, quite honestly, is the sales tax,” she said.
But learning about that revenue has the longest lag time.
“It is likely we won’t know until September what our ending fund balance will be. As of right now we are projecting it to be slightly positive,” she said with a cautious laugh.