Going back to black

Chico City Council approves deficit-repayment plan

Administrative Services Director Chris Constantin’s “fund deficit mitigation plan” was set up to pay back more than $15 million to city funds that have run in the red.

Administrative Services Director Chris Constantin’s “fund deficit mitigation plan” was set up to pay back more than $15 million to city funds that have run in the red.

file PHOTO by tom gascoyne

Chico City Councilwoman Mary Goloff took the admittedly unusual step of voting against her own motion during the panel’s regular meeting Tuesday evening, Dec. 17.

That motion was to extend the meeting to 11 p.m., as the council members made their way through a jam-packed agenda—the final one of 2013—that had already tackled a plan to address a more than $15 million deficit as well as several other items, including a controversial plan related to waste hauling within the city (see Downstroke, page 8).

Goloff’s motion came just before 10 p.m.—about 3 1/2 hours into this last meeting of the year—and Councilman Sean Morgan followed Goloff’s lead in voting nay, as did Councilwoman Tami Ritter and veteran Councilwoman Ann Schwab, who noted that clear-minded decisions don’t come that late. Those four votes meant that several items on the night’s agenda, including the consideration of a so-called social-host ordinance, would have to come back to the council in the New Year.

The chief discussion Tuesday centered on a plan to address the $15.2 million in deficits in six city funds, primarily the private-development and capital-projects funds, which account for $9.3 million and $3 million of that total, respectively, as Administrative Services Director Chris Constantin explained.

Constantin presented to the council a plan that includes repayment of $1.52 million each year, starting in fiscal year 2014-15 and ending in fiscal year 2021-22, and an additional $700,000 during the final year, 2022-23.

He pointed out that, over the past eight months, city officials had implemented more than $5.6 million in cuts to address operational deficits. At a certain point, however, there was concern that the city would have to borrow from a $5 million line of credit by the end of the year to pay its bills. That hasn’t happened.

Constantin noted that the deficit-mitigation plan may require that the city dip into its emergency reserves for the next few years, but that in the years that follow, with revenue growth, the city should be able to cover the annual repayments with new revenues.

“Once we achieve that, any incremental revenue above and beyond that becomes available to the city for expenditures—salaries, benefits, people, services—things of that nature,” he said. “But we have to get to that point to have a steady stream of new revenue that can be tied to our deficits.”

Morgan was the sole council member to take issue with the plan. First, he questioned whether additional cuts to public safety would be necessary to come up with the $1.52 million. Second, he asked about alternatives to protecting the city’s cash flow, such as selling assets, in order to buoy operational costs that could be used to pay for additional public-safety personnel or administrative staff.

Constantin jokingly mentioned a certain “750 acres”—aka Bidwell Ranch—but then immediately followed that up with a word of caution: “We should not fall into the trap where I have an asset that I can sell, I get a one-time windfall … if that asset is worth two and three times tomorrow what it is today.”

Noting that previous city management had for many years kicked the can down the road when it came to addressing certain deficits, Morgan asked what would happen if there isn’t enough new revenue or emergency reserves to pay for the plan. Constantin responded that the issue would then be taken up at the council level. “You are in control of this plan,” he assured the members.

Councilman Mark Sorensen asked him to describe the consequences should the council not move forward on the deficit-mitigation plan. According to Constantin, if the general fund showed a negative fund balance, the city would have a hard time securing bonds for projects without paying an astronomical interest rate.

Five members of the public spoke on the issue. Most of them voiced their support for bolstering funding to police services.

There was some confusion on Morgan’s part regarding the plan, which essentially makes the repayment the city’s No. 1 budget priority and codifies that in the budget policy. Toward the end of discussion on the item, he conveyed concerns that there would not be enough new revenue or reserves to pay the yearly balance and that the city would then dip into police and fire services (which account for the bulk of the general fund). He posited the idea of using half of the new revenue for repayment and half for funding police services.

As Mayor Scott Gruendl pointed out, somewhat subtly, the city is in negotiations with a number of bargaining units that could make concessions that would prevent the city from making further sweeping cuts to services.

“I appreciate all the people who came up … around restoring our police staffing, but if we fail to achieve what Mr. Constantin is asking us to do, we will have no choice but to reduce what we already have. So we will do the exact opposite of what everyone is asking us to do,” Gruendl said.

In the end, the council voted 6-1 (with Morgan dissenting) to approve the plan. The panel is scheduled to reconvene on Jan. 6 for a budget-related goal-setting workshop.