Money talk

Financial update carries over into other city business

Mayor Ann Schwab underscored the precarious nature of the economy and Chico’s financial solvency during her look back at 2010, another challenging year for the city.

During the regular meeting of the City Council Tuesday evening (Feb. 15), the mayor gave her second annual State of the City address. This time around, however, the speech focused less on the sunny side, sounding considerably more foreboding.

While Schwab noted several accomplishments, such as the city’s work to complete the general plan and wage concessions from a majority of the city’s employees that will help keep the city in the black, she spent a significant amount of time lamenting the potential loss of its redevelopment agency (RDA).

She called Gov. Jerry Brown’s plan to eliminate RDAs “short-sighted public policy,” especially as it relates to low-income residents. “It will kill the state’s leading program to provide affordable housing,” she said.

(See “Future is blight?” by Tom Gascoyne, page 8, for more on this subject.)

Schwab added that the city is committed to growing its economy, keeping a balanced budget and creating jobs.

Her comments could not have been timelier. The meeting included a financial update on the second quarter of the current fiscal year as well as discussion of the potential purchase of a property that would add to the footprint of other city-owned lots slated for the eventual development of an RDA-funded affordable-housing project.

First, though, City Manager Dave Burkland pointed out that the city is running with 63 fewer employees than in 2007. He thanked city employees for agreeing to wage concessions and said he hoped to be able to maintain the current workforce for the next two years.

Jennifer Hennessey, the city’s finance director, reported that the city’s expenditures have come in under budget. As of the end of December, halfway through the fiscal year, departments citywide have spent 46 percent of their budgets.

Meanwhile, on the revenues side, sales tax (36 percent of general-fund revenues) and transient-occupancy tax (4.5 percent) came in slightly above projections. In fact, growth in sales tax has taken place in the last three quarters over the previous fiscal year, she said.

“We’re still far off from our high in 2007,” she cautioned.

That was part of the good news. The bad news is that the collapse of the housing market has driven down property values and thus property taxes, which comprise 29 percent of total general-fund revenue. Hennessy said this is the first occasion—since the city began tracking such information in 1978 with the passage of Proposition 13—that homes have assessed for lower values.

Thus far, 23 percent of the city’s parcels have shown devaluations, she said. That’s translated into a 3 percent revenue decrease from the previous year, according to her report. Through October, utility-users tax showed a decline of 5 percent.

Hennessy said the city will make “course corrections” to stay within budget over the remainder of the fiscal year. A budget meeting for the 2011-12 fiscal year is scheduled for June 21.

After her presentation, the council unanimously approved (6-0, with Councilman Scott Gruendl absent) a budget-modification request that, among other things, sought to pull about $700,000 from the emergency reserve for the settlements in two litigation cases, and about $160,000 from the same reserve to cover litigation expenses.

Later, when the council reconvened for a special meeting of the Redevelopment Agency, the panel balked on whether to approve the purchase of 758 Wisconsin St., a single-family residence adjacent to a 1.3-acre site the city bought for an eight-home future affordable-housing project.

The spirit of the earlier discussions appeared to carry over into that issue.

Newly appointed Councilman Bob Evans, who was sworn in ceremonially during the evening, though he participated in last week’s general-plan meeting, questioned the property’s $140,000 price tag. Though the property includes a residence, Evans said the cost seemed excessive. It equates to $1.4 million per acre, he said, noting that the property is a tenth of an acre.

Bob Kromer, a fiscal watchdog and former council candidate, echoed Evans.

“It seems an incredible amount of money for 5,500 square feet,” he told the panel.

Sherry Morgado, the city’s director of Housing and Neighborhood Services, noted that two appraisals valued the property at that price. However, those appraisals were conducted many months ago, and there was talk that the assessment could have dropped in the meantime.

Councilman Andy Holcombe initially made a motion to approve the purchase but agreed to continue discussion to an upcoming meeting to allow the city time to get a more-recent assessment of the property.