San Leandro City Budget: Already $1 Million in the Red

Last week the San Leandro Times reported:

The city adopted it’s 2009- 2010 budget just last month, but new figures show revenue is already down another million dollars from what was projected just weeks ago. The initial budget had a projected cuts of $2.9 million happen this year. But recent sales tax figures were down by $455,000 and property tax was down $600,000, meaning the city’s budget is already off by over a million dollars.

In response, at a city council finance committee meeting, Mayor Santos wanted the state constitution amended:

Santos also said that he’d like to invoke the city’s charter, which states that the city can impose an increase in property taxes without a vote, but the state passed Prop. 13 in 1978, which caps the increases. Santos said that he’d like to see the state law changed and that, given the budget situation in Sacramento, now is the time to do it.

The continued and growing city defict comes as no suprise. As I noted last month,

The budget planned for next fiscal year 2009-10 is seriously flawed. It continues to draw on reserves and relies on unrealistic projections that tax receipts will increase. In the midst of the worse recession post World War II, the city is planning on a 4% gain in sales taxes and 3% growth in property taxes.

In a San Leandro Times report published on May 20, 2009, I criticized the city manager's proposed budget, which the city council subsequently adopted, predicting it soon become apparent the budget was unbalanced:

“You’ve got a budget that is dead on arrival because it is based on expectations that are un[realistic],” Cassidy said. . . . Cassidy [added] that, if the council approves the proposed budget, they will find themselves going back to the drawing board within weeks. “If they pass this budget, they will be doing the same thing Sacramento does and just passing it for the sake of passing it. They need to roll up their sleeves and make some decision based on sound fiscal sense or they will be back in July or August asking where the money is, because this revenue is not going to just appear.”

Even if the California economy were to quickly turnaround, and to date there is no sign of that occurring as the state unemployment rate continues to grow, the assessed value of properties in San Leandro, upon which property taxes are based, has dropped 4.3% for 2009-2010. Dan Borenstein of the Contra Costa Times stated in a recent column (which included a chart showing the decline in assessments for each city in Alameda and Contra Costa counties),

The economic hit of the housing downturn that struck property owners during the past two years is now whacking local governments with a vengeance, forcing cuts in everything from police and grounds maintenance to firefighting and library services. For years, local officials had figured that the state's unusual property tax assessment formulas, which protect property owners from volatile tax increases when the housing market surges, would also insulate local cities, counties and special districts from tax revenue declines if housing prices fell.

City managers and county administrators had assumed that, in a worst-case scenario, assessments, and the corresponding tax revenues, would only flatten. Last year, they saw signs that they were wrong. This year, reality is hitting them in the face. For the first time since the 1978 passage of Proposition 13, the landmark property tax-cutting initiative, the assessed value of the state's residential and commercial property is expected to decline.

In the spring, the state Legislative Analyst's Office internally forecast a 3.5 percent drop for the 2009-10 fiscal year. Now assessors across the state are starting to report their numbers and, indeed, the trend is unmistakable: Values are dropping. Contra Costa and Alameda counties this month reported their first declines since Prop. 13 passed. Contra Costa was off an average 7 percent and Alameda County about 3 percent.

Again, San Leandro's drop is 4.3%, 1.3% above the average decline for cities in Alameda County.

In the meantime, 110 city employees earned salaries over $100,000 in 2008, up from 78 employees in 2007. The Daily Review recently reported that despite its budget crisis, the City of San Leandro is paying "$38,250 annually to purchase computers and other equipment — which becomes the property of the employee — and fitness club memberships for 45 management and nine confidential employees."

If you increase your expenses while your income is dropping, you should not turn to the public for a bailout. City Hall must get its fiscal house in order before seeking any new taxes.

The city council needs to appreciate that the public sees waste, inefficiency and abuses as justifying their lack of confidence in government, and believe greater openness and accountability are needed. The public should be brought into the process of finding constructive solutions to the city's fiscal crisis.

If we can have a citizen’s commission to address the future of the shoreline, there should be a commission to examine the city’s current and long-term fiscal challenges. Such a commission was established in the City of Alameda. Otherwise, mistrust and cynicism of City Hall will increase, and vital programs and services for our community will continue to be cut.