A discussion of civic issues in San Leandro, California, and the East Bay, hosted by former Mayor Stephen Cassidy.
Thursday, February 8, 2018
San Leandro Facing New Fiscal Crisis
Next Tuesday evening (2/13 at 7 pm at City Hall) is an important meeting concerning our City’s solvency and the services we as San Leandrans rely upon. CalPERS officials are coming to San Leandro to provide the City Council an update on pension benefit costs.
Some may say this is equivalent to the wolf providing an update on the status of the chicken coop. Despite the inherent self-interest of CalPERS officials to downplay the severe fiscal threat San Leandro is facing from rising pension costs, I am hopeful that the City Council will be provided accurate information and ask demanding questions.
Why is the presentation important?
The City Council last year approved a two-year budget that included an operating deficit for the first time since San Leandro emerged from the Greet Recession. San Leandro is having to draw down reserves to cover its deficit which stands at $8.2 million this and next fiscal year.
The good news is the City’s reserves for economic uncertainty are strong, standing at $23 million at the beginning of this fiscal year. The bad news is the City is projecting operating deficits for the next decade with reserves for economic uncertainty being exhausted in 4 years.
What is the cause of the deficit?
First, it is not a lack of revenue. For the first time ever, since 2015, San Leandro’s General Fund revenues exceed $100 million. The local economy is booming. Plus, Measure HH passed in November 2014 boosted sales tax revenue by $10 million.
As recently as 2015, the City had a General Fund surplus of $12 million. But in 2015, employee salary and benefit costs were $42 million annually. Next fiscal year the cost for employee salaries and benefits is projected to reach $55 million.
Driving this surge is the annual bill San Leandro must pay CalPERS for pension benefits. In 2005, the bill the City paid CalPERS $5 million. This fiscal year the cost is $12.5 million. In 5 years, the CalPERS bill is projected to rise to $24-$30 million annually.
In short, San Leandro has an expenditure driven structural deficit due to exploding employee pension costs.
Every new dollar in revenue the City earns over the next 5 years will have to be dedicated to paying the CalPERS bill. But it will not be enough. The City will burn through it reserves triggering devastating cuts to services and programs.
Come to the City Council work session on next Tuesday night at 7 pm at City Hall to learn more, ask questions of the City Council and see what solutions they may have to the impending fiscal disaster. And to put San Leandro's situation in context of what's happening in other CA cities check out: https://www.mercurynews.com/2018/02/08/borenstein-aint-seen-nothing-yet-pension-cost-rise-just-starting/