Council to review options to address Glendale budget deficit
Although city fees related to Glendale’s building boom and a rebound in post-recession sales taxes are expected to boost resources for the city’s budget, rising pension, medical, and other costs are expected to eat into those increases, leaving Glendale with deficits over the next seven years.
The deficits, which could range between $1.7 million next fiscal year, which begins July 1, and top off at $5.5 million in fiscal year 2018-19, followed by a steady decline, could be tackled in two ways, City Manager Scott Ochoa said on Tuesday morning during the first budget study session for next year.
The City Council could keep the status quo, which would continue a salary freeze, minus automatic salary bumps for some employees who score well on performance reviews and already agreed-upon future cost-of-living increases, or offer retirement incentives for miscellaneous and management staff.
Glendale slimmed down its workforce by about 14%, dropping personnel to 1,605, in fiscal year 2012-13 compared to the prior year through retirement incentives.
But that workforce reduction cost more than $1.6 million and another round would also cost money, although final numbers have yet to be crunched. Another round of retirement incentives could come from freezing vacant positions for six months to build up funding, according to a city report.
While keeping the status quo would allow Glendale to “muddle through” the “relatively small” deficits, which are a far cry from the $15.4 million and $18 million deficits of the recent past, Ochoa recommended the retirement incentives to get Glendale structurally solid.
The majority of the City Council, including Mayor Zareh Sinanyan, said during the meeting they were on board with reviewing that option.
Councilman Dave Weaver said as the public continues to oppose tax increases — even one that would only impact hotel users — and state laws siphoning money away from Glendale continues, the city has to take bold steps to keep up the services residents expect.
“Everybody has got to realize it’s a new day. It’s going to be tough on everybody, the residents and the employees, for the foreseeable future,” Weaver said.
Glendale has been grappling with its finances for years as the city was hard hit by both the protracted recession as well as the end of redevelopment, a state program that allowed the city to use a portion of sales taxes to subsidize development and affordable housing projects, such as the Americana at Brand and Alex Theatre renovations.
Some redevelopment money also supported salaries, so when it disappeared in 2012, Glendale had to shed employees.
Despite the reorganization, retirement costs remain a burden on Glendale, like most cities. However, because of cost-sharing agreements in which employees pay into their benefits at differing rates, depending on the city union, Glendale is better off than others, Ochoa said.
Rising pension costs — propelled by historically high rates set by the California Public Employees’ Retirement System — played a role in bankrupting cities such as Stockton and Vallejo, but those municipalities had pension costs of more than 20% of their budgets, Ochoa said.
Glendale’s pension costs are currently about 11% of its total budget, or $18.9 million after cost-sharing is netted out, and expected to increase to nearly 17%, or $34.4 million, in fiscal year 2021-22, according to a city report.
Councilman Ara Najarian said the city may want to consider changing subsidies given to retirees who choose to continue using the city’s health insurance plan since that post-employment benefit is forecast to cost $214 million over time.
The deficits could be lessened if the city gets repayments of loans it made to jump-start its defunct redevelopment agency decades ago, but it may have to sue the state to get them since Sacramento officials have said they don’t plan to make those reimbursements, Ochoa said.
The proposed budget for next year is about $181 million for the general fund, which pays for police, parks and other general services, according to a city report. That would require using about $7.5 million of the city’s more than $50 million in reserves to pay for a data center upgrade and part of the planned Central Library renovation.
Officials plan to comb through next year’s budget over multiple study sessions with a final vote from council scheduled for June 3.
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Follow Brittany Levine on Google+ and on Twitter: @brittanylevine.
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