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061920-council-meeting

Santa Maria City Councilman Michael Moats listens to City Manager Jason Stilwell during Tuesday's meeting. 

Faced with years of budget deficits due to soaring pension costs, the Santa Maria City Council Tuesday unanimously adopted its two-year budget, which utilizes millions of dollars in reserve funds to maintain critical city services.

In an attempt to balance the budget during the 2018-20 period — which includes an $8.5 million deficit in the first year’s general fund — city staff submitted a budget which calls for exhausting the $3.7 million Local Economic Augmentation Fund (LEAF), utilizing money from the city’s economic stabilization fund for the first time outside of a recession and leaving unfilled staff positions vacant.

The $8.5 million deficit in the city’s General Fund — the city’s primary operating fund that supports nearly all departments — represents about seven percent of the overall General Fund budget.

While Santa Maria’s major revenue sources — property tax, sales tax, hotel bed tax and construction permits — are at or above pre-recession numbers, pension costs have continued to rise, City Manager Jason Stilwell said.

Based on current revenue and expenditure trends, the city is expecting structural deficits — meaning expenditures that exceed revenues — for at least the next four years and more likely six years, said city spokesman Mark van de Kamp.

The deficits are largely attributable to rising CalPERS costs, the manager for pension benefits of millions of California public employees. This fiscal year, the city is projected to spend $11.7 on CalPERS costs, compared to $7.3 million during 2012-13. Additionally, the city’s pension costs are projected to rise around $1.2 million per year for each of the next five years.

To maintain services at the current level, the city will need to dip into reserve funds.

To reduce pension costs going forward, the city had renegotiated cost-sharing agreements with current employees — asking them to pick up part of the retirement costs the city previously covered — and developed lower cost benefit plans for new hires, Stilwell said.

Stilwell said other cost-saving measures the city would implement include closing administration offices to the public on Fridays starting June 29. While city employees will be working on Friday’s, closing the offices to the public will allow lighter staffing levels, allowing the city to save money, Stilwell said.

In addition, the city will reduce park watering. “We don’t anticipate dead parks or brown parks but they may not be as green as they had been,” Stilwell said.

While public safety staffing is maintained at current levels for the next fiscal year, it wasn’t possible to guarantee that staffing beyond that due to potential budget constraints, van de Kamp said.

While the city has so far been able to rely on reserves to help maintain levels of service, city officials acknowledge a long-term solution will require new revenue, significant reductions in levels of service or additional statewide pension reforms.

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Councilman Michael Moats said it seemed that of the three items, additional statewide pension reforms seemed to be most needed.

“It seems obvious that the problem we have is the defined benefit plan from CalPERS,” Moats said.

Councilwoman Etta Waterfield expressed concern about the effect of utilizing economic stabilization fund money while not in a recession.

“My concern is we won’t have the reserve funds when there is a recession,” Waterfield said.

Ignacio Sanchez — one of three community members to speak during the public hearing — suggested the city consider allowing marijuana dispensaries to raise revenues.

The budgetary challenges have already affected various city departments, which have intentionally left unfilled positions vacant or put off hiring needed employees in an effort to reduce expenditures.

The Police Department put in a request for supplemental funding for three officers each year for the next two fiscal years but was unable to get the needed funding due to the deficit.

Razi Syed covers Santa Maria City Government for Lee Central Coast Newspapers.  Follow him on Twitter @razisyed

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