Berkeley is beginning its biennial budget process. Below are excerpts from a report from the Berkeley's budget manager taking a first look at the city's fiscal health for 2014-15. To read the full report, see the pdf attached to this post.
"As our local economy slowly improves we should take heed from the State Controller and continue to budget conservatively."Projected Deficit 2014 $3 million Projected Deficit 2015 $2.1 million
"One bright spot is Property Transfer Tax. This revenue results from the City’s 1.5% tax on the sale price of properties."Property Transfer Tax Revenue 2007 $16 million 2010 $7.9 million 2012 $8.4 million 2014 (a "cautiously optimistic" projection) $10 million
"Interest income is projected to continue to decline in FY 2014 and then further again in FY 2015. This is due to the fact that the City’s long term investments are maturing and the investments currently available are at historically low rates due to the Federal Reserve’s interest rate policy."Interest Income 2011 $5.4 million 2012 $4.7 million 2014 (projected) $3.2 million 2015 (projected) $2.8 million
"In sum, while some revenue sources are performing better, others are performing worse. Just comparing the projected increase in transfer tax with the projected decrease in interest income for FY 2014, we see that those two revenue sources combined are effectively flat. Even with the modest increases projected in other areas such as sales tax, business license tax and utility users tax, revenues are not projected to outpace expenditure growth..."Projected General Fund Deficit In millions 2014 2015 Projected Revenue $150.4 $153 Projected Expenses $153.4 $155.1 Balance ($3) ($2.1)
"The projections above are based on current fiscal trends experienced during the first two quarters of FY 2013 and assume the following:
- No additional Federal or State cuts
- No funding for new programs
- No increased funding for capital improvement programs
- No further decreases in revenue
- No cost of living (salary) increases
"In addition to the projected deficits in the General Fund, several other major funds require balancing measures in FY 2014 and FY 2015."
Major Funds Facing Structural Deficits in FY 2014
- General Fund ($3 million)
- Refuse ($0.5–1.0 million)
- Gas Tax and Measure B ($0.5 million)
- Parks Tax Fund ($0.8 million)
- Marina Fund ($0.3 million)
- Housing and Community Services ($0.7 million)
- Public and Mental Health ($0.6 million)
- Total ($6.9 million)
"Employee salary and benefits make up 77% of the City’s General Fund operating budget. Thus, controlling labor costs is the primary method to manage expenditures and address the City’s structural deficit. However, there are other costs related to the operation of the City organization which have also experienced increases that must be managed."
"Rising pension costs continue to be a contributing factor to the projected General Fund deficit in FY 2014 and FY 2015."
Fiscal Year 2014 and 2015 CalPERS Employer RatesCalPERS Actuals 2013 CalPERS Actuals 2014 Actuarial estimates 2015 $ increase in millions Police 42% 45.7% 45.9% $.826 Fire 29.1% 31.5% 32% $.446 Misc. 19.2% 20.9% 21.1% $1.36
"As we develop a balanced budget for FY 2014 and FY 2015, we will work with departments and labor to discuss the related operational and service impacts of the budget cuts. A series of Budget Work Sessions will be held from January through March to review and inform the development of the City Manager’s proposed budget on May 7, 2013."
Berkeley City Council will discuss the 2014-15 budget at a special meeting on Jan. 22.