City revenues will barely exceed expenditures in the coming years, leaving the city with inadequate reserves and no money for crucial capital projects.
That’s one of the conclusions from a bleak 10-year financial forecast that City Manager Jennifer Phillips presented to the City Council on Tuesday.
“There is just not enough revenue coming into this city,” Phillips said.
Mayor Alan Galbraith praised the report and called it “very sobering.” He encouraged people to read it before attending the council’s goal-setting session from 9 a.m. to 4 p.m. Friday, Feb. 27, at the firehouse.
Galbraith said Phillips’ projections were based on reasonable assumptions that, if anything, might be “on the optimistic side.” The projections assume current staffing levels, which Phillips said are already too low.
Phillips made two revenue forecasts, one assuming “modest economic recovery” and one anticipating a minor recession. The first forecast saw revenues slightly exceeding expenditures, while the second found them roughly equal.
The city has a 21 percent General Fund reserve, and the report concludes it will be difficult to reach the council’s goal of 25 percent, which is considered a reasonable standard in city government. Maintaining a reserve of at least 25 percent is critical if the city wants to borrow money or issue bonds on favorable terms, Phillips said.
The report finds that even in the optimistic scenario, the city won’t be able to amass a 25 percent reserve until at least fiscal year 2024.
The report underscores the lack of money available to fix St. Helena’s roads, which are tied for the worst among Bay Area cities, let alone replace the dilapidated City Hall and police station.
Galbraith noted the lack of investment in city facilities. Some deferred maintenance projects at City Hall and the police station have gone unfunded since at least 1990, the report found.
“This is the cumulative impact of not doing anything for such a long period of time,” said Councilmember Peter White. “We’ve gotten ourselves into such a hole that we’re going to have a hard time getting out of it. We all need to put our heads together and see over the next couple of years how we can increase our revenues to be able to climb out of this hole.”
The report looks only at the General Fund, not the separate water and wastewater funds.
General Fund expenditures are projected to exceed revenues in 2015-2016, due to a $528,000 debt service payment to the State Revolving Fund related to the St. Helena flood project. The city will have to reduce spending or draw down reserves to close the deficit.
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The city should be back in the black in 2016-2017, thanks to hotel taxes from the Las Alcobas project. But the city still won’t have enough revenue “to add critical administrative staffing or enhance services,” the report states.
“Nor is funding available to hire additional consultants, fund new programs or initiatives, implement unfunded mandates or support community proposals,” the report continues. “Essentially, as forecasted with the current revenue sources, the city has inadequate revenue to maintain current levels of staffing and services, as well as maintain an acceptable Assigned General Fund Reserve Balance.
“The inability to add any additional staff or respond to unfunded state and federal mandates could place the city at risk. It is important to note that the current staffing levels are considered inadequate and the workload exceeds capacity.”
The report lists the following “strategies for sustainability”:
— Closely manage General Fund expenses
— Regularly review fees for services
— Conduct annual goal-setting sessions
— Evaluate additional revenue measures like a sales tax increase, parcel tax, assessment district or real estate transfer tax, which would require St. Helena to become a charter city
— Evaluate opportunities for economic development
— Explore annexation of county land
— Develop long-term funding plans for asset recapitalization of city streets, facilities, parks, and information technology upgrades.
The report is available at cityofsthelena.org. Look up the agenda for the council’s Feb. 24 meeting and click on item 15.