EL CERRITO — This city has to make $4 million in cuts in programs and services for the next fiscal year to just balance the budget, the city’s finance director told the El Cerrito City Council on Tuesday night.
Finance Director/City Treasurer Mark Rasiah forecast a “huge reduction” in the budget for the 2020-21 fiscal year. He also said the city has to deal with a deficit estimated from $2 million to $2.5 million for the rest of the current fiscal year ending June 30 because of the devastating impacts of the coronavirus pandemic and shelter-in-place order on the economy.
Rasiah also said the city was in talks for another $9 million short-term loan. City Manager Karen Pinkos said she is expected a decision on the loan request in the next few weeks.
Rasiah reported some good news: The city has enough funds to pay off the $9 million one-year loan from Westamerica Bank it took out this past July.
The El Cerrito City Council did not take any action on budget cuts at Tuesday’s meeting, but decided on the framework: an interim 2020-21 budget with $4 million in cuts approved by June 30, and a final budget, with additional cutbacks, by September, adjusted for the pandemic.
According to a report by Rasiah and Pinkos, the city on March 31 was estimated to have a deficit of $3.7 million.
Pinkos, who has already proposed $2 million in cuts for the next fiscal year, explained she wasn’t prepared to submit an additional $2 million to $3 million in reductions because of time required by civil service rules and labor contracts covering public agencies.
Before the pandemic hit, the general fund budget was expected to end up with $544,000 at the end of the current 2019-20 fiscal year. But as a result of the shelter-in-place business closures and revenue loss tied to falling commercial and consumer spending, the city will end the current the fiscal year with a deficit of at least $2.3 million.
Revenues are expected to fall $3.8 million in the fourth quarter of the 2019-20 fiscal year, according to the staff report. Sales tax revenues are anticipated to decline $1.1 million in the fourth quarter.
A consultant hired by the city warned that the city could face a deficit of up to $7 million for the next fiscal year in 2020-21 and a deficit has high as $10 million through fiscal year 2022.
A decision to reduce library hours to save the city $129,000 and other proposed cuts was delayed until a special City Council meeting at 10 a.m. Saturday.
El Cerrito, which has a population of about 25,000 residents, has a current budget of about $40.5 million for 2020-21.
In October, California State Auditor Elaine Howle ranked El Cerrito No. 7 on a high-risk list of cities facing trouble financially. The State Auditor’s Office intends to audit the city’s finances sometime this year.
In her Jan. 13 letter to the Legislature requesting an audit of El Cerrito, Howle said the city had “inadequate general fund reserves, cash flow and liquidity challenges, and escalating pension costs” and had “not developed a long-term approach to improve its financial condition and has not addressed its increasing pension costs.”
