RICHMOND — The coronavirus pandemic has devastated cities up and down the state and Richmond is no exception — and the city has about 50 days to close a $27 million deficit for the next fiscal year.
Across-the-board city furloughs, cuts in services, hiring freezes, layoffs, and closing the city’s library system were all part of a list of 59 “budget strategies” presented by city staff at the May 5 Richmond City Council meeting. Richmond, which operates three libraries, isn’t part of the Contra Costa County Library system.
“Everything is on the table,” said Mayor Tom Butt, in response to a question about the future of the library.
“Between now and the end of June, we have to find a way to reduce expenditures by $27 million,” he said in his weekly email statement, which he titled “Budget Balancing 101.” “The job ahead is daunting.”
In anticipation of the pandemic’s impact on the economy, Butt formed an ad hoc budget committee in April in which he and Council members Ben Choi, Melvin Willis will work with City Manager Laura Sniderman and staff. In addition, Richmond officials have held meetings with representatives of the city’s employee unions. Special council meetings will be held Tuesday and June 9 on the new fiscal budget for 2020-21.
Meanwhile, the city will dip into its reserve fund to cover a $7 million deficit in the last quarter of the current fiscal year, which ends in June, Butt said.
For the next fiscal year beginning in July, city revenues are projected at $166 million while expenses are forecast at $193 million.
“The increase in projected expenditures is not a result of new services, programs and projects; it is a result of increased compensation, benefits and the cost to the city of goods and services due to inflation,” stated Butt in his weekly newsletter.
“One question often, asked is, ‘Why can’t we fund the budget shortfall from reserves?’ Technically, we could use some of our reserves, but that is both risky and has limitations,” he said, pointing out that Richmond currently has $19 million in reserve funds. The current $7 million shortfall caused by the pandemic will reduce that to $12 million.
“That is equivalent to less than one month in expenditures, putting the city at great risk in another emergency,” he said. Reducing reserves any further could reduce the city’s bond rating, which will increase the cost of borrowing, he said.
“Others speculate that the state or federal government will bail us out,” Butt stated. “We can’t count on it. … the state is projecting a $50 billion deficit. And Congress and the president are talking about bailouts that might require cities to change their immigration polices or pension benefits.”
He said the city is looking for ways to increase its revenue. But he acknowledged that “big ticket items” like sales tax increases and fees usually require ballot measures. Even if these measures are approved in November, the revenues wouldn’t show up next fiscal year.
He said services, programs and purchases can be reduced or eliminated with only six layoffs for libraries and pools, ranging from a cost savings of $13.7 million to $21.4 million. Of that, $4 million would be from the complete closure of libraries, “which will be very controversial,” Butt said. Without that $4 million, the range is from $13.7 million to $17.4 million in savings.
According to Butt, reducing pay or benefits to union members could save from $7.3 million to $10.9 million, but he expects “a lot of push back. The time and complexity of seeking union collaboration may not fit our schedule deadlines.”
In addition, the city could save $6.2 million through hiring freezes, he said.
