At Tuesday night’s City Council meeting, one of the things that came up as a negative about the budget from City Auditor Kevin Kearney, City Treasurer Kevin Kennedy, and Councilmember Doug deHaan was the use of one-time funds to close the budget gap. City Manager John Russo took issue with the characterization of the one-time as being the same as the one-time funds from previous years:
I just wanted [Controller] Fred [Marsh] to address the issue of one-time, use of one-time revenue, because I don’t think this is really the same as last year. I don’t think the characterization is quite right.
Fred Marsh says:
Basically for the 11-12 budget we’re having some budget savings that were realized due to the great efforts of our departments and I think they’re really to be commended for being lean, staying tight within their budgets…yes we have used some one-time revenues in the past, there’s a little bit of that in this budget, but the budget savings is really different from one time revenues. It’s really due to diligent efforts of staff in keeping control of costs.
John Russo then steps in:
Let me say why this is so important, this is so important because if you staff squeezes every dollar as hard as it can to make savings that’s a good thing. If Ms. Goldman and Mr. Marsh come up with expense numbers at the beginning of the year that turn out to be too high because we squeezed the numbers, we could have just had lower numbers and then it wouldn’t look like a one time budget savings. Our very conservative approach to maybe overestimating expenses a little bit and underestimating revenue a bit is something we want to do and continue to encourage. But if we then re-characterize the reality when we close up the budget as one time because we spent less that’s not a one-time savings at all, that just shows that we can do this job for this much less money.
He then goes into a tangent about retail sales tax leakage, worth watching if you are interested.
Oh and then Doug deHaan goes on to some tangent about how employees are already taking a hit, but something about two-tiered systems. Essentially he is making very little sense and sort of dancing around various subjects to try to justify why he doesn’t like the budget. When Councilmember Beverly Johnson asks him for specifics, the only thing he offers is that he thinks that outsourcing ambulance services would be a good start even though he says that it would be a political non-starter for the other Council people.
He then references a letter from the County that is “full of caveats” and saying that they can manage it, but as Councilmember Lena Tam explains, the letter from the County’s private ambulance company reached the conclusion that they could not offer the same service level for cheaper. I’ve posted that letter many times, it’s the last page of the set linked to. So it’s not clear whether Doug deHaan is advocating for lower levels of service at similar rates or the same level of service at a higher rate.
Is it a ‘conservative’ method to overestimate budget requirements at the beginning of the budget cycle in order to have yearly ‘one-time’ savings or is it a political ploy to look ‘belt-tightening frugal when there is a yearly ‘one-time’ planned surplus?
Comment by Jack Richard — June 29, 2012 @ 9:35 am
I think it is, since people like to compare everything to personal finances it’s akin to overestimating your yearly budget (aka food will cost me $500 per month) but trying very hard to stay under that budgeted $500 every month. At the end you have budgeted to spend $500 per month for food, but in reality have only spent — on average — $450 per month. The savings you have, which you can roll over into your savings, or perhaps decide to use to pay down your mortgage, is not drawn out of your savings account (in the City’s case, the reserve) to close the gap on your mortgage, but as a result of overestimating your expenses based on a conservative estimate of your income.
It’s better than the alternative which is the City budgeting however much to each department and that department scrambling to spend down the entire amount by the fiscal year’s end so that their budget doesn’t get cut the next year.
Comment by Lauren Do — June 29, 2012 @ 9:58 am
John Russo is beginning to resemble one of the minor characters in “Atlas Shrugged”, tho I’m not sure which one.. This speech demonstated the futility of comparing municipalities solely on the basis of population size. Each one he mentioned has something generating revenue that Alameda doesn’t. Pleasanton has the Alameda County Fairgrounds, Dublin has Camp Parks, & San Leandro has Bayfair-sorry, but South Shore will probably never host Macy’s!-as well as Wal-Mart. He’s right about Alameda needing stuff like that to justify continued spending on public safety like we have been.
Comment by vigi — June 29, 2012 @ 10:07 am
“It’s better than the alternative which is the City budgeting however much to each department and that department scrambling to spend down the entire amount by the fiscal year’s end so that their budget doesn’t get cut the next year.”
We should commend our city staff and leadership for NOT taking the typical bureaucratic path of spending down their budget every year, lest their budget is whacked the next year.
Comment by Not. A. Alamedan — June 29, 2012 @ 10:23 am
Mr. Russo asks Fred Marsh to address the issue. Fred Marsh proceeds to praise the departments for their ‘great efforts’ then Mr. Russo steps back in and essentially says, ‘no big deal because we overestimated the budget and the departments spent the ‘real’ budget, so the didn’t save anything’. That’s the way I read it.
Comment by Jack Richard — June 29, 2012 @ 11:24 am
I’m not sure how one interprets “this is so important” as “no big deal.”
Comment by Lauren Do — June 29, 2012 @ 2:22 pm
Lauren
Where in the Budget Meeting presented by staff did they address and give actual numbers of how Big our Bill is for for our OPEB Liability that we continue to defer..(it was $74 million and growing in 2009) …Hard to leave out something that is as large as your whole General Fund Budget for just one year.
Where did they address the CALPERS underfunding that we have deferred and what is our total Bill there.
Where did they address total maintenance costs to our assets we kept deferring the past 15 years and what is our total bill there.
Looking at this like a household budget ….I guess we just ignore past bills and what we owe…We have Enough to pay our Gardeners and Maids that work here now .Were going to pay them double what other house maids and gardeners make but were trying to negotiate 1% reduction….Also the House is falling apart…half the driveway is cracked..The roof leaks…The pools broken..The Kids don’t have money to go to parks….We Don’t have money to pay huge back pay for past gardeners and maids and their retirement and health care we promised……But the Gardener saved a quarter on water this month and the maids didn’t use soap when doing the Laundry. Wheeeeeeeee we balanced the Budget.
Comment by John — June 29, 2012 @ 3:27 pm
To follow your household budget analogy….We have one Lemonade Stand in front of house to try and pay the gardeners and maids…..The Head Gardener says we need 5 or 6 and we can be just like the Neighbors and pay our gardeners more.
Comment by John — June 29, 2012 @ 3:42 pm
6. You’re right, Mr. Russo twice says how ‘important’ it is that staff ‘squeeze’ but then, when apparently they’re not squeezing at all but in fact meeting the ‘real’ budget because the budget was ‘overestimated’ to begin with, he doesn’t want the delta from real to the over-estimated portion of the money considered a one-time savings since that’s their yearly conservative approach to budget estimating. It’s ‘NOT’ calling it a ‘one-time-savings’ that’s the importance of the matter. It’s no big deal because they do it every year.
Comment by Jack Richard — June 29, 2012 @ 3:52 pm
Actually this is the first year that the savings from the squeezing has been used to bridge the budget gap, all other years true “one-time fund” were used.
Comment by Lauren Do — June 29, 2012 @ 4:13 pm
Jack
This year was different ..Don’t you understand…They added sand with the vaseline and wore new fashionable shades tinted in Grey.
Comment by John — June 29, 2012 @ 4:36 pm
10
City Manager’s words: “Our very conservative approach to maybe overestimating expenses a little bit and underestimating revenue a bit is something we want to do and continue to encourage.”
I’m trying to understand what he’s getting at and that statement sounds to me like this is modus operandi. What does it mean to youj, Lauren?
Comment by Jack Richard — June 29, 2012 @ 5:38 pm
I think it will be how budgets are done in the future: giving departments reasonable budgets but expecting them to be frugal with those funds. It’s much better than the alternative that was mentioned above which is penalizing departments from being frugal by cutting their budgets if they manage to come under their budgeted amounts.
Comment by Lauren Do — June 29, 2012 @ 6:24 pm
I agree with that. The old way is the way we did in the Fed (I don’t know if it’s still that way). The Departments always sought ways to spend every last penny at the end of each quarter. Waste squared, but that’s the way it was done.
Comment by Jack Richard — June 29, 2012 @ 7:01 pm