Palo Alto is in the midst of finalizing its operating budget for fiscal year 2012. A series of budget hearings by the Palo Alto City Council and Finance Committee will take place this month, including a special meeting today at the council chambers.
The city plans to modify the existing budget in several ways, with a primary focus on concessions for safety labor groups. The proposed budget would also adjust spending to confront the effects of the recent economic recession.
In the FY 2012 operating budget proposal, City Manager James Keene reveals that the combination of lower sales tax revenues and increasing costs for employee benefits has forced the city council to re-evaluate the budget. The proposed general fund budget is $146 million, which represents a 2.7 percent increase from the FY 2011 budget. According to the document, the total city budget will be $463 million, a 3.2 percent increase from last year.
In an email to The Daily, Director of Administrative Services Lalo Perez explained that the budget changes are a response to the costs of healthcare and pension plans, which are increasing much faster than city revenues.
“We need to make changes to our safety pension plans, similar to those that the non-safety staff changes already made,” Perez said. “We have a two-tier pension system that reduces the benefits for non-safety staff and, therefore, the cost to the city. In addition, we seek employee contributions to healthcare premiums.”
According to Pamela Antil, assistant city manager, a primary change is an increase in concessions from labor groups in both the police and fire departments.
“The largest portion of our general fund dollars goes to pay the salaries and benefits of our employees…A critical component of the city’s ability to maintain quality services for the community, in the face of declining revenues and growing personnel costs, has been working with labor groups over the last several years to achieve wage and benefit concessions,” the budget proposal reads.
“The proposed budget projects that the city will receive about $4.3 million in concessions from the labor groups in police and fire,” Antil wrote in an email to The Daily. “If those concessions are not achieved, the budget staff will have to come back to the city council for consideration of other operating and service cuts.”
Antil said she was confident that these concessions would be met. According to Perez, if labor groups are unable to meet these conditions, Palo Alto will be forced to implement reductions in its safety programs first.
Apart from the concession changes, Perez indicated that Palo Alto plans to use a $1 million placeholder to create an Office of Emergency Services. Perez said staff members are “working on the specifics” of the new office. The funds for this development “will include staff and non-salary items associated with community emergency preparedness, which is a council priority,” he said.
Perez emphasized that the impact of the proposed FY 2012 budget is contingent on whether or not the labor groups agree to provide the concessions. If the labor groups do not act accordingly, cutting the safety programs would be one of few ways to balance the city’s budget. The city may also need to make budget reductions during the fiscal midyear timeframe.
In addition to these points, the proposed budget incorporates plans to continue to improve Palo Alto’s infrastructure by renovating libraries as well as increasing sustainable practices within the community. Furthermore, the proposal outlines the city’s intentions to continuously upgrade its infrastructure by proactively repairing and replacing utilities.
According to the tentative budget, the city intends to support Caltrain’s efforts to develop a long-term financial plan. Another priority is the promotion of programs focusing on youth well being.
Antil expressed optimism about the budget proposal.
“The main goal of the budget continues to be to provide the highest level of desired and enhanced services to the community within our means, while still being mindful of changes that are imminent in the future with regard to sustainability, infrastructure needs and changes in technology and its application to the services we provide,” Antil said.