City Manager Mike Ortega has released a proposed new budget that is a slight increase over the current one and does not include any increases in fees or tax rates but will need some cuts in expenses to be balanced.
The proposed $1.373 billion budget, expected to be adopted by the ÃÛèÖÖ±²¥ City Council next month, is about $1 million more than the present budget of $1.372 billion.
To make up an expected shortfall of about $9 million in the general fund, the main part of the overall budget, the city will be required to reduce expenses to reach a “structurally balanced†budget.
Ortega said those reductions in expenses would be made through a combination of eliminating positions through attrition and hopefully not layoffs; merging departments; other cuts; and changing the way the city provides services. Personnel costs account for about 70 percent of general-fund expenditures, he wrote.
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“It is clear we can no longer assume we will be providing services in the same manner as we have in the past,†Ortega wrote in his memo to the council. “This transformation will shape our City Government for the future and develop a culture of flexibility, adaptability, and accountability that will help us to compete in the ever-changing landscape we find ourselves.â€
Ortega said while not requesting an increase in city fees, he left the door open to bringing recommendations for increases in some fees next fiscal year.
The city manager is recommending a slight decrease in the city’s primary property tax, although the amount will be offset by rising property values. The proposed combined tax rate, primary and secondary, is $1.43 per $100 of assessed value, representing a small decrease over the current combined rate of $1.60.
For an owner of a $150,000 home, the city estimates the savings would be about $24 next year.
Mayor Jonathan Rothschild said he was pleased with the budget put together by Ortega.
“The bottom line, for the second year in a row, we’ve got a structurally balanced budget,†the mayor said.
Councilman Steve Kozachik said the city’s major challenge is to continually compensate for costs outside of its control.
“Our major challenge is the public-safety pension. The state writes the rules and we write the check,†he said. “Our budget issues are under control — structurally balanced. So what we can control is under control. The state piece is our lingering challenge.â€
Recent legal settlements have required the city to pay more into the state public safety pension system. The city will pay $19.8 million more into the state system next year. Ortega expects the figure to continue to grow in the years ahead.
“I expect our unfunded liability (in the state system) to continue to increase and approach $1 billion in the next few years. In order to address this, we must make our full annual contributions, and when possible, overpayments as well,†wrote Ortega.
Layoffs uncertain
With a goal of cutting $8.9 million in expenses, Ortega said he would focus on making those cuts through job attrition.
“The goal for these reductions is to accomplish them with no staff layoffs. I cannot guarantee that will be the case, but during (this fiscal year) we reduced over 300 FTEs and ended with one layoff,†he said.
However, the employee laid off was offered and accepted another position within the city, he wrote in his memo.
The city manager has assured the council that only vacancies in noncritical positions would be left vacant and that public-safety positions would continue to be filled. Ortega has also worked to merge the 911 emergency communications personnel of the police and fire departments, which is expected to save the city money.
Bonuses possible
Vice Mayor Regina Romero said she wanted to discuss raises for employees next year, saying she was concerned about blue-collar city employees. The proposed budget, which starts July 1, does not include across-the-board pay increases for employees.
Last year, the city gave a one-time bonus to about 4,000 employees before Thanksgiving. The $1,000 bonus to full-time employees cost the city an estimated $4 million.
For next year, Ortega has set aside $2.6 million for “one-time†distributions to qualifying employees. However, the city will wait to release the funds until three months into the new fiscal year to make certain budget projections are accurate.
“By waiting to make the decision, it provides us some flexibility in case something catastrophic occurs causing us to rethink the distribution,†Ortega wrote.
Ortega also wants the city to move toward becoming self-insured for health care for its employees, following the model adopted by Pima County. Such a move away from private insurance could lower insurance costs for the city and employees, he wrote in his memo.
Providing health insurance to city employees is expected to cost about $34 million next year, an increase of $3.4 million over this year. Ortega said the city will foot the increase .
A public hearing and the tentative budget approval is scheduled for May 23 with the final budget up for approval June 6.